China’s central bank has declared that all transactions of cryptocurrencies are illegal, thereby banning digital tokens such as Bitcoin. “Virtual currency-related business activities are illegal financial activities,” the People’s Bank of China said, warning it “seriously endangers the safety of people’s assets”.

China is one of the largest cryptocurrency markets in the world. Fluctuations in the price of crypto in China often impact the global price of cryptocurrencies. Therefore, it comes as no surprise that the price of Bitcoin fell by more than $2,000 due to the Chinese announcement.

The People’s Bank of China said that in recent years, trading of Bitcoin and other virtual currencies had become “widespread, disrupting economic and financial order, giving rise to money laundering, illegal fund-raising, fraud, pyramid schemes and other illegal and criminal activities”. This was “seriously endangering the safety of people’s assets,” the PBOC added.

China sees crypto as a volatile investment at best, and a way to launder money at worst. Officially, trading cryptocurrency has been banned in China since 2019, but has continued online through foreign exchanges. However, there’s been a significant crackdown this year.

In May this year, Chinese state intuitions warned buyers that they’d have no protection for trading Bitcoin and other cryptocurrencies online, as government officials vowed to increase pressure on the industry. In June, China told banks and payment platforms to stop facilitating transactions and issued bans on “mining” cryptocurrencies (the trade of using powerful computers to make new coins).

But Friday’s announcement has made it crystal clear that China wants to shut down cryptocurrency trading in all its forms. The statement clarifies that those involved in “illegal financial activities” are committing a crime and will be prosecuted. Foreign websites providing such services to Chinese citizens online will also be considered an illegal activity.

With its relatively low electricity costs and cheap computer hardware, China has been one of the world’s primary centers for mining for a long time. The activity is so prevalent in China that gamers sometimes blame the industry for a global shortage of powerful graphics cards, which miners use to process cryptocurrencies.

China’s crackdown has hit the mining industry as well. In September 2019, China accounted for 75% of Bitcoin energy use worldwide. By April 2021, it had fallen to 46%. The crypto crackdown also leaves room for China to introduce its own digital currency. It is already in the pipeline, allowing the central government to monitor transactions.