Other currencies such as Ethereum and Dogecoin drop around 8%
A blow to bitcoin in China. The Asian giant’s central bank has announced a series of measures that effectively prohibit the exchange, mining and circulation of cryptocurrencies. In fact, any financial transaction carried out with cryptocurrencies will be considered an illicit activity, even when conducted through platforms outside the country’s borders. The authority’s statement specifies that “cryptocurrencies are not legal tender” and declares that virtual currency transactions are “illegal” because they “disrupt the economic and financial order”.
The People’s Bank of China has pledged to eradicate activity in this market, after already promising in May to take tough measures as part of its efforts to prevent financial risk. Bitcoin fell 4.6%, while ethereum and dogecoin dropped around 8% after the news broke.
Chinese authorities have been warning for months that they consider cryptocurrencies a factor of financial destabilization for the country; they now also link this activity to fraud and money laundering, given that cryptocurrency transactions are not traceable. They also link cryptocurrency mining to pollution, due to the large amounts of energy it consumes. China is the country with the most computer farms in the world dedicated to mining bitcoin, the most popular virtual currency.
The energy consumption generated by these facilities is equivalent to that of a mid-sized country, such as Greece or the Czech Republic. China’s economic planning agency, in a statement separate from the Central Bank’s, indicated that banning this activity is urgent in order to meet emissions targets, in a context of rising energy prices.
Cryptocurrencies are digital currencies whose ownership is guaranteed by an encrypted database distributed among all operators of the system, which bypasses the need for a central bank or financial institution to centralize payments. Obtaining them requires powerful computers to solve mathematical algorithms which, since the supply of coins is fixed, grow increasingly complex, forcing miners to carry out more complex and more energy-intensive processes
The central bank has also prohibited financial institutions, payment companies and Internet firms from facilitating cryptocurrency trading. The government “will take drastic measures against speculation in virtual currencies and related financial activities, in order to safeguard people’s property and maintain economic, financial and social order”, the People’s Bank of China said in a statement on its website.
Source: El País
