Transactions involving cryptocurrency have now been outlawed in China owing to the fact that they are not fiat currencies and are thus illegitimate on the market.
Well, that's certainly a statement and a half. This is only the most recent move against cryptocurrencies by the Communist Party of China. In 2017, local cryptocurrency exchanges were shut down leading to the dissolution of a speculative market that contributed to 90% of crypto trading in the world. Two years after that, all domestic and foreign cryptocurrency exchanges and Initial Coin Offering websites were blocked from operating in the country as these currencies "are not supported by real value."
And, earlier this year, the country prevented financial institutions and payment companies (fancy terms for banks and other channels to pay for things) from offering services connected to cryptocurrency and crypto trading. All of these directives have had a palpable effect on the value of Bitcoin, with Bloomberg reporting that the currency dipped by 5.5% on Friday.
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Now, all crypto-related transactions, including services conducted through offshore exchanges to Chinese citizens, are illegal. Not only is this to do with controlling the flow of legitimate currency in the country, it is also aimed to assist China in its meeting of carbon goals.
Mining cryptocurrency has had a serious impact on the planet, with emissions from Bitcoin rising by over 40 million tonnes in the last two years. That's like adding another nine million cars to the roads, and annual emissions from these activities is comparable to those of American Airlines.
So, depending on who you ask, the fact that Bitcoin has suffered a significant decrease in its value as a result of the Communist Party of China decree is either a good thing or a bad thing.
In the statement from the People's Bank of China, banning cryptocurrencies is a step towards diminishing criminal use of these virtual coins in "gambling, illegal fundraising, fraud, pyramid schemes, money laundering" and more. Antoni Trenchev, co-founder of crypto lender Nexo, told Bloomberg that investors will likely see a "knee-jerk price reaction as China takes the wind out of Bitcoin's sails" and that "the recent rebound from just below $40,000 has likely run its course for now."
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