Bitcoin falls further as China cracks down on crypto-currencies
I ended a piece in which I compared the cryptocurrency with 17th-Century Dutch tulips or London houses in the 1980s with this thought: “Unless and until Bitcoin can be used to buy a sandwich, or be accepted by your friends when you pay them back for a restaurant meal, then it is likely to remain just a playground for geeks and gamblers.”
Bitcoin plunges below $40,000 as China widens its crypto crackdown
Hong Kong (CNN Business) Bitcoin and other cryptocurrencies are plunging as anxiety spreads through the market — this time, after China took more steps to crack down on the digital coins .
The world’s most heavily traded cryptocurrency plunged as low as $30,202 per coin early Wednesday after starting the day around the $40,000 mark, according to data from Coindesk
Alongside bitcoin’s fall Wednesday, several other major cryptos also were down. Ethereum plummeted below $2,000 per unit after trading above $3,000 on Tuesday, before reclaiming some of its lost ground.Ether was down around 22% at nearly $2,600 Wednesday afternoon. The meme-turned-cryptocurrency dogecoin lost more than 24% of its value.
Tesla TSLA Bitcoin was already dropping this month afterCEO Elon Musk said he was wary of its environmental impact. But a new announcement from a trio of Chinese finance and banking watchdogs appears to have shocked cryptocurrency markets even more.
The agencies said Tuesday that financial institutions and payment companies should not participate in any transactions related to cryptocurrency, nor should they provide crypto-related services to their clients.
“Prices of cryptocurrency have skyrocketed and plummeted recently, and speculative trading has bounced back. This seriously harms the safety of people’s property and disturbs normal economic and financial orders,” said the statement from regulators supervised by the People’s Bank of China and the China Insurance and Banking Commission.
China’s chilly stance toward cryptocurrency goes back years. While the country doesn’t completely ban cryptos, regulators in 2013 declared that bitcoin was not a real currency and forbade financial and payment institutions from transacting with it. At the time, they cited the risk that bitcoin could be used for money laundering, as well as the need to “maintain financial stability” and “protect the yuan’s status as a fiat currency.”
Members of the public can hold or trade cryptocurrencies, but major exchanges in mainland China have been shut down. Authorities in 2017 also banned initial coin offerings, a way for tech startups to raise money by issuing crypto tokens to the public.
The growing crackdown may also be in part to boost China’s state-backed digital yuan initiative , which authorities are working to implement so it can keep money flows under its strict oversight.
While the 2013 notice mentioned only bitcoin by name, some observers have taken it to apply to all cryptos given Beijing’s distaste for the currencies. The state-owned China Times on Wednesday described the latest announcement as a “risk warning in nature.” While not a national law or regulation, it represents an “industry standard to some extent,” the outlet wrote, citing Zhu Youping, an official from the State Information Center, a policymaking think tank.
Still, it shows that China isn’t changing its tack on crypto anytime soon — and that seemed to be enough to worry traders.
“The Chinese position on cryptocurrencies is clear from the beginning: trading and usage of cryptocurrencies are simply forbidden,” wrote Ipek Ozkardeskaya, senior analyst at Swissquote, in a Wednesday research note. “Therefore, the news is nothing ‘new’, but given that crypto traders are too sensitive to negative news nowadays, it adds to the downside pressure on cryptocurrencies.”
Even before the latest announcement from China, Tesla’s Musk had already sent crypto markets on a wild ride.
He flip-flopped last week on a plan to allow his electric carmaker to start accepting bitcoin as payment for its cars, by suspending the program and citing sustainability concerns around the mining of bitcoin. The cryptocurrency then fell 12%. It kept dropping into the start of this week after Musk appeared to suggest that his automaker may have dumped its holdings of the digital currency, though he later clarified that it hadn’t.
Dogecoin, meanwhile, tumbled earlier this month after Musk — the coin’s most prominent supporter — joked about it on “Saturday Night Live.”
Even so, the two cryptos are still astronomically higher than they were a year ago. Bitcoin is up more than 30% in the year to date, according to Coindesk, while Ethereum and Dogecoin have rallied more than 255% and more than 7,500%, respectively.
—Anneken Tappe contributed to this report.
China crypto players shrug off Beijing’s latest crackdown
SHANGHAI — China’s latest salvo against cryptocurrencies has driven a brutal selloff in bitcoin markets but retail traders, miners and even crypto finance firms reckon Beijing’s bark is louder than its bite.
China’s announcement on Tuesday of a tougher ban on banks and payment companies offering crypto-related services furthered a selloff that briefly wiped $1 trillion off crypto market capitalization.
But fears that the rules would cripple cryptocurrency markets and mining on the Chinese mainland appear baseless. Cryptocurrencies could still be bought from China on Thursday and investment schemes promising juicy returns for mining them remained operational.
Bobby Lee, founder and CEO of Ballet, a cryptocurrency wallet app, said he thought the announcement was merely an attempt by regulators to protect retail investors from volatile markets, but that it would be a challenge for banks to identify crypto-related dealings.
“If you look at the banking activity in China, millions or maybe billions of transactions happen on a daily basis. From all that … how many are actually really crypto services versus dining or e-commerce? It’s almost unknowable,” said Lee, formerly CEO of BTC China, China’s first bitcoin exchange.
It’s not the first time China has banned crypto-related financial and payment services. Beijing issued similar bans in 2013, and in 2017, though the latest one has expanded the range of prohibited services. The repeated bans highlight the challenge of closing the loopholes.
On Thursday, Reuters found it was still possible for Chinese individuals to buy bitcoin and other cryptocurrencies and trade them on overseas crypto exchanges such as Binance. Yuan payments for these purchases could be made via banks or commonly-used online payment platforms in over-the-counter (OTC) markets.
“If you have bitcoin or ethereum, and I want to buy some, I can just send money to you through banks. Just don’t write down anything like bitcoin or ethereum,” said Mr Li, who sells cryptocurrencies on behalf of miners.
“Of course, banks have internal risk-management. If the transaction volume is too big, you might be caught,” said Li, who was unwilling to give his full name because of the sensitivities of the issue.
Miners undaunted
Players in China’s crypto mining industry were also broadly unfazed by the latest crackdown, again citing the difficulties regulators would have in identifying transactions.
China-based miners have the opposite problem to investors, as they already have bitcoin which they need to change for yuan to pay their electricity costs.
Mining is big business in China, which accounts for as much as 70% of the world’s crypto supply, according to some estimates, although others say that proportion has come down in recent years.
“The Chinese government does crack down from time to time, but currently it is not overly challenging to convert mined coins to RMB for Chinese miners,” said Thomas Heller, chief business officer of Compass Mining, using another word for China’s currency.
Although the new rules ban crypto-related investment products, such schemes are still sold online.
One platform offering retail investors a chance to quadruple their money over three years by buying computing power for miners of a smaller cryptocurrency, Filecoin, which has surged in popularity in China, still seemed to be accepting money on Thursday.
Flex Yang, chief executive officer of Babel Finance, a cryptocurrency financing firm, remained bullish.
“Bitcoin prices dropped more than 50 percent last year in March but eventually rebounded back to a new record high,” Yang said.
“In the long run, bitcoin still makes for an excellent asset class for portfolio managers seeking growth.”