China’s central bank reaffirmed its aggressive stance in the wake of Bitcoin Friday, declaring the use of digital currencies unconstitutional and promising to crackdown to stop the trade.
In an Q&A published on its website, the People’s Bank of China said services that offer trading or order matching, as well as token issuance, derivatives and virtual currencies are prohibited. Crypto exchanges operating overseas that provide services on China’s mainland China are also prohibited according to the PBOC declared.
“Overseas virtual currency exchanges that use the internet to offer services to domestic residents is also considered illegal financial activity,” the central bank stated according to an CNBC version of its statement. The employees of foreign crypto exchanges will be investigated, the bank added.
The PBOC announced that it also upgraded its systems to speed up the monitoring of transactions involving crypto and remove speculative investment.
“Financial institutions and nonbank payment institutions cannot offer services to activities and operations related to virtual currencies,” the central bank added, reiterating previous comments.
The value of bitcoin fell by more than 6.5 percent over the course of 24 hours. It was last being at around $41,882, as per Coin Metrics data at midmorning Friday, ET. Ethereum is the second-largest digital asset, dropped 9percent to $2,867.
Stocks that have a lot of involvement in crypto sank during mid-morning trading on Nasdaq and the Nasdaq Composite, including the Coinbase stock down by 2 percent, MicroStrategy slipping 5percent as well as Riot Blockchain down more than six percent.
This isn’t the only time that China has been tough on crypto currencies. This year Beijing declared a ban on cryptocurrency mining which is an high-energy process that checks transactions and creates new currency units. The result was a drastic decline in bitcoin’s processing capacity and a number of miners shut down their equipment off.
The PBOC also directed banks and other nonbank financial institutions such as Ant Group, Alibaba’s Affiliate Ant Group not to provide services in connection with crypto.
In July the bank instructed a Beijing-based firm to close because it was allegedly helping facilitate transactions in digital currency using its software.
China’s cryptocurrency crackdown comes at a time when Beijing is working to achieve its climate goals. China is the largest carbon emitter, and plans to become carbon-neutral by 2060..
It is believed that the PBOC is also developing the development of its own electronic currency. China is considered to be one of the top contenders in the race for digital currencies issued by central banks having tested an online version of the Yuan in different regions.
This is not the first time when china decided to completely ban digital cryptocurrencies. There are more crackdowns on cryptocurrencies this year.