China’s central bank reiterated its stance on cryptocurrencies on Friday and released a memorandum banning cryptocurrency transactions and banning foreign exchanges from providing services to people in China.
“Business activities related to virtual currencies are illegal financial activities,” the People’s Bank of China said in a statement posted on its website on Friday afternoon.
She accused the cryptocurrency of “disrupting the economic and financial order” and facilitating “illegal and criminal activities” such as gambling, fraud, pyramid schemes, money laundering and theft.
Bitcoin, Ether and TEDA are explicitly mentioned in the communication and it is pointed out that they “do not have the same legal status as legal currencies”.
“They are not legal and should not and cannot be used as currency in the market,” said the notice, before listing all activities related to cryptocurrencies that are now banned.
These include operating virtual currency exchanges, buying and selling virtual currencies as a central counterparty, providing information brokerage and pricing services for virtual currency transactions, financing token issues, virtual currency derivative transactions, and more.
Chinese government agencies have long had a problem with cryptocurrencies, and in May, three state-backed financial groups issued a joint statement warning against the use of cryptocurrencies as a means of payment, citing their volatility as high risk.
The National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China urged their members not to engage in cryptocurrency transactions.
Cryptocurrencies have been banned in China for many years, but citizens have the option of accessing coins in other ways. China has also been working on its own digital currency for years.
Chinese Deputy Prime Minister Liu He said in May that the country must also take a tougher course against crypto mining. This statement by Liu He caused several operators of cryptocurrency mines to cease their activities.
Researchers recently estimated that China accounts for more than 75% of bitcoin hashing power or computations, benefiting from China’s access to hardware and cheap electricity. The Wall Street Journal noted that the mining is supported by hydropower plants in Sichuan and Yunnan, and coal from Xinjiang and Inner Mongolia.
According to CoinDesk, the news on Friday dropped Bitcoin price by 4% and Ethereum price by more than 7%.