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What is the News?
China has said that all crypto currency transactions in China, including transactions using Bitcoin, will be deemed illegal.
China and Cryptocurrency
China has been one of the world’s largest crypto-currency markets.This is despite the fact that trading in crypto-currency has officially been banned in China since 2019.
However, the recent announcement by China’s central bank that all cryptocurrency-related transactions are illegal and must be banned sends the strongest signal yet on its determination to crack down on cryptocurrency.
But for now, it seems that holding Bitcoin or any other cryptocurrency is not illegal in China. Only their use is illegal.
Why is China cracking down on Cryptocurrency?
No Legal Backing: Cryptocurrencies like Bitcoin are not backed by any government or bank. Hence, they cannot be used as legal tender.
Harmful to Environment: China considers crypto-currencies harmful to the environment because bitcoin mining requires a lot of computing resources and that in turn increases power use. There are reports noting that the entire power consumption of computers and server farms used to mine Bitcoin exceeds the power use of a country like Switzerland.
To stop Illegal activities: Cryptocurrencies bypasses official institutions and the anonymity that it offers makes it a flourishing business for illegal activities.
To avoid Financial Risk: Bitcoin and other cryptocurrencies cannot be traced by a country’s central bank, making them difficult to regulate. Hence, China has acted on cryptocurrencies to prevent and control financial risks.
To launch its own Digital Currency: China is planning to introduce its own digital currency. Its aim is to allow China to conduct transactions in its own currency around the world reducing dependency on the dollar which remains dominant internationally.
Source: This post is based on the following article
- “China says all crypto-related transactions are illegal” published in Indian Express on 25th September 2021.
- “China says all Bitcoin or crypto transactions are illegal, may ban crypto currencies” published in India Today on 25th September 2021.