China’s most influential regulators imposed on Friday, September 24th, a ban on all transactions in Bitcoin and other cryptocurrencies, hitting the value of major coins and highly affecting crypto and blockchain-related stocks.
In a coordinated effort, China’s financial regulators have joined forces to crack down on “illegal” activities related to cryptocurrency. The move is the first time that the country’s financial watchdogs have joined forces to address the issue.
In May, China’s financial watchdogs banned financial institutions and other establishments from providing services related to Bitcoin and other crypto transactions, noting that they previously imposed similar bans in 2013 and 2017.
Several banks and payment firms have imposed restrictions on Crypto transactions in recent months. The moves highlight the difficulty of closing down the various avenues for transferring money to and from digital currency.
The statement from China’s regulators, which was released on Friday, is the most detailed yet in response to the country’s crypto market. It highlights Beijing’s efforts and dedication to suffocating the Chinese crypto market.
In this matter, Winston Ma, NYU Law School adjunct professor explains that China’s crypto market regulation is the most comprehensive in the country’s history, with multiple ministries responsible for enforcing it.
The US Department of Justice has issued a warning about the dangers of digital currencies, which it says could threaten the stability of the financial system.
Governments from Asia to the United States are cracking down on digital currencies, and are issuing warnings about their dangerous impact, which could threaten the stability of the financial system and promote the rise of financial crime.
They are also concerned about “mining”. Cryptocurrency mining is a process that consumes a lot of energy and is considered harmful to the environment.
Authorities in China have constantly warned that the country’s cryptocurrency market could disrupt the country’s financial and economic order, one of Beijing’s top worries.
Financial analysts announced that crypto is considered dangerous to the advanced sovereign digital yuan in China.
US Senator Pat Toomey said that China’s hostility toward free trade is so severe that it limits the freedom of its people to participate in what’s considered the most exciting development in finance in decades.
While US regulators are looking at digital asset risks and opportunities to promote financial inclusion.
The Social Order
The People’s Bank of China (PBOC) has issued regulations that prevent the circulation of cryptocurrencies in the country. It also prohibits financial institutions and internet firms from accepting transactions from Chinese customers.
The Chinese government will crackdown on speculation in virtual currencies, which it says will safeguard the properties of people and maintain social order.
The government will strictly implement measures to prevent the speculative use of virtual currencies, the PBOC said. This will protect people’s properties and the economic and financial situation.
China’s SOEs said it will cut off financial support and electricity supply to mining companies in order to prevent them from contributing to greenhouse gas emissions.
Bitcoin’s drop accelerated after it hit a record high. The cryptocurrency immediately fell 6.6% after hitting a high of $41,937. Smaller coins also followed Bitcoin and dropped down.
In May, China’s cabinet vowed to crack down on Bitcoin mining and trading but did not provide details. The move sent the cryptocurrency market tumbling 30% in a day.
NYU’s Ma stated that “This is the manifestation of the crypto mining and trading crackdown announcement … back in May”.
Bouncing Back?
Even though few of those declines were clawed back in the U.S. trading, the move also impacted other crypto and blockchain-related shares.
U.S.-listed miners sank on Friday, with Marathon Digital, Riot Blockchain, and Bit Digital leading the decliner by slipping between 2.5% and 5%.
Despite the initial shock caused by the US crypto-asset ban, analysts said they did not believe it will have long-term effects on the asset markets since companies continue to adopt crypto products and services.
Major players such as Coinbase and China’s biggest crypto exchange, Binance, were not immediately clear about their exposure to the country’s regulators. To note that global payment company PayPal does not provide crypto services in China.
Cryptocurrency exchanges Huobi and OKEx, which originated in China, are most likely to be affected by the crash since they still have some users in the country. Tokens related to the two exchanges jumped over 20%. The exchanges did not directly answer requests for comment.
To note that, historically, the Chinese government has struggled a lot to ban internet users from escaping its controls.
Craig Erlam, an analyst at OANDA, said he wouldn’t be surprised to see a crypto bounce back once again after China’s actions in not holding back crypto’s rise in the past.
China’s virtual currency mining boom ended in May, occupying more than half the world’s crypto supply, with miners moving to other countries.
According to Christopher Bendiksen, head of research at digital asset manager CoinShares, the Chinese are the biggest losers since they will be losing around $6 billion worth of annual mining revenue. This amount will surely flow to the rest of the global mining regions.
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