Cryptocurrencies are meant to be decentralized currencies, meaning that no one can control them.
Because the flow of the money and the transaction are not centralized, cryptocurrencies allow users to enjoy anonymity to a certain degree, less fee, and speedy transaction.
This makes cryptocurrencies a rival to governmental institutions, and also threats to anyone who wishes to control the flow of money.
While cryptocurrencies, popularized by Bitcoin and Satoshi Nakamoto, only in 2009, banks on the other hand, have been around for centuries. Yet, cryptocurrencies are already disrupting the centuries-old systems.
And China doesn't like that at all.
This time, China’s central bank declared that all cryptocurrency-related transactions are illegal.
And for that, they must be banned.
"Virtual currency-related business activities are illegal financial activities," said the People’s Bank of China on a page on its website.
"Financial institutions and nonbank payment institutions cannot offer services to activities and operations related to virtual currencies."
The central bank added that digital currencies, like Bitcoin and Ethereum, “are not legal and should not and cannot be used as currency in the market.”
The ban is yet another major step in China’s war on digital currencies.
Previously, Chinese authorities have started banning banks and payment companies from providing cryptocurrency-related services.
"Overseas virtual currency exchanges that use the internet to offer services to domestic residents is also considered illegal financial activity,” the central bank said.
And not only that, as China has also clamped down on cryptocurrency mining.
Energy companies were ordered to stop supplying electricity to cryptocurrency miners in their area.
In a statement made by Yin Youping, the Deputy Director of the Financial Consumer Rights Protection Bureau back in August, it was announced that all cryptocurrencies, especially Bitcoin, do not have real value, because they are not a legal tender.
The announcement caused cryptocurrencies to tumble. Bitcoin dipped by 6%, while Ether plummeted by 10%.
Stocks that are popular in the cryptocurrency world, also slumped in midmorning trading on the NASDAQ, with Coinbase down by 2%, MicroStrategy slipping 5% and Riot Blockchain down over 6%.
China’s cryptocurrency crackdown comes as Beijing is looking to fulfill its climate targets.
At this time, the country is among the world’s biggest carbon emitter. With its eyes set to become carbon neutral by 2060, cryptocurrency-related activities that are allegedly said a pollution, is prohibited.
However, it should be noted that the People’s Bank of China is also working on its own digital currency.
China is seen as a leading contender in the race toward central bank-issued digital currencies, having tried out a virtual version of the yuan currency in several regions in the country.