"China's ban on all cryptocurrency trading activity will have some short-term impact on the currency's valuation, but long-term implications are likely to be muted," said Ganesh Viswanath Natraj, an assistant professor of finance at Warwick Business School.
While there are probably still Chinese onshore speculators, activity has already shifted out of the country over the years, said Clara Medalie, the research lead at data provider Kaiko.
A proponent of cryptocurrency, Sen. Pat Toomey, R-Pa., ranking member on the Senate Banking Committee said in a tweet that China’s announcement is a big opportunity for the U.S.
“Beijing is so hostile to economic freedom they cannot even tolerate their people participating in what is arguably the most exciting innovation in finance in decades,” Mr. Toomey said. “Economic liberty leads to faster growth, and ultimately, a higher standard of living for all.”
Cryptocurrency mining's massive energy consumption is also part of the reason the industry is coming under scrutiny. In a separate statement, China's economic planning agency said it's an urgent task to root out cryptocurrency mining and the crackdown is important to meet carbon goals.
China is facing a severe power crisis that's already roiled commodities from aluminum to steel, and several industries have seen their power supplies curbed in the past few weeks.
The country is home to a large concentration of the world's cryptocurrency miners and as recently as April had a 46% share of the global hash rate, a measure of computing power used in mining and processing, according to the Cambridge Bitcoin Electricity Consumption index.
"The Chinese regulators have always been extreme in their views and these comments are not new," said Vijay Ayyar, head of Asia-Pacific with cryptocurrency exchange Luno in Singapore.
"The interesting part is also why they continue making these statements. It's probably because they sense continued unabated activity in China and hence having to go on an overdrive," Mr. Ayyar added.
China's renewed crackdown against cryptocurrency mining and trading activity started in May. That was the first time top officials had singled out cryptocurrency mining at the national level since dropping it in 2019 from a proposed list of dirty industries to be eliminated.
The move caused a collapse in cryptocurrency prices, with bitcoin losing about half its value between April and July this year. While the market has since recovered some ground, it's still far below the all-time high of $63,000.
Rosario Ingargiola, founder and CEO of Bosonic Digital, a platform that eliminates counterparty credit and settlement risk across digital asset markets, said in an email that the announcement out of China was not surprising.
“China has been trying to control monetary outflows for decades, and virtually all payments are already electronic so crypto has been a natural fit for people in the region,” Mr. Ingargiola said. Bitcoin, “with its decentralized network that is outside of physical governmental monetary controls may prove hard to stamp out.”
China has made its intention to prohibit blockchain and cryptocurrency known for years, added Carlos Domingo, CEO of Securitize, a digital asset securities firm, in an email. “Many countries are still figuring out how to approach cryptocurrencies, so there will be steps forward and steps back,” Mr. Domingo said. “The appeal of blockchain, including cryptocurrency, is its ability to democratize access to and movement of capital. This is why innovation, particularly around digital asset securities, is occurring in the U.S. and other countries and the industry is growing subject to its laws.”
Brian Croce contributed to this story.