China Makes Cryptocurrency Illegal
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China is banning cryptocurrency transactions. And as NPR's David Gura reports, it's sending shockwaves through a sector valued at $2 trillion that's been largely free from government interference.
DAVID GURA, BYLINE: Part of cryptocurrency's popularity worldwide stems from the fact that the digital asset is free from government control. And it really hasn't been regulated. That's appealing to many Chinese citizens. But China's leaders have spent years trying to crack down on crypto. Winston Ma teaches securities law at NYU. And he says Friday's announcement is an escalation.
WINSTON MA: I think the implication will be profound and major.
GURA: As cryptocurrencies get bigger and they become more mainstream in many countries, China is going against trend. In the world's second-largest economy, you're no longer able to buy them or sell them. Banks aren't allowed to process transactions. And there's been a crackdown on the infrastructure that supports crypto. Ma says this is a government-wide effort.
MA: When you have 10 ministries involved - right? - that's very serious.
GURA: Cornell economist Eswar Prasad is the author of a new book called "The Future Of Money," and he says China's leadership is wary of competition and of losing control.
ESWAR PRASAD: I think this speaks to the Chinese government's desire to make sure that the payment system does not get entirely managed by the private sector.
GURA: It's targeted big companies that have pioneered digital payments, including Alibaba and WeChat. And China is developing a digital version of its own currency. Prasad says lawmakers and regulators around the world will pay close attention to the rules China has put in place.
PRASAD: Because of concerns about domestic financial stability, as well as illicit capital flows across international borders.
GURA: This week, the Treasury Department sanctioned a site where cryptocurrency can be bought and sold because of its role in ransomware attacks. Crypto appeals to investors, to iconoclasts and to international criminal syndicates. In the U.S., the chief securities regulator, SEC Commissioner Gary Gensler, said in a recent speech there's a need for more safeguards.
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GARY GENSLER: Investors really aren't getting the information that judge the risk and understand the risks. And I fear that if we don't address the issues, I worry a lot of people will be hurt.
GURA: After China announced its ban, the price of Bitcoin fell by more than 5%. Now, that may sound like a lot, but that kind of volatility is very common. Some U.S. lawmakers who oppose stricter regulation welcomed China's ban. And they're using it to make the case to steer clear of more rules. As they see it, a huge player has been taken out of the global crypto economy. And that's an opportunity for the U.S. David Gura, NPR News, New York. Transcript provided by NPR, Copyright NPR.