China says all Bitcoin or crypto transactions are illegal, may ban crypto currencies

China on Friday said that all crypto currency transactions in China, including transactions using Bitcoin, will be deemed illegal. China’s central bank in a note said that the country considers all crypto-currency transactions in the Chinese economy illegal.

Although the note, confirmed and reported by Bloomberg, stopped short of banning crypto-currencies this Chinese move effectively means that goods and services cannot be bought or sold in China using cryptocurrency. The country says that the cryptocurrencies like Bitcoin are not backed by any government or bank and that they cannot be used as legal tender.

The central bank also noted on its website that Bitcoin and Tether cannot be circulated in the Chinese economy.

However, it seems that for now holding Bitcoin or any other cryptocurrency is not illegal in China. Only their use is illegal.

In its report, Bloomberg noted: “All crypto-related transactions, including services provided by offshore exchanges to domestic residents, are illicit financial activities, the PBOC said in the statement.”

There are speculations that China is going after crypto-currencies because it believes they are being misused. The country also, reportedly, considers crypto-currencies harmful to the environment because “mining” something like Bitcoin requires a lot of computing resources and that in turn increases power use. There are reports noting that the entire power consumption of computers and server farms used to mine Bitcoin exceeds the power use of a country like Switzerland.

As the popularity of Bitcoin and other crypto currencies rise, governments across the world are increasingly taking a closer look at these virtual currencies. Because these currencies exist outside the purview of central banks or government bodies, they are increasingly facing scrutiny from regulators. India too is considering curtailing the use of Bitcoin, or at least regulate it in a way that it is part of the country’s formal monetary system.

In March earlier this India took its first step to regulate Bitcoin when it made it mandatory for all companies in the country to disclose their dealings in virtual currency in their balance sheets. The directive was passed by the ministry of corporate affairs (MCA) and it had noted that the companies dealing with crypto currencies would have to disclose profit or loss on transactions involving cryptocurrency or virtual currency and the amount of holding.