China has banned financial institutions and payment companies from providing services related to trading cryptocurrencies, and warned investors against speculating in these currencies.
The price of Bitcoin and other virtual currencies simultaneously dropped after the above move. According to data from Coinmarketcap.com, Bitcoin price dropped to $41,000, down more than 9% within 24 hours. Virtual currencies that are "hot" such as Ether, Internet Compute, and Dogecoin are also plunging.
The movement of the virtual currency market in the last 24 hours
Source: Coinmarketcap
This is China's latest attempt to rein in the booming digital trading market. Under the ban, institutions, including banks and online payment channels, are not allowed to provide digital currency-related services such as registration, trading, clearing, and 3 agencies in charge of digital currency transactions. know in a joint statement dated May 19.
“Recently, the price of cryptocurrencies has skyrocketed and then plummeted. And speculative trading activities in digital currencies also recovered, seriously infringing on the safety of people's assets and disrupting the normal economic and financial order," they said in a statement. declare.
Previously, China banned digital currency exchanges and initial coin offerings (ICOs) banned individual investors from holding digital currencies.
Institutions may not provide services to store, trust or secure digital currencies, nor offer digital currency-related financial products, the statement said.
“This is the latest chapter in the story of China tightening its control on virtual currencies,” Antoni Trenchev, director of crypto lender Nexo, told Bloomberg news agency.
In a notice posted on the official WeChat account, the PboC said that virtual currencies should not and should not be used in the market because they are not real money. Financial and payment institutions are not allowed to price products or services in virtual currency, the statement read.
Bitcoin price movement from the beginning of the year to now. Unit: USD/Bitcoin - Source: Trading View.
Recently, China began to roll out a digital renminbi, with the goal of replacing cash, while maintaining control over the payments sector, which is increasingly adopting technology and has a strong presence. flourishing of unregulated companies like banks.
“I find nothing surprising. China's control of capital flows can be challenged when investors buy cryptocurrencies in the country and then move abroad," said Adam Reynolds, CEO of Asia-Pacific markets at Saxo Markets, stated.
“Therefore, banning the use of virtual currencies in the country is essentially to maintain control of capital flows. The only digital currency that is suitable for a government's capital control policy can only be a central bank-issued digital currency.
Many technical analysts believe that the Bitcoin price is receiving strong support at the $40,000 level. If this threshold is not maintained, the Bitcoin price may drop to $30,000.
This is not the first time Beijing has introduced measures to control virtual currencies. In 2017, China shut down domestic cryptocurrency exchanges, strangling a highly speculative market in which 90% of Bitcoin trades globally.
In June 2019, the Central Bank of China (PBoC) issued a statement saying it would block access to domestic and foreign cryptocurrency exchanges, as well as ICO websites. The goal is to tightly control cryptocurrency transactions and ban foreign exchanges.
The statement also highlights the risks of trading cryptocurrencies, saying that they are “not based on real value”, prices are easily manipulated, and trading contracts are not protected by Chinese law.
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Crypto