Entire Crypto Market Plummets After China Introduces Huge Bans
Bitcoin, Ethereum and other major cryptocurrencies have suffered huge losses after China announced it would ban its financial institutions from handling cryptocurrency transactions.
Three of the country’s largest financial industry organisations issued a statement yesterday, May 18, warning against speculative trading in virtual currencies like Bitcoin, saying they are ripe for manipulation and risked disrupting the economy.
The ban means banks and online payment systems will not be allowed to provide any services that involve cryptocurrency, though it is still legal for individuals to hold their own cryptocurrency wallets.
Following the announcement, leading cryptocurrencies saw their values suffer heavy losses overnight. Bitcoin has continued to suffer a dramatic crash in today’s trading, falling from above $43,000 to a current low of around $31,900. According to Coindesk it has since recovered to just under $37,000, but is still trading down 15% on the past 24 hours. Ethereum and Dogecoin also suffered similarly steep drops before beginning to recover, with both currencies trading down 25%.
According to the Financial Times, more than $8 billion worth of cryptocurrency holdings have been liquidated in the past 24 hours.
The three industry bodies behind the announcement are the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China.
In a joint statement, as per Reuters, they said:
Recently, crypto currency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people’s property and disrupting the normal economic and financial order.
Local cryptocurrency exchanges have been banned in the country since 2017, with access to all domestic international crypto exchange sites blocked in 2019. In a statement announcing the trading ban, the People’s Bank of China warned that Bitcoin, Ethereum and other virtual currencies ‘are not supported by real value,’ and reiterated its position last night.
In a post on Chinese social media platform WeChat, the Bank stressed that virtual currency ‘is not really currency’ and ‘should not and cannot be used as currency in the market,’ per FT.
Prior to the ban on local exchanges, Reuters reports as much as 90% of speculative trading in Bitcoin originated in China, with the loss of the Chinese market representing a huge blow for wider cryptocurrency trading.
While other countries have remained more open to cryptocurrency trading, the industry is not just under scrutiny in China, with both the United States and the UK believed to be considering implementing their own regulations on the crypto market.
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