China Makes Cryptocurrency Transactions Illegal: An Explainer

On the September 24, 2021, 10 government authorities, including the People’s Bank of China (PBOC), jointly issued a notice to clarify that cryptocurrency is not a legal tender. Further, all cryptocurrency transactions in China are considered illegal, including offshore exchanges to provide services to Chinese citizens. The authorities stated that China-based employees of offshore crypto exchanges or any companies providing services to them will be investigated and prosecuted. See more details here.

On the same day, the National Development and Reform Commission (NDRC) and 10 other authorities issued another circular (the NDRC circular) to local governments on how to wind down cryptocurrency mining activities in their areas.

China joins a growing list of countries where cryptocurrencies are banned or restricted. Egypt, Indonesia, and Nepal are among where these restrictions exist.

China has one of the world’s biggest cryptocurrency markets, which is why global price of cryptocurrencies is affected by fluctuations in the Chinese market. With the announcement of the banning of cryptocurrencies, the price of bitcoin fell by more than US$2,000.

This ban is part of a national crackdown on the currency form. The Chinese government sees it as a volatile investment and have concerns about it being used to launder money. The People’s Bank of China said of “[cryptocurrency] seriously endangers the safety of people’s assets”.