On Friday, China officially declared all cryptocurrency-based financial transactions illegal.
The announcement was made alongside a nationwide ban on mining any and all cryptocurrencies.
In the wake of the announcement, bitcoin dropped nearly 7 percent, floating just above the $40,000 mark. Since then, the cryptocurrency leader has regained some of those losses.
As the repercussions of China’s ban trickle throughout the financial world, context is essential.
From the inception of cryptocurrency, China has been resistant.
Hoping to maintain control of its population’s finances, China has consistently sought to regulate cryptocurrency transactions.
China is barreling towards the implementation of a digital yuan—aka the country’s central bank digital currency—early next year.
Here is a timeline of the history of cryptocurrency and China:
June 2009: Only a few months after the launch of bitcoin, China’s Ministry of Commerce and Ministry of Culture bans residents from using digital currencies as means of making payments for real-world goods and services. This ban also includes the use of digital currencies utilized within video games.
December 2013: The People’s Bank of China (PBOC) takes a first step in regulating bitcoin by ordering all financial institutions and third-party providers to stop using bitcoin. The cost of bitcoin plummeted by 50 percent.
April 2014: The PBOC orders commercial banks and all payment companies to cease bitcoin trading and to close bitcoin accounts within 14 days.
September 2017: Chinese authorities ban ICOs, effectively stopping the sale of tokens. In addition, the government forces all cryptocurrency exchanges operating in the country to terminate services by the end of the month. Authorities cite ties between cryptocurrency and criminal activities as a rationale for the move.
January 2018: The PBOC announces that the State Administration of Foreign Exchange will crack down on bitcoin mining through the Leading Group of Internet Financial Risks Remediation.
August 2018: Authorities officially ban cryptocurrency activities in all capacities. The document calls out communication channels such as WeChat, prohibiting them from hosting any events or activities related to cryptocurrency.
April 2019: A draft from the National Development and Reform Commission (NDRC) claims the regulator is working to eliminate permanently all cryptocurrency activities in China.
May 2020: Authorities in the province of Sichuan, the Chinese hub of cryptocurrency mining, begins seeking approval to ban mining.
October 2020: Officials threaten fines of five times the value of the cryptocurrency funds in offenders’ accounts if found to be trading cryptocurrencies.
December 2020: Authorities in the province of Yunnan, which is home to the largest mining hubs in China, are ordered to stop providing power to miners, resulting in a steep drop in bitcoin’s hash rate.
May 2021: Officials ban financial institutions and all payment organizations from providing any transaction-related service related to cryptocurrency, leading to the banning of payment gateways. Authorities also warn users against speculative trading.
June 2021: Over 1,100 people are arrested for using cryptocurrencies in alleged illegal activities, including laundering and internet scams. Weeks later, the government cracks down on mining in the province of Sichuan, citing environment pollution and resource consumption concerns. The move sparks a global conversation about the future homes of large-scale mining operations.
July 2021: The PBOC shuts down an unnamed company believed to allowing cryptocurrency transactions and warns other institutions against allowing any service related to a virtual currency.
September 2021: The Chinese government declares all cryptocurrency transactions illegal, escalating its war on cryptocurrency.
In light of last week’s decision, I hosted an emergency episode of Hold My Purse with the host of the podcast The Cheat Code, Cami Nwokedi, which you can find below.