In late September 2021, the People's Bank of China (PBOC) banned all cryptocurrency transactions. You might be wondering what is behind China's cryptocurrency ban and whether crypto is still banned in China? If you are curious to know, you can read this article to find out more.
What's behind China's cryptocurrency ban?
The People's Bank of China cited cryptocurrencies' role in facilitating financial crime, as well as posing an increasing risk to China's financial system due to their highly speculative nature. Yet another possible reason behind the cryptocurrency ban is an attempt to crack down on capital flight from China.
The People's Bank of China said that “business activities related to virtual currency are illegal financial activities” and warned that it “seriously endangers the safety of people's assets.” China is one of the largest cryptocurrency markets in the world. Volatility there usually affects the global price of cryptocurrencies.
The price of Bitcoin fell by more than $2,000 (£1,460) following the Chinese announcement. It's the latest in China's nationwide crackdown, and it's a volatile speculative investment at best and a money laundering method at worst.
According to the Chainalysis blockchain data platform, between 2019 and 2020, more than $50 billion worth of cryptocurrencies left East Asian accounts and flowed outside the region. Since China has a large share of cryptocurrency exchanges in East Asia, Chainalysis staff believe that most of these net outflows from cryptocurrencies are actually capital flight from China. Although Chainalysis has no firm figures on how much money fled China between 2019 and 2020, they estimate it could be as high as $50 billion. Problems for China's cryptocurrency industry in 2021 began in May, when the State Council doubled down on past cryptocurrency policy by calling for restrictions on cryptocurrency mining and trading. Prior to this, provincial authorities such as Inner Mongolia, Xinjiang and Sichuan, all major Bitcoin mining centers,have begun to introduce policies restricting the operations of Bitcoin miners.
Following the State Department's statement, provincial governments began taking aggressive steps to eradicate crypto mining. The regulator cited bitcoin's energy-intensive nature and how it poses a threat to the country's environmental goals as core reasons for its defense of the new crackdown.
These are the years and reasons why China Ban crypto
- 2013: China Bans Banks From Crypto Transactions
- 2017: China bans crypto initial coin offerings
- 2019: Attention turns to Bitcoin mining
- 2020: Enforcement intensifies
- 2021: China bans cryptocurrency trading and mining
Is crypto still banned in China?
Trading in cryptocurrencies has been officially banned in China since 2019, but it continues to be traded online via Forex. According to sources, many mainland users will see their cards frozen if they are used for crypto over-the-counter (OTC) transactions. However, trusted OTC channels still allow crypto trading in China.
I hope this article will help you to learn what's behind China's cryptocurrency ban and whether crypto is still ban in China. However, despite the political urgency, such a strict ban on cryptocurrency trading will be difficult to enforce. Capital flight facilitated by cryptocurrency trading is likely to continue. Time will tell how severe the eventual economic impact will be.
