The Chinese government recently declared all cryptocurrency transactions illegal, causing cryptocurrency exchanges to cut ties with users from mainland China.
The Chinese central bank, together with other nine government agencies, declared on Friday that trading, token issuance, order matching, and cryptocurrency derivatives are now strictly forbidden. This not only includes local cryptocurrency exchanges, but also overseas exchanges that offer services through the internet.
In the joint statement, the government stated that cryptocurrency trading disrupts economics and financial order and is related to illegal and criminal activities. It also claimed that because of this, and to maintain social stability and national security, the government made the decision to restrict these financial assets.
"Recently, virtual currency trading hype activities have risen, disrupting the economic and financial order, breeding illegal and criminal activities such as gambling, illegal fund-raising, fraud, pyramid schemes, and money laundering, and seriously endangering the safety of people’s property," the Chinese government stated.
As we already mentioned, several cryptocurrency exchanges decided to restrict mainland China users from using their services. Seychelles-based Huobi announced that it is not allowing users from mainland China to register anymore, while Binance, which is the largest exchange in the world, announced that they're doing the same and will remove the accounts of existing mainland Chinese users.
This is not the first time that the Chinese government has attempted to intervene in the cryptocurrency markets. Previously, it restricted cryptocurrency mining, claiming that this activity is not environmentally friendly and could affect the country's attempt to become carbon neutral. In 2017, the Chinese restricted the issuance of digital tokens, which is a way to raise money for crypto companies.
Because of this, the main cryptocurrencies in the market lost ground, followed by crypto-related stocks. On Friday, Bitcoin dropped by 0.31% against the US dollar, closing the session at the 42,819.9 level. On Saturday's session, Bitcoin kept losing ground, going down by 0.31% and closing at the 42,686.8 level. In weekly terms, Bitcoin dropped by 11.63% against the greenback and gave up all the gains it made the previous week.
Despite this, Bitcoin has been recovering since the beginning of the week. On Sunday, it went up by 1.21% against the US dollar, closing the session at the 43,203.4 level. In weekly terms, the cryptocurrency gained 1.98% against the greenback.
Both Ethereum and Ripple have also gained ground since the beginning of the week. In weekly terms, the former has gained 5.95% against the US dollar, after dropping by 14.97% last week, while the latter has so far climbed by 2.52%, breaking a three-week losing streak.
Other countries are also attempting to regulate cryptocurrencies. Recently, the US Treasury Department announced sanctions against cryptocurrency exchange Suex, alleging that it was laundering ransoms for cyberattacks. Ransomware payments went up by $400 million in 2020, four times higher than the 2019 figure.
By 10:43 GMT, Bitcoin gained 1.94% against the US dollar, hitting the 43,903.0 level.