China escalated its campaign against cryptocurrencies Friday by declaring virtual-currency business activity illegal and directing authorities to intensify the shutdown of cryptocurrency mining, sending Bitcoin and other digital assets lower and further restricting one of the industry’s largest former markets.

The People’s Bank of China and nine other agencies said in a joint notice that Bitcoin, Ether, Tether and similar virtual currencies do not have the same legal status as fiat money and cannot circulate as currency. The policy classifies exchange services, matching trades, token issuance, derivatives and services provided by overseas exchanges to Chinese residents as illegal financial activity.

In an accompanying question-and-answer document dated September 24, the central bank said cryptocurrency speculation had disrupted economic and financial order and contributed to money laundering, fraud, illegal fundraising, pyramid schemes and other crimes. Authorities said they would improve monitoring of domestic users and companies that facilitate access to overseas trading platforms.

The prohibition reaches offshore exchanges and support services

China had already barred domestic cryptocurrency exchanges and initial coin offerings in 2017 and repeatedly instructed banks and payment companies not to process crypto transactions. The new directive goes further by explicitly defining services offered by overseas exchanges to residents inside China as illegal, closing one of the principal routes traders used after domestic exchanges were forced out.

The order also targets the infrastructure around trading. Financial institutions and payment companies may not provide accounts, clearing or settlement services for virtual-currency activity, while internet companies are expected to restrict marketing and online access to illegal platforms. Employees of overseas exchanges who provide services to Chinese residents can also face legal scrutiny.

Markets reacted quickly. Bloomberg reported that Bitcoin fell as much as 4.5 percent after the announcement, while Ether and crypto-related equities also declined. The price reaction was smaller than some earlier Chinese crackdowns, reflecting how much trading and mining activity had already moved outside the country.

A Guardian report noted that Beijing has restricted cryptocurrency repeatedly since 2013, but Friday’s language is among the most comprehensive efforts yet to eliminate avenues for domestic participation.

Mining policy shifts from provincial restrictions to a national phaseout

China’s National Development and Reform Commission simultaneously detailed a broader campaign against cryptocurrency mining, the energy-intensive process through which networks such as Bitcoin validate transactions and issue new coins. In a September 24 policy explanation, the commission said mining consumes large amounts of energy, contributes relatively little to the broader economy and complicates national goals for energy conservation and carbon reduction.

Provincial governments in Inner Mongolia, Sichuan, Xinjiang and other mining centers had already moved against operators earlier this year. The national approach calls for tighter electricity monitoring, restrictions on new projects and orderly withdrawal of existing mining operations, making clear that miners should not expect to relocate within China and resume business elsewhere.

The commission also said mining should not be disguised as data-center, cloud-computing or digital-economy activity. That provision is designed to prevent operators from using industrial classifications intended for legitimate computing infrastructure while running specialized machines dedicated to cryptocurrency networks.

The Washington Post reported that the two announcements combine financial-control and environmental objectives: the central bank wants to limit unregulated capital flows and speculative risk, while economic planners want to reduce electricity use and emissions from mining.

Beijing is separating blockchain technology from private currencies

China’s stance is not a rejection of digital finance itself. The central bank is developing an official digital yuan and has expanded pilots in major cities. A July central-bank briefing said more than 20 million individual digital-yuan wallets had been opened by the end of June, with tens of millions of pilot transactions completed.

The contrast is fundamental. Bitcoin and similar cryptocurrencies operate outside direct state monetary control and can move value across borders through decentralized networks. The digital yuan is a central-bank liability designed to operate within China’s regulated payments system. By squeezing the first while expanding the second, Beijing is defining the kind of digital money it is willing to support.

The PBOC had already summoned banks and payment providers in June to reinforce restrictions on speculative trading. A regulatory account of that meeting said institutions were told to identify customer accounts associated with crypto exchanges and over-the-counter dealers and to cut payment links to such activity.

The global industry is being pushed further away from China

China once accounted for a large share of global Bitcoin mining and trading. The crackdown has accelerated a geographic shift toward the United States, Central Asia and other jurisdictions where electricity is available and regulators remain more tolerant. Mining equipment, technical expertise and investment capital can move, even when physical facilities cannot.

A Reuters-based report said the PBOC’s new rules bar financial institutions, payment companies and internet firms from facilitating crypto trading and reinforce the message that private digital currencies cannot circulate as conventional money in China.

The immediate market damage may therefore be less important than the structural message. Beijing is not merely warning investors about volatility or regulating exchanges more tightly. It is attempting to remove cryptocurrency trading and mining from the domestic economy while developing a state-controlled digital alternative.

For a global industry built around resistance to centralized control, the Chinese decision creates both a challenge and a test. The largest national crackdown yet may reduce participation inside China, but it will also demonstrate how readily decentralized networks can relocate when one major government decides that their economic and political costs are unacceptable.