China Says All Crypto-Related Transactions Are Illegal And Must Be Banned

China’s central bank said all cryptocurrency-related transactions are illegal and must be banned, sending the strongest signal yet on its determination to crack down on the industry.

All cryptocurrencies, including Bitcoin and Tether, are not fiat currency and cannot be circulated on the market, the People’s Bank of China said on its website. All crypto-related transactions, including services provided by offshore exchanges to domestic residents, are illicit financial activities, the PBOC said in the statement.

This latest harsh directive, which sent Bitcoin dropping as much as 5.5% on Friday, comes as global markets grow increasingly concerned over a debt crisis involving property developer China Evergrande Group. The Chinese government may also be responding to signs that miners are disguising their activities to stay in business.

Vijay Ayyar, head of Asia Pacific with cryptocurrency exchange Luno in Singapore, said that while the Chinese government has made similar statements in the past, it is “a slightly nervous environment for crypto with the recent SEC comments and overall macro environment with the Evergrande news. So any comments of this nature will cause a sell-of in risky assets.”

The nation’s economic planning agency also said it is an urgent task for China to root out crypto mining, and the crackdown is important to meet carbon goals.

Investors should expect “knee-jerk price reaction as China takes the wind out of Bitcoin’s sails,” said Antoni Trenchev, co-founder of crypto lender Nexo.  “The recent rebound from just below $40,000 has likely run its course for now.”