China bans Bitcoin, marking a major reversal of Chinese policy. Now, China has banned all cryptocurrency transactions in China. So, this ban includes transactions using Bitcoin. China’s central bank says that the country considers all cryptocurrency transactions in the Chinese economy as subverting the Chinese government’s monetary control.
Bitcoin and cryptocurrencies like it use a cryptographically verified data tree (sometimes called a public ledger) to store records of financial holdings. No government controls the records. Fraudsters and criminals cannot forge or tamper with the records–not easily. Cryptocurrencies are digital assets that international borders. Stopping people from using them has proven very difficult for many governments. Though, El Salvador has recently recognized Bitcoin as a form of legal tender.
China Bans Bitcoin, Reversing Previous Policy
Originally, China proposed that there was a people’s right to own Bitcoin and money. Slowly, this policy has reversed. Presently, China’s Central Bank stopped short of banning cryptocurrencies completely. Chinese banks will block goods and services from being bought or sold in China with cryptocurrency.
Recently, the country says that the cryptocurrencies like Bitcoin are not backed by any government or bank and that they cannot be used as currency. The central bank also stated that Bitcoin and Tether cannot be circulated in the Chinese economy. Bloomberg reports that: “All crypto-related transactions, including services provided by offshore exchanges to domestic residents, are illicit financial activities.”
Bitcoin isn’t Technically Illegal–Yet
However, China banning Bitcoin isn’t the end of the story. Bitcoin nor any other cryptocurrency is not illegal in China. Not yet. For now, the government has only banned transactions in currency. In other words, you can own it but you cannot use it. Unfortunately, the current China Bitcoin ban can probably get worse.
Now, some speculate China is targeting cryptocurrency because it believes criminals are using them. The country also considers cryptocurrency harmful to the environment because “mining” something like Bitcoin requires a lot of computing resources and that in turn increases electrical power use.
The Cat is Out of the Bag
As the popularity of Bitcoin and other cryptocurrencies rise, governments across the world are increasingly taking a closer look at these virtual currencies. Because these currencies exist outside the purview of central banks or government bodies, regulators look at them with skepticism. After 10 years of Bitcoin, regulators across various nations do not know how to effectively regulate cryptocurrency.
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