TECH NEWS – China’s central bank has announced that all transactions involving cryptocurrencies are illegal, effectively banning digital tokens such as Bitcoin. Graphics video cards may thus once again be used only for gaming instead of crypto mining.
“Transactions involving virtual currencies are considered illegal financial activities,” the People’s Bank of China said, warning that this “seriously endanger the security of people’s wealth”. This is shocking news because China is (until now) one of the world’s largest cryptocurrency markets, with fluctuations there often affecting the global cryptocurrency exchange rate.
The Bitcoin exchange rate fell by more than $2000 (£1,460) after the Chinese announcement. In this latest move, China has cracked down nationwide on what it sees as at best a volatile, speculative investment – and at worst a money-laundering scheme. Trading in cryptocurrencies has been officially banned in China since 2019 but has continued online through foreign exchanges. This year, however, there has been a significant tightening.
In May, Chinese state advisers warned buyers that they would not get protection for trading Bitcoin and other currencies online, as government officials vowed to pressure the industry.
In June, the government called on banks and payment platforms to stop facilitating transactions and banned virtual currency mining, a trade in which powerful computers create new coins. But Friday’s announcement is the clearest sign yet that China wants to stop cryptocurrency trading in all its forms.
The statement clarifies that those who engage in “illegal financial activities” commit a crime and will be prosecuted. The report said that foreign websites offering such services to Chinese citizens online are also considered illegal activities, the statement said.
The technology underlying many cryptocurrencies, including Bitcoin, is based on a network of distributed computers that verify and authenticate transactions in a vast shared ledger, known as a blockchain. As a reward, new “coins” are randomly assigned to those who participate – a process known as crypto mining.
With relatively low electricity costs and cheaper computer hardware, China has long been one of the world’s leading mining centres. The activity is so popular that gamers sometimes blame the industry for a global shortage of high-performance graphics cards, which miners use to process cryptocurrency.
China’s crackdown has already hit the mining industry. In September 2019, China accounted for 75% of the world’s Bitcoin energy use. That figure had fallen to 46% by April this year. And thanks to the announcement, another drastic drop is predicted.
Source: BBC News