Bitcoin, the world’s largest cryptocurrency, fell on Friday, falling to $ 41,000 as China stepped up its crackdown on cryptocurrency trading, calling it “illegal” activity.
Bitcoin fell more than 5% on Friday to $ 41,368 at 3:23 p.m. UAE time. Ethereum, the second largest cryptocurrency, fell 9.40% to $ 2,784.
China, the world’s second-largest economy, has pledged to eliminate “illegal” activity in trading bitcoin and other virtual currencies as it renews its tough rhetoric on cryptocurrencies.
The government “will resolutely crack down on virtual currency speculation, financial activities and inappropriate behavior in order to protect people’s property and maintain economic, financial and social order,” Reuters reported, citing a statement from the People’s Bank of China (PBOC).
The PBOC said cryptocurrencies should not circulate in the markets as traditional currencies, and foreign exchanges are not allowed to provide services to mainland investors via the internet.
The PBOC has also banned financial institutions, payment companies, and internet companies from facilitating cryptocurrency trading.
This is not the first time that China has been tough on cryptocurrencies. Earlier this year, Beijing announced a crackdown on crypto mining, the energy-intensive process that verifies transactions and strikes new currency units.
The news is not “unusual” and Beijing has always had a very tough stance on cryptos, said Naeem Aslam, chief market analyst at Ava Trade. The National.
There is clear evidence of capital flight from China, due to the massive chaos taking place over Evergrande and “China wants to tighten the screws further for capital flight and one of the main vehicles used to the flight of capital is the cryptos and China wants to make sure it has full control over the Chinese yuan and therefore sent this very strong message to the market, ”he said.
The Bank for International Settlements (BIS), the global body of central banks in a June report called cryptocurrencies assets speculative which in many cases allow criminal activity and “work against the public good.”
“It is clear that cryptocurrencies are speculative assets rather than cash, and in many cases are used to facilitate money laundering, ransomware attacks and other financial crimes,” said the BIS.
Bitcoin in particular has “few redemptive public interest attributes when you also consider its unnecessary energy footprint,” he said.
Central banks around the world have been reluctant to approve cryptocurrencies due to their speculative nature, lack of value, and regulatory oversight. The Central Bank of the UAE also does not recognize cryptocurrencies as legal tender.
“China would declare illegal crypto transactions would be disastrous for the cryptocurrency industry,” said George Monaghan, analyst at GlobalData. “Being shut out of the world’s biggest market is terrible for any product, and it’s the strongest demonstration of China’s anti-crypto sentiment to date.
The next few weeks are expected to be “tough for crypto markets that were already on edge after recent comments from the US Securities and Exchange Commission, but only real legislation will have a long-term effect.”
Updated: September 24, 2021, 13:07