ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter
Cryptocurrencies

China declares all crypto transactions 'illegal' as digital yuan nears

Bitcoin falls by as much as 9% after Beijing's latest crackdown

China's central bank said it would crack down on cryptocurrency trading, banning overseas exchanges from providing services to mainland investors.   © Reuters

BEIJING/TOKYO -- China's central bank on Friday announced a ban on all cryptocurrency payments and services, escalating its ongoing clampdown on bitcoin and other digital coins as it moves to roll out its own virtual currency.

Chinese regulators' latest action "strictly prohibits" exchanging cryptocurrency for legal tender, providing information or pricing services, and trading in cryptocurrency derivatives. The measure also applies to overseas exchanges that provide services online within the country's borders. Violators will face criminal penalties.

This marks Beijing's latest ratcheting up of restrictions on what it sees as a vehicle for capital flight and competition for its digital yuan, now set to roll out as early as 2022.

The price of bitcoin, the world's leading virtual currency, fell by as much as 9% after the announcement to below $41,000 before paring its losses.

The statement, signed by multiple authorities including the People's Bank of China, the Cyberspace Administration of China and the Supreme People's Court said virtual currencies had "disrupted the economic and financial order" and bred money laundering, illegal fundraising and fraud.

Virtual currencies do not have the same legal status as legal tender, and may not be circulated in markets as currency, the document stated, naming specific examples including bitcoin and Ethereum.

Takahide Kiuchi, executive economist at Nomura Research Institute and a former Bank of Japan policy board member, called the latest move an "extension" of measures to "ban all virtual currencies except central bank digital currency."

China in June ordered five state-run banks including Industrial and Commercial Bank of China, Agricultural Bank of China, as well as mobile payments giant Alipay, to cut off cryptocurrency transactions. It also imposed a broad ban on virtual-currency mining that month, driving many miners overseas and slashing the country's share of digital coin creation, once above 80%.

Also on Friday, the authorities announced even tougher mining restrictions, barring new operations and accelerating exits from existing projects. Supplying electricity to miners is prohibited, and such projects cannot receive financial, fiscal or tax support.

The PBOC plans an official launch of the digital yuan as soon as 2022, following testing at the Winter Olympics. China plans to revise its laws to add it as legal tender and ban private-sector issuance of digital currencies, whose proliferation poses an oversight challenge for regulators.

Capital flight is another factor. Cryptocurrencies have been used to circumvent Beijing's capital controls since before the coronavirus pandemic, and regulators have sought to close this loophole.

The direct impact of the ban will be limited, as China's influence on virtual currency markets has diminished. But as the U.S. hammers out new regulations and other countries work toward their own digital currencies, market watchers are keeping an eye out for similar moves elsewhere.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more