China’s latest crypto crackdown is its toughest yet

China is cracking down on crypto.
China is cracking down on crypto.
Image: REUTERS/Florence Lo/Illustration
We may earn a commission from links on this page.

In China, the crypto market has been under constant threat, but it’s never fully been shut down. That may be about to change.

China’s regulators clarified on Friday (Sept. 24) that cryptocurrency transactions and mining are illegal, the country’s strongest stance against the non-government-issued currencies to date. In a statement, the People’s Bank of China (PBOC) said the rules are necessary to “maintain national security and social stability.”

China has taken steps to curb the rise of cryptocurrency since at least 2013, but with crypto markets booming in 2021 and the gradual rollout of China’s state-backed digital yuan, the government is getting more serious about cracking down on crypto.

A timeline of China vs. crypto

The Chinese government sees cryptocurrencies as illegitimate, a risk to the financial sector, a drain on the environment, and something it cannot fully control. Until now, China’s fight against crypto assets had mostly consisted of a piecemeal set of restrictions on the industry. Its actions gradually went from cracking down on individual institutions to banning essentially all crypto activities with its latest announcement. Here’s a look back at what’s happened:

Fall 2013

  • China bans banks from handling bitcoin transactions, calling it a “virtual good” and not legal tender.
  • BTC China, the country’s largest bitcoin exchange, stops taking deposits in yuan under pressure from payment processors and the government.

Winter 2017

  • Amid a crypto boom, China says it is investigating market manipulation and money laundering through bitcoin.

Fall 2017

Fall 2019

  • China considers eliminating crypto mining but eventually declines to act.

Spring 2021

What’s new about China’s latest crackdown?

Nine different government agencies joined the central bank in its statement on Friday. Unlike its previous restrictions, this time around China is issuing a blanket ban on all transactions and business dealings that touch crypto.

In its statement Friday, the PBOC called out bitcoin, ether, and even the stablecoin tether by name, saying they are not “legally reparable” and should not be used. (Stablecoins are generally indexed to the value of fiat currencies, but China is making it clear they don’t pass muster with government regulators.)

Now, not only are financial institutions cut off from providing support to crypto-related businesses, but so are marketing and IT providers, the order said. In other words, any crypto holders or miners are now entirely cut off from legal business dealings in China.

“Whilst this is not a surprise as China has ‘banned’ crypto many times in the past, this time there is no ambiguity,” tweeted PricewaterhouseCoopers crypto leader Henri Arslanian. “Crypto transactions and crypto services of all kind are banned in China. No room for discussion. No grey areas.”