On Friday, many cryptocurrencies, including Bitcoin (CRYPTO: BTC), experienced an unceremonious fall after China tightened its stranglehold with further regulation on digital assets.
The Chinese government has a long track record for detesting all forms of cryptocurrency. However, the latest move marks the most all-encompassing ban on blockchain-based currencies. In reaction, crypto markets shuddered in fear of what the regulation could mean for investors.
In the space of 5 hours, Bitcoin fell ~8.5% to A$56,650. Meanwhile, the second-largest crypto, Ethereum (CRYPTO: ETH), dropped ~9.7% to A$3,860.
Crypto gets outlawed in China
Although the pain was felt in the crypto markets on Friday, the source stems from a memo posted by the People’s Bank of China on 15 September 2021. This memo was reposted on Friday, adding to the fear and panic exhibited by investors.
According to the release, China has moved to make all cryptocurrency transactions illegal. The regulation, which covers all regions and municipalities, is in response to the reasons stated:
Recently, virtual currency trading hype activities have risen, disrupting economic and financial order, breeding illegal and criminal activities such as gambling, illegal fund-raising, fraud, pyramid schemes, and money laundering, seriously endangering the safety of people’s property.
The new regulations go beyond previous laws, which banned domestic exchanges. Now foreign exchanges such as Coinbase Global Inc (NASDAQ: COIN) are also barred from facilitating transactions to Chinese residents.
Additionally, this action follows a recent crackdown on Bitcoin mining in China — with some reports indicating the practice has dropped by over 90% since China’s enforcement.
Furthermore, the latest ban involves strong backing by a total of 10 China-based agencies. These include the Cyberspace Administration of China, the Supreme People’s Court, Supreme People’s Procuratorate, and the Public Security Bureau.
Where is the Bitcoin price now?
In the meantime, the Bitcoin price has somewhat stabilised around A$60,000. At this stage, investors of cryptocurrencies appear to be waiting for clarity to the extent of the potential fallout before reacting again.
This apprehension to act drastically on China’s latest regulations might be due to the frequency of bans in the past. While the latest regulation could be more impactful, it is not the first time cryptocurrencies have been stifled by China.