China Declares All Cryptocurrency Transactions Illegal

WHY IN THE NEWS?

The central bank of China has declared all Cryptocurrency transactions illegal.

About:
The global values of cryptocurrencies including Bitcoin have massively fluctuated in during 2020-2021 partly due to Chinese regulations that sought to prevent speculation and money laundering.

• According to the People’s Bank of China (PBOC), Virtual currency-related business activities are illegal financial activities.
• Offenders will be “investigated for criminal liability” in accordance with the law.
• Chinese notice has banned all the related financial activities involving cryptocurrencies like transactions involving virtual currency derivatives, selling tokens, trading crypto, and illegal fundraising.

Why ban was put?

According to People’s Bank of China, trading of Bitcoin and other virtual currencies had become widespread and are disrupting economic & financial order. It also gave rise to money laundering, fraud, illegal fund-raising, pyramid schemes and other illegal & criminal activities. These disruptions were seriously endangering the safety of the assets of the people. Considering these facts, China has declared all Cryptocurrency transactions illegal.

Significance of the ban for China

Crypto crackdown has opened up gates for China to introduce its own digital currency. China’s own digital currency is already in the pipeline. It will allow the central government of China to monitor transactions.

Background

Crypto creation and trading have already been illegal in China since 2019.

About Cryptocurrency

Cryptocurrency is a binary data that have been designed to work as a medium of exchange. Here, individual coin ownership records are stored in a ledger which is existing in the form of a computerized database. Strong cryptography are used to secure transaction records, control the creation of additional coins as well to verify the transfer of coin ownership