Transactions involving Bitcoin and other virtual currencies were declared illegal in China and their prices dropped

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China’s Central Bank on Friday declared all transactions involving Bitcoin and other virtual currencies illegal, as part of its campaign to block use of unofficial digital money. The agencies said that overseas crypto exchanges would be blocked from providing services to Chinese residents through the internet. Ten Chinese state authorities, including the PBoC, the Cyberspace Administration of China and the Ministry of Public Security, have established a “coordination mechanism” to prevent financial players from participating in any cryptocurrency transactions. “Virtual currency derivative transactions are all illegal financial activities and are strictly prohibited,” the People’s Bank of China said on its website. 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. Instead, the 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. Bitcoin fell about 8% on the news.

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Ethereum, another leading cryptocurrency, was down 11%. The price of bitcoin fell 8% to $41,241, according to Coin Metrics data. Ethereum dropped to $2,808. Beijing has cracked down sharply on crypto this year. The Chinese government moved to stamp out digital currency mining, the energy-intensive operation that validates transactions and produces new coins. Vijay Ayyar, head of Asia Pacific at digital currency exchange Luno, said that while China’s position on crypto was not new, it was enough to pressure the market. Global markets have been roiled lately by fears of a potential collapse for embattled Chinese property developer Evergrande.

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