Cryptocurrency price crash fears as China announces complete ban on digital assets

Cryptocurrency price crash fears as China announces complete ban on digital assets

A notice posted on the Chinese central bank website said it is now illegal for anyone in China to purchase cryptocurrencies from abroad. Cryptocurrency mining and providing support to crypto businesses has also been made against the law.

Beijing is attempting to stave off capital flight, amidst fears that the massive Evergrande Real Estate Group could collapse.

Earlier this year Cambridge University academics estimated 65 percent of the world’s Bitcoin mining takes place in China.

In a statement the central People’s Bank of China (PBoC) said: “Virtual currency-related business activities are illegal financial activities.”

They claimed this “seriously endangers the safety of people’s assets”.

In May Chinese financial institutions were banned from providing cryptocurrency related payments.

As a result the value of Bitcoin fell by over 20 percent.

Another crackdown in June, orchestrated by the PBoC, caused another fall in value.

However GlobalBlock, a UK based digital asset broker, said it had seen “little in the way of knee-jerk reaction” to the latest announcement.

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“The current adoption rate at the moment is significant and this is only positive for crypto.”

GlobalBlock pointed out the Chinese crypto market has previously proven highly resilient.

They commented: “We’ve also seen this before from China where news of bans have been reported over the years, but it has not prevented adoption of Bitcoin and digital assets from continuing their upward trend.”

State crackdowns have already had a big impact on crypto mining in China.

Research from the Cambridge Centre for Alternative Finance, published earlier this year, found China’s share of crypto mining fell from 75.5 percent in September 2019 to 46 percent in April 2021.

Speaking to the BBC David Gerard, author of Attack Of The 50 Foot Blockchain, said some Bitcoin miners had moved out of China.

He said: “Miners pack shipping containers with mining rigs so that in effect they are mobile computer data centres, and they are now trying to ship those out of China.”

The Evergrande Real Estate Group crisis has sparked wider concerns about the health of China’s previously booming economy.

Writing for the Daily Telegraph Ambrose Evans-Pritchard commented: “Deflating an economy that is so hyper-leveraged to property is going to take years and will be untidy.

“China will almost certainly avert a Minsky crisis but it may not avert a long grinding semi-slump that profoundly changes the world’s perception of the country.”

Published at Fri, 24 Sep 2021 11:45:00 +0000