China declares cryptocurrency transactions illegal, Bitcoin tumbles

Yahoo Finance's Jennifer Schonberger breaks down China's latest crackdown on cryptocurrencies.

Video transcript

- Let's ask Jennifer Schonberger what she thinks, as she is our brand spanking new crypto reporter based down in DC. Jen, Thanks so much for being here. What's your take on this new statement here this morning? And, I don't know, you're down in DC. Is the US going to ban crypto trading? I don't think so.

JENNIFER SCHONBERGER: Hey, good morning, Julie-- Good morning, Julie. Good morning, Brian. Great to see you guys. Happy Friday.

Yeah, I don't see the US outright banning crypto. I think regulators here understand that this is the way forward. This is the new innovation that we're going to be dealing with. This is a reality.

The question is, how you create rules of the road for that. And I think members of the SCC, the OCC, members of Congress, led by Senator Elizabeth Warren, are really scrutinizing that right now, but to your question on China, certainly this is the most sweeping action we've seen to date so far by Chinese authorities.

And as you said, it comes on the back of that ever grand news of Chinese authorities like to have control over their economy and cryptocurrency can be very speculative. And this isn't the first action we've seen by China's government on this front. You know, they banned crypto exchanges several years ago and people have found ways around that in transacting.

Now they're saying, OK, Alipay, Alibaba, we're not going to be accepting payment in crypto anymore. They've been cracking down on mining, which is very energy intensive. So as you guys had mentioned, we're seeing mining for crypto go elsewhere around the world, not just Singapore, but other places as well.

So this is not that surprising to me and I think that it just is a way for the Chinese government to crack down on potential more speculation. They're seeing it in the real estate sector. They don't want to see that again in the crypto sector. And just one more point here, they are-- they were the first to come out with a central bank digital currency.

And so many people have said, this is the new space race and that the US needs to really follow in tow if they want to lead the global economy. So it's interesting to see China cracking down on some of these more private cryptocurrencies, but still moving forward with its central bank digital currency. I think it speaks to, where do Chinese authorities fall in terms of blockchain and in terms of embracing that technology to wring out costs from their economy and really boost growth?

- Jen, I know you've been digging into the regulatory aspect to crypto since you joined us. I mean, you don't get-- Do you get the sense that the US government or US politicians, one, have any clue on what to do with Bitcoin? And two, do they want to crack down like China is?

JENNIFER SCHONBERGER: So I think they're trying to understand what authorities they have right now to regulate this. Gary Gensler from the SCC seems to think that a lot of this can be regulated in the form of securities. You've seen him go after Coinbase and point to certain activities as illegal, saying, no that, that needs to be classified as a security and we should have jurisdiction over that. However, in many cases, the regulators don't have authority and they need new authority from Congress. So it's kind of this back and forth finger-pointing between senators, members of the House and regulatory authorities.

- Well Jen, we look forward to keeping in touch with you as all of this unfolds and as we start to get more regulatory comments on all of this. Again, welcome aboard. Jen Schonberger joining us from DC to talk crypto. Appreciate it.