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  • The People's Bank of China said on Friday that all cryptocurrency-related transactions are illegal.
  • Cryptocurrencies "are not legal and should not and cannot be used as currency in the market," the central bank said.
  • It also banned foreign exchanges from providing crypto services to local residents in China's biggest crackdown move yet.
  • For more stories go to www.BusinessInsider.co.za.

China's central bank declared all cryptocurrency-related transactions illegal on Friday, and said foreign exchanges are banned from providing services to Chinese residents, in its strongest crackdown move yet on the digital asset industry.

Digital tokens such as bitcoin and ether "are not legal and should not and cannot be used as currency in the market," the People's Bank of China said in a statement.

Virtual currencies do not have the same legal standing as fiat currency as they are issued by non-monetary authorities and use encryption technology, it said.

Bitcoin dropped 4% to about $42,560 in the wake of the announcement, according to data from CoinDesk. Ether lost 7.5% to hit $2,881, ada declined 3% to $2.16 and Ripple's XRP moved 7% lower to 92 cents. Dogecoin fell 7% to 20 cents.

The PBOC also said all crypto-related transactions are considered illegal.

That covers a range of operations, such as buying and selling virtual assets as a central counterparty, and providing intermediary or pricing services for crypto transactions. It also includes token issuance financing, crypto derivatives transactions, and other activities suspected of illegal sale of tokens.

"Those who carry out related illegal financial activities (that) constitute a crime shall be investigated for criminal responsibility in accordance with the law," it said.

The central bank specifically called out the services offered by offshore crypto exchanges to Chinese customers via online platforms.

"The provision of services by overseas virtual currency exchanges to Chinese residents through the internet is also an illegal financial activity," it said.

Local employees at foreign crypto exchanges that continue to operate illegally, and those who provide services such as marketing and payments to them, will be investigated in accordance with the law, the PBOC said.

In its directive, the central bank said the hype around crypto has disrupted financial order in China, and provided a breeding ground for fraud, gambling, money laundering and pyramid scheme scams.

National regulators - including the Central Cyberspace Administration, the Supreme People's Court, the Ministry of Industry and Information Technology, and the Ministry of Public Security - plan to work together on these issues, it said.

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