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Bitcoin fell 14% to its lowest level since early February after Chinese regulators stepped up efforts to curb the use of cryptocurrencies by financial institutions.
In a joint statement issued to the People’s Bank of China’s WeChat account, banking and Internet industry associations said financial and payment institutions should not accept cryptocurrencies as payment or offer services and products related to them.
The virtual currency “is not a real currency” and “should not be used and cannot be used as currency in the market,” the groups said in a statement issued late Tuesday, referring to recent rise in prices as “speculation.”
Bitcoin traded at a low of just over $ 38,500 Wednesday morning in Asia, according to the Bitstamp exchange.
The development reflected that of China campaign to limit institutional activity in cryptocurrencies as it prepares to launch its own digital currency. Other markets such as the United States have remained comparatively open to institutional participation.
“Part is that they have their own digital renminbi, part is the lack of control in terms of cash outflows and part is trying to ensure people aren’t scammed,” said Paul Haswell, a partner at the lawyers Thinking Masons in Hong Kong, of China’s repression.
China’s pressure on cryptocurrencies gained strength in 2017 when it occurred Closed the country’s bitcoin exchanges, which had previously accounted for the majority of world trade.
Government plans for a digital renminbi, which would provide the central bank with a record of all real-time foreign exchange transactions, could provide a rival cashless payment mechanism to compete with extensive online fintech platforms from Ant Group and Tencent.
In the United States, regulators have made it easier to buy cryptocurrencies for retail investors allowed listing of cryptographic exchanges in public markets. Large US financial institutions such as Goldman Sachs and JPMorgan are exploring offering investments in digital currencies to wealth management clients.
Despite its price, the price of bitcoin has skyrocketed by 300% over the last twelve months recent sale.
“I would not be surprised to see other regulators and policymakers do the same [as the Chinese restrictions] over the next few weeks as they warn investors about the risks of speculative trading or the volatility of the crypto market, ”said Henri Arslanian, global head of cryptography at consulting firm PwC.
“The reality is that we are seeing the continued entry of institutional actors and institutional investors into this space and it is unlikely to slow down any time soon.”
The recent volatility in cryptocurrency prices has cast doubt on some institutional investors about their value, with UBS Wealth Management and Pimco expressing reservations on the potential of digital currencies as an asset class.
Cryptocurrencies are not regulated in Hong Kong, a semi-autonomous Chinese territory. However, in November, the city’s financial services and the Treasury Office issued proposals that would ban retail investors from trading cryptocurrencies.
“If anything it seems to me that the market is growing in Hong Kong in terms of the cryptocurrency industry,” Haswell said.
Additional reports from Wang Xueqiao in Shanghai
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