China said on Friday that all cryptocurrency transactions in the country, including those using Bitcoin, will be declared unlawful by the government. According to a letter published by China’s central bank, the nation considers all cryptocurrency transactions in the Chinese economy to be unlawful.
The memo, which was validated and published by Bloomberg, stopped short of outright banning bitcoin, but it essentially implies that products and services cannot be purchased or sold in China using cryptocurrencies. The country asserts that cryptocurrencies such as Bitcoin are not guaranteed by any government or bank and so cannot be used as legal currency in any jurisdiction.
The Chinese central bank also said on its website that cryptocurrencies such as Bitcoin and Tether are not permitted to be used in the country’s economy.
However, it appears that for the time being, owning Bitcoin or any other cryptocurrency in China is not prohibited. Only their possession is prohibited.
According to Bloomberg’s article, “all crypto-related transactions, including services offered by offshore exchanges to domestic citizens, are considered unlawful financial operations, according to the People’s Bank of China in its statement.”
Rumors have circulated that China is targeting cryptocurrency exchanges because it feels they are being abused. According to reports, the government also believes cryptocurrency to be damaging to the environment because “mining” something like Bitcoin necessitates the use of a large number of computational resources, which in turn increases the use of electricity. The total power consumption of computers and server farms that are used to mine Bitcoin has been estimated to be greater than the total power consumption of a country such as Switzerland.
As the popularity of Bitcoin and other cryptocurrencies continues to grow, governments around the world are taking an increasingly careful look at these virtual currencies. The fact that virtual currencies operate beyond the authority of central banks or government entities means that they are increasingly coming under the attention of regulators and law enforcement. Also contemplating limiting the use of Bitcoin, or at least regulating it so that it becomes a part of the country’s legitimate financial system, in India, according to reports.
When India made it necessary for all firms in the nation to report their operations in virtual currency in their balance statements earlier this year, it became the world’s first government to regulate Bitcoin in its early stages. The directive, which was passed by the Ministry of Corporate Affairs (MCA), stated that companies dealing with cryptocurrency would be required to disclose their profit or loss on transactions involving cryptocurrency or virtual currency, as well as the amount of cryptocurrency or virtual currency they currently hold.