China bans Bitcoin - crypto courses plummet

While El Salvador accepts Bitcoin as legal tender, the world power China is taking a different path: Bitcoin trading will be illegal in the future - violations will be punished.

Beijing - Almost two thirds of all Bitcoin were mined in China earlier this year.

But the decentralized crypto currencies have long been a thorn in the side of the state.

In May, the Middle Kingdom banned payment transactions with cryptocurrencies.

On this Friday, the Chinese central bank declared that any kind of trade in Bitcoin and Co. is now considered "illegal financial activity".

The Bitcoin course gave way.

Bitcoin & Co .: All activities related to cryptocurrencies in China are now illegal

The Chinese central bank's announcement on Friday indicated that all activities related to cryptocurrencies would be classified as "illegal financial activity" with immediate effect. Offenses would be punished severely. Foreign online services that enable the Chinese to access digital currencies are also not allowed. The People's Bank of China explicitly mentioned the popular virtual currencies Bitcoin, Ether and Tether in its report. Crypto mining is now also officially prohibited in the Middle Kingdom, although parts of the country had already implemented this ban in the course of this year. Many miners had migrated to South America, Iran or Kazakhstan, for example. The pure trading of crypto currencies has been banned in China since 2019, but was continued via foreign crypto exchanges.

The decision of the Chinese central bank not only includes trading, but also the sale and transactions of crypto derivatives.

The price of numerous cryptocurrencies dropped after the news became known: Bitcoin, the cryptocurrency that has existed since 2009 and is currently the most valuable, initially fell from 45,000 US dollars to 43,000 dollars and is now at a rate of around 42,000 dollars.

Ethereum lost over ten percent, as did Polkadot.

The market volume of all around 12,000 cryptocurrencies worldwide fell from around 2.0 to 1.9 trillion dollars.

Digital yuan instead of cryptocurrencies?

The Chinese central bank had already declared war on cryptocurrencies in advance by creating the digital yuan. The European Central Bank is pursuing a similar mission, it is currently testing the digital euro. This is not a crypto currency, but an alternative to it: The digital euro is neither decentralized nor anonymous. Instead, it is secure central bank money in digital form. So far, only commercial banks have been able to open an account with the ECB - the digital euro would also make this possible for private individuals. But critics view this with skepticism: Cash is anonymous, as is cryptocurrencies to a certain extent. The digital euro or yuan, on the other hand, would leave digital traces behind.

Technically speaking, it could even be earmarked.

Certain products could then not be purchased with the digital yuan or euro.

This would be a conceivable form of application, especially with regard to the social credit system in China.

This system awards social points for desirable behavior and subtracts points when citizens do not act “correctly”.

For example, those who do not have enough points are not allowed to travel abroad or have no access to certain jobs.

Critics such as the former President of the Ifo Institute, Hans-Werner Sinn, also see monetary devaluation through the back door as a possible consequence.

The digital yuan is considered to be very advanced and is already being tested in field trials.

The ECB's digital euro is currently in a 24-month test phase.

Meanwhile, another piece of news from China worries the markets: The real estate giant Evergrande is about to end.