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China is tackling cryptocurrency and banning all transactions.

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China on Friday stepped up its crackdown on cryptocurrency, declared all financial transactions involving cryptocurrencies illegal and issued a nationwide ban on cryptocurrency mining, the power-hungry process in which computer networks compete to solve computations in exchange for newly created crypto tokens. .

In a joint statement By 11 Chinese government agencies, authorities have vowed to work closely together to sanction “illegal” crypto mining activities to help prevent the industry’s “hidden risks caused by the blind and disorderly development” of the industry and to help the country meet its carbon reduction targets. to achieve.

Chinese central bank announced that trading services, order matching, issuance of virtual currency tokens and derivatives would be strictly prohibited. The bank also said foreign crypto exchanges providing services in mainland China were illegal.

Bitcoin, the world’s largest cryptocurrency, fell a whopping 7 percent to about $41,100 after the notice was posted by China’s central bank.

China is not alone in targeting the $2 trillion blockchain sector, nor is it the only country to have limited access to unregulated exchanges and online offerings. But crypto fans have found solutions to these limitations, masking their locations.

US officials have also recently expressed concerns about users accessing offshore crypto exchanges. The exchanges are required to block access for US users, leading to the most dedicated crypto exchanges and traders – be they Chinese or American – jump to countries looking for opportunities in digital gold.

The measures come as China’s central bank is testing its own digital currency, the electronic Chinese yuan. The central bank’s message made explicit mention of Bitcoin and Ether, the two most popular cryptocurrencies, as they were issued by “non-monetary authorities”, suggesting that the Chinese electronic yuan, or eCNY, would not be affected by the latest announcements.

Friday’s moves were the latest signal of Beijing’s determination to turn the screw on cryptocurrencies, which it has long seen as a threat to its control over capital flows in the country. China banned domestic cryptocurrency exchanges years ago, but trading on other platforms has continued. And China has remained a major hub for cryptocurrency mining operations, with huge computer farms competing to solve complex equations in exchange for Bitcoin.

Statements in recent months from top policymakers and in state media have suggested a desire to further manage financial risks.

In May, China’s State Council, or cabinet, vowed to crack down on bitcoin trading and mining, causing local authorities in several parts of China to halt crypto mining activities. In 2017, China made more than two-thirds of all Bitcoins issued daily.

The latest announcements also come amid a regulatory blitz that has seen Chinese authorities crack down on the country’s booming technology, education and real estate sectors.

Governments worldwide are rushing to keep pace with developments in the $2 trillion cryptocurrency sector, which is growing exponentially and beginning to disrupt traditional banking and finance. US banking regulators have been conducting “crypto sprints” between agencies in recent months and have met separately in recent months to map out avenues for regulation.

Given the explosion of interest in cryptocurrency this year alone, some officials fear that these digital tokens could become a systemic risk, threatening the wider financial system as the new crypto firms build more and more bridges with old-fashioned financial institutions.

In some smaller countries, such as El Salvador, which recently adopted Bitcoin as legal tender, the open, global financial system, fueled by cryptocurrencies, is being promoted as a tool to promote financial inclusion and economic renewal that will attract capital and create new industries and will create jobs.

Questions have been raised about cryptocurrency adoption in El Salvador, but some technology and human rights advocates say the project shows promise.

“Bitcoin has a strange mechanism,” said Alex Gladstein of the Human Rights Foundation. “It turns people’s greed and self-interest into greater human freedom.”

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