China Intensifies Crypto Crackdown and Bitcoin Stumbles

On Friday, China introduced further measures in its crackdown against crypto trading, as it vowed to eliminate illegal activity and imposed a nationwide ban on crypto mining. This announcement hit Bitcoin and other major cryptocurrencies and put a great deal of pressure on blockchain and crypto-related stocks. A joint statement by ten Chinese government agencies, which include the central bank as well as foreign exchange, securities and banking regulators, highlighted that they would closely work to maintain a clampdown on crypto trading in the country. According to the People’s Bank of China (PBOC), cryptocurrencies should not be circulated in the same markets as traditional currencies.

The PBOC also said that overseas exchanges are no longer permitted to provide services to investors in the mainland over the internet. Internet firms, payment companies and financial institutions have all been barred by the central bank from offering crypto trading services. This moves come after the State Council in China, or cabinet, vowed to crack down on bitcoin trading and mining in May, as part of their efforts to push off financial risk, thereby sparking a major sell-off in the crypto market. The People’s Bank of China published a statement on its website where it said that the Chinese government would crackdown on digital currency speculation, along with other financial activities for safeguarding people as well as maintaining financial, economic and social order.

This latest announcement by the Chinese government resulted in a drop of 6% in the world’s largest cryptocurrency, as Bitcoin dropped to $42,167, already having declined by 1% earlier. Smaller coins that typically fall and rise in tandem with bitcoin also fell. There was a 10% decline in Ether and XRP also faced a stumble of a similar amount. Market analysts said that there appears to be some degree of panic. While cryptocurrency continues to exist in China, it has now entered a grey area of legality.

This move also had an impact on blockchain and crypto-related shares. US-listed mining companies Riot Blockchain, Bit Digital and Marathon Digital all saw their share prices slip in pre-market trading between 6.3% and 7.5%. There was also a 6.1% drop in China-focused SOS, whereas a 3.4% drop was seen in Coinbase Global, top crypto exchange based in San Francisco. The National Development and Reform Commission (NDRC) in China announced that they were initiating a nationwide, thorough cleanup of crypto mining. It said that these activities consume a massive amount of energy, don’t contribute much to China’s economic growth and also hamper carbon neutrality targets. 

In its notice to local governments, the NRDC said that wiping out crypto mining is ‘imperative’ because it can lead to high-quality growth in the Chinese economy. Before China began a crackdown earlier this year, virtual currency mining had been a substantial business in the country, as it accounted for almost half of the crypto supply in the world. The NRDC also added that it would be closely working with other government agencies for cutting off the electricity supply and financial support for crypto mining. 

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