The new China Bitcoin ban marks a major reversal of Chinese policy. Now, China has banned all cryptocurrency transactions in China. This includes transactions using Bitcoin. China’s central ban says that the country considers all cryptocurrency transactions in the Chinese economy.
Bitcoin and cryptocurrencies like it use a cryptographically verified data tree to store records of financial holdings. It cannot be forged or counterfeited, not does any government control it. Cryptocurrencies are digital assets, span international borders, and stopping people from using them has proven very difficult for many governments. El Salvador has recently recognized Bitcoin as a form of legal tender.
Originally, China proposed that there were a people’s right to own Bitcoin and money. Slowly, this policy has reversed. Now, China’s Central Bank stopped short of banning cryptocurrencies completely. Chinese banks will block goods and services from being bought or sold in China using cryptocurrency.
The country says that the cryptocurrencies like Bitcoin are not backed by any government or bank and that they cannot be used as currency. The central bank also stated that Bitcoin and Tether cannot be circulated in the Chinese economy. Bloomberg reports that: “All crypto-related transactions, including services provided by offshore exchanges to domestic residents, are illicit financial activities.”
However, it seems that for now holding Bitcoin or any other cryptocurrency is not illegal in China. Only transaction with cryptocurrency is illegal. Meaning, the current China Bitcoin ban can probably get worse.
Some speculate China is targeting cryptocurrency because it believes they are being misused. The country also considers cryptocurrency harmful to the environment because “mining” something like Bitcoin requires a lot of computing resources and that in turn increases electrical power use.
As the popularity of Bitcoin and other cryptocurrencies rise, governments across the world are increasingly taking a closer look at these virtual currencies. Because these currencies exist outside the purview of central banks or government bodies, regulators look at them with skepticism. Even after 10 years of Bitcoin, regulators across various nations are not clear on how cryptocurrencies like Bitcoin can be effectively regulated.