China Declares All Cryptocurrency Transactions Including Bitcoin Illegal, Vows to Stop Illegal Mining

"All cryptocurrencies, including Bitcoin and Tether, are not fiat currency and cannot be circulated on the market," the People’s Bank of China said on its website.

(Representative Image/Getty)

New Delhi: In yet another jolt to the crypto-currency industry, China's Central Bank on Friday declared all transactions including Bitcoin and other virtual currencies illegal. The move is said to be a bold step block the usage of unofficial digital money.

"All cryptocurrencies, including Bitcoin and Tether, are not fiat currency and cannot be circulated on the market," the People’s Bank of China said on its website.

All crypto-related transactions, including services provided by offshore exchanges to domestic residents, are illicit financial activities, the PBOC said in the statement.

Chinese banks were banned from handling cryptocurrencies in 2013, but the government issued a reminder this year. 

The reminder reflected official concern regarding cryptocurrency mining and trading might still be going on or the state-run financial system might be indirectly exposed to risks.

Soon after the reminder, Bitcoin witnessed a massive dip with the digital currency dropping as much as 5.5 per cent on Friday. The notice complained Bitcoin, Ethereum and other digital currencies disrupt the financial system and are used in money-laundering and other crimes.

Virtual currency derivative transactions are all illegal financial activities and are strictly prohibited, the PBOC said further. 

Promoters of cryptocurrencies say they allow anonymity and flexibility, but Chinese regulators worry they might weaken the ruling Communist Party's control over the financial system and say they might help to conceal criminal activity, AP reported. 

According to reports, People's Bank of China is developing an electronic version of the country's yuan for cashless transactions that can be tracked and controlled by Beijing.

The move by China comes weeks after El Salvador became the first country in the world to adopt bitcoin as an official currency.