China has effectively banned financial institutions from supporting cryptocurrency transactions, crashing the price of Bitcoin in the process.
The price of Bitcoin dropped by more than 10% following the announcement by Chinese regulators. Bitcoin fell below $40,000 for the first time since February on the news, with widespread price declines across the cryptocurrency world.
We saw average losses ranging from 15 to 20% for Ethereum, Cardano and dogecoin. Following the news in China, banks, payment platforms and lenders will no longer offer their customers any cryptocurrency-related services, including trading.
While the new regulations do not prohibit individuals from holding Bitcoin or other cryptocurrencies, they are a significant blow to those who believe cryptocurrency offers a viable payment option in the future.
The trading and payment processing ban came in a joint statement from the National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China, who also claimed that cryptocurrencies are “not supported by real value”.
In a statement, the three regulators said: “Recently, cryptocurrency 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 news from China follows a tumultuous time for Bitcoin and other cryptocurrency prices, sparked by comments from Tesla founder Elon Musk, who said the car manufacturer would stop accepting Bitcoin as a payment option for new cars.
The price of Bitcoin fell by nearly a third following Elon Musk’s tweet last week and now around 40% off its record high from mid-April. Despite falling sharply in recent weeks, the price of Bitcoin remains higher than it was this time last year when it traded below $10,000 a token.
Bank of England governor Andrew Bailey recently said that cryptocurrencies have “no intrinsic value” and those who invest in them should be “prepared to lose all their money.”