China Bans Financial Institutions From Transacting In Bitcoins

China has forbidden financial institutions and payment companies in the country from offering cryptocurrency-related services, while also warning investors against speculative cryptocurrency trading, a Reuters report reveals.

Reuters

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The new regulation clamps down the movement of cryptocurrency in the nation. According to the ban, institutions such as banks, online payments channels should refrain from offering clients any services surrounding cryptocurrency, including registration, trading, clearing and settlements.

This announcement was made by three industry bodies -- the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China.-- jointly, on Tuesday, ¡°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.¡±

China had already banned crypto exchanges and initial coin offerings, however, it hadn¡¯t stopped citizens from holding cryptocurrencies. The new regulations also state that the institution should not offer saving, trust or pledging services against cryptocurrency. Moreover, it shouldn¡¯t issue financial products related to cryptocurrency.

China had shut down its local exchanges back in 2017, nipping a speculative cryptocurrency market that accounted for 90 percent of global bitcoin trading, in the bud.

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Two years ago, in 2019, the People¡¯s Bank of China announced that it would block access to all domestic and foreign cryptocurrency exchanges and Initial Coin Offering websites to squeeze the trading of cryptocurrency with foreign exchanges.

The aforementioned bodies have also stated that these virtual currencies are not supported by real value and their pricing gets easily manipulated. Moreover, trading contracts are not protected by Chinese law.

Reuters

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This caused a massive drop in Bitcoin¡¯s value, with cryptocurrency falling as much as 5.1 percent to $42,547 in New York, amidst a week-long drop that occurred after Elon Musk¡¯s comments on Tesla¡¯s holdings of the cryptocurrency, according to a Bloomberg report.

The drop has put Bitcoin at its lowest level since early February. Another popular cryptocurrency, Ether, also lost more than 7 percent.