China's central bank has doubled down on its moves to crush cryptocurrency and announced that all transactions involving cryptocurrencies are illegal, effectively signaling an outright ban.

People’s Bank of China said in an announcement on Friday services offering transactions, trading, token issuance, and derivatives for cryptocurrencies are “all illegal financial activities and are strictly prohibited.” They added that overseas virtual currency exchanges that provide services to Chinese residents through the Internet were also engaging in illegal financial activity. 

The announcement, written in Chinese, is currently not mentioned on the English language version of the website.

Cryptocurrency markets have been struggling in recent weeks and this announcement triggered another downturn, with the price of Bitcoin falling by more than $2,000 (£1,460) in the wake of the news, while other leading cryptocurrencies like Ether, EOS, Litecoin, and Dash all saw significant losses. 

Meanwhile, China's National Development and Reform Commission (NDRC), an important macroeconomic management agency, has recently said it would launch a nationwide crackdown on cryptocurrency mining, according to Reuters. The NDRC said that crypto mining activity is risky and contributes very little to China's economic growth. It also cited environmental concerns, arguing that the cryptocurrency mining industry consumes a vast amount of energy and could hamper the country's carbon neutrality goals.

This latest move by China has been brewing for a while. In May 2021, they signaled a crackdown on cryptocurrency payments saying banks and online payment channels should not accept cryptocurrencies as payment or offer services related to them.

The reason behind this crackdown, which is also being seen in many countries across the world, is multifaceted. In their recent statement, China’s central bank said the rising popularity of cryptocurrencies has resulted in “disrupting economic and financial order, breeding money laundering, illegal fund-raising, fraud, pyramid schemes, and other illegal and criminal activities.” 

However, as any crypto-bro would love to tell you, the volatile new world of cryptocurrency also threatens to shake up the global financial system and undermine the strength of national fiat currencies. 

The Chinese Government has been testing its own national digital currency, electronic Chinese yuan, or any, in a number of major cities across the country. Many other countries, including the UK and the US, have also started developing their own central bank digital currency (CBDC). Like cryptocurrencies, CBDCs attempt to provide digital money that can move faster and make online financial tools more accessible. Unlike cryptocurrencies, CBDCs will not be decentralized and central banks will maintain some degree of control over them.