China, new crypto ban and bitcoin crashes
China has issued a new ban against cryptocurrencies. This time, the ban issued by the Central Bank of China concerns financial institutions and payment companies that will not be able to provide services involving cryptocurrency transactions.
In fact, the announcement was issued by the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China.
The statement reads:
“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”.
The statement from the three entities is a blatant call not to offer financial services or payment services in cryptocurrency as the volatility, particularly evident these days, makes it an unreliable and insecure product.
The statement also points out that cryptocurrencies have no realistic value and are extremely easy to manipulate.
Yet another cryptocurrency ban in China
The relationship between cryptocurrencies and China seems decidedly complicated. Already in 2017, exchanges and ICOs were banned. Nevertheless, the Chinese are not formally prevented from owning cryptocurrencies.
And it is surprising that China is one of the world’s top producers of bitcoin given the sheer size of its mining farms.
However, the authorities in Beijing are not at all convinced of the value of cryptocurrencies, and are now dealing a new blow to the sector. This is because a ban from China affects practically one-sixth of the world’s population.
Regulation in India
According to the Economic Times, a panel of experts is being formed to regulate the sector. However, India is not expected to re-impose a ban, which has been deemed unconstitutional in the past and, according to sources in the Economic Times, is now outdated.
Rather, it would be a discussion to study the uses of blockchain and suggest ways to regulate cryptocurrencies. On the surface, this is not a ban, but the discussion is still in its infancy.
The consequences for the market
Meanwhile, as expected, the new ban in China has hit Bitcoin like a fury, causing a sharp drop in price.
BTC, at the time of writing this article, is currently down 13% and has dipped below $40,000, the threshold it abandoned in February. It’s worse for Ethereum, which just a few days ago touched $4,300 and today is back below $3,000 with a loss of 16%.
These declines come in an already difficult week for the sector, marked by the words and choices of Elon Musk. The drop was expected though, given that the entire sector has just returned from a rally that has led many cryptocurrencies to multiply their value and see new historical records. All that remains to be seen now is whether today’s drop is an “adjustment” or a sign that the bull run is over.