On September 24, 2021, the People’s Bank of China (PBOC) and ten other government agencies issued a joint notice, clarifying that cryptocurrency is not considered legal tender in the country. China also prohibits the use of cryptocurrency exchanges located outside of the country in order to provide services to Chinese nationals. Those who work in China and provide services to offshore cryptocurrency exchanges or companies that do business with them have been warned that they will be subjected to an investigation and prosecution, according to the official line of the government.
A circular to local governments outlining how to put an end to cryptocurrency mining operations in their jurisdictions was also sent out on the same day by the NDRC and ten other government organisations (the NDRC circular).
The Chinese government has added their name to the growing list of countries that have either restricted or outright banned the use of cryptocurrency in their jurisdiction. Some of the countries that have implemented these restrictions are Egypt, Indonesia, and Nepal, among others.
Because China has a large cryptocurrency market, the volatility in the Chinese market has an impact on the global price of cryptocurrencies, as well. As a result of the announcement of the ban, the price of bitcoin dropped by more than US$2,000.
This ban is part of a broader national campaign to eliminate cash as a medium of exchange, which includes a number of other measures. In the eyes of the Chinese government, it is a risky investment because of the possibility of money laundering. It has been stated by the People’s Bank of China that cryptocurrency “[cryptocurrency] seriously jeopardises the safety of people’s assets.”
A brief history of cryptocurrency use in China: Chinese authorities have placed restrictions on its use.
Use of cryptocurrencies is restricted in the People’s Republic of China, which is not a new phenomenon. The Chinese speculative market, which was closed down in 2017, was responsible for 90 percent of all global bitcoin trade. The People’s Bank of China (PBOC) announced a ban on all types of cryptocurrency exchanges, both domestic and international, as well as on Initial Coin Offering (ICO) websites in June of this year. Despite the ban, cryptocurrency transactions continued to take place through foreign online exchanges despite it.
Meanwhile, the government has stepped up its efforts for the year 2021, as well.