South Florida Criminal Defense Lawyer Blog
Late last week the People’s Bank of China stated in a press release, “virtual currency-related business activities are illegal financial activities.” The Bank claimed that such virtual currencies endanger “the safety of people’s assets.” This means that overnight, one of the world’s largest cryptocurrency markets forced millions of users to sell their digital currencies. In the wake of this announcement, the price of Bitcoin fell by over $2,000.
This is only the most recent move in what has been a series of regulations against Bitcoin and other digital currencies in China. The Chinese government sees cryptocurrency as an unsafe and vulnerable investment, as well as an easy way for criminals to launder their illegal earnings. Although crypto-trading has been illegal in China since 2019, trading was made possible using foreign exchange outlets.
But this year, China has been stamping down on cryptocurrency trading, tightening regulations and enforcing stricter compliance. In late May, the Chinese government informed traders that they would no longer be entitled to the traditional legal metrics of protection if they continued to trade. The following month, the government ordered all financial institutions to block all transactions involving cryptocurrencies.
Last week’s announcement is the harshest restriction yet, clearly evidencing the Chinese government’s intent to stamp out all crypto trading. activity within the country’s borders. The statement informed citizens that all digital trading was a crime, and that the State would soon begin prosecuting those in violation. Further, all foreign exchange outlets making trading possible to China are also in violation of Chinese law.
How Does this Affect U.S. Crypto Traders?
All US investors should hear this news and be concerned primarily with one thing: volatility. Last week, Bitcoin fell 4% within a 24-hour period, following the press release, while Ether fell over 6% in the same period. One of the main critiques of cryptocurrencies surrounds their volatility. Experts already warn users to exercise caution when trading cryptocurrency, due to the volatile nature of the transaction.
But there is a larger, overarching concern for US-based investors. If the US follows in China’s path and strikes down on cryptocurrency investing, trading will be turned on its head. The US government has been cracking down on cryptocurrencies more and more. The US government has begun viewing digital currencies as a burden to their regulation of currency management.
Cryptocurrency experts are warning of an incoming influx of regulations over the industry in the coming years. Even US lawmakers have chimed in on the debate. The Securities and Exchange Commission chairman stated that the SEC is working diligently to create new regulations for cryptocurrencies.
For US-based cryptocurrency investors, traders, and businesses, this means that the very existence of digital trading is shrouded by a legal uncertainty, which may not clear anytime soon. This means continued turbulence for Bitcoin and other digital currencies, until the storm settles.