The People’s Bank of China has declared all digital currency activities illegal, and has vowed to crack down on the market, CNBC reported. According to CNBC, the People’s Bank of China said services offering trading, order matching, token issuance, and derivatives for virtual currencies are strictly prohibited. Overseas crypto exchanges providing services in mainland China are also illegal.
It appears that this decision affected the price of cryptocurrency, which resulted in the stocks for at least some types of cryptocurrency falling. CNBC pointed out that this comes after Beijing announced a crackdown on crypto mining earlier this year, which caused a slump in bitcoin’s processing power.
The Wall Street Journal reported that the People’s Bank of China declared all cryptocurrency-related transactions illegal to prevent the risks surrounding crypto trading and to maintain national security and social stability. According to the Wall Street Journal, the People’s Bank of China said that cryptocurrencies are issued by non monetary authorities, use encryption technologies and exist in digital form, and shouldn’t be circulated and used in the market as currencies.
I’m no expert on cryptocurrency, but it is my understanding that one of the reasons why some people like cryptocurrency is because they think the transactions are anonymous. However, the Federal Trade Commission (FTC) points out that “depending on the cryptocurrency, the information added to the blockchain can include details like the transaction amount and the sender’s and recipient’s wallet addresses”. To me, that sounds like China could potentially discover which of their people are buying or selling cryptocurrency.
I understand that a country can make rules or laws that people who live in that country are required to comply with. I’m having difficulty understanding why China’s decision to call all digital currency illegal also requires people who live in other countries to comply with China’s new rules.