Bitcoin hit a two-week low as China tightens its grip on cryptocurrencies. The decline comes as officials in the southwest province of Sichuan ordering bitcoin mining operations to shut down on Friday. China’s central bank urged the nation’s major banks and payment systems to take a more active role in preventing cryptocurrency trading and associated activities.
The People’s Bank of China requested the presence of representatives from a number of institutions on Monday, including state-owned commercial banks and Ant Group Co.’s Alipay, and told them to “strictly implement” recent government notifications and rules on reducing risks associated with bitcoin and cryptocurrency fundraising activities. It was the latest indication that Beijing is toughening up on uncontrolled virtual currency.
Bitcoin fell over 10% on Monday, while other digital currencies such as Ether fell as much as 12% in the previous 24 hours, going below $2,000 for the first time in nearly a month. Dogecoin has also dropped by 12% to about $0.22.
Banks who trade cryptocurrencies over-the-counter were also asked to go through their systems and investigate and identify customers with accounts at virtual-currency exchanges or who trade cryptocurrencies in the over-the-counter market. According to the central bank, in such instances, financial institutions must disable the accounts’ capacity to transmit or accept funds for payments.
In recent weeks, Chinese government has intensified a countrywide campaign against virtual currencies, following the release of a strong report.
The official concerns came after a surge in bitcoin’s price, which peaked above $64,000 in mid-April, fuelled by celebrity supporters such as Tesla Inc. CEO Elon Musk. Since then, it has lost about half of its worth.
The potential of more governmental monitoring of crypto trading in the United States, as well as intensified efforts by Chinese authorities to limit bitcoin creation by power-hungry machines, are among the reasons weighing on bitcoin and its peers.
China banned domestic cryptocurrency exchanges and digital-currency fundraising known as initial coin offerings (ICOs) some years ago. Authorities have also ordered money lenders and banks to stop offering virtual-currency trading and associated services. Despite these measures, China remains a bitcoin mining hotspot. China has created up to three-quarters of the world’s bitcoin supply, but the mining process consumes a lot of power, which conflicts with the government’s environmental objectives.
Peer-to-peer transactions, which entail direct money transfers between accounts, have continued to be used in China to trade bitcoin and other digital currencies.
Some offshore cryptocurrency trading platforms have been enabling deals between customers who wish to buy bitcoin using the yuan, China’s native currency. Buyers have sent money to persons selling cryptocurrencies using accounts at banks or digital-payments providers, frequently without disclosing the purpose of the transfers.
The People’s Bank of China (PBOC) issued a warning on Monday about the risks virtual currencies pose to economic and financial stability, as well as the possibility for the assets to be utilised for illicit activities. More than a thousand people were jailed in China lately on suspicion of utilising cryptocurrency to launder ill-gotten gains.
China has instructed Alipay and other local banks to refrain from providing services related to virtual currency trading. The People’s Bank of China stated in a statement that the banks were also instructed to cut down payment methods for crypto exchanges and over-the-counter platforms.
Alipay said that it would step up its efforts to monitor and analyse cryptocurrency-related transactions in its accounts, as well as prohibit or remove offenders. More than one billion customers and 80 million businesses in China utilise the popular digital payment network. It also intends to employ risk algorithm models to detect anomalous transactions, flag suspicious activity, and prevent some accounts from receiving funds. Merchants who engage in virtual currency transactions will be banned and removed off the site, according to the company. “We reiterate that Alipay does not conduct or participate in any business activity related to virtual currencies,”
In separate statements, five banks, including Industrial & Commercial Bank of China Ltd., Agricultural Bank of China Ltd., China Construction Bank Corp., Postal Savings Bank of China Co. Ltd., and Industrial Bank Ltd., stated that they will not allow virtual currency transactions through their accounts.
They promised to put an end to such transactions as soon as possible, terminate bank accounts, and report any evidence of such activity to the authorities. They also urged members of the public to notify banks about virtual currency transactions.
According to Chen Shujin, an analyst at Jefferies, the central bank’s instruction to financial organizations is intended to shut down payment channels used by Chinese people and enterprises engaged in cryptocurrency trading and mining. Peer-to-peer transactions, on the other hand, are difficult to trace and identify since they are often tiny and anonymous, according to her. “This will make it harder [for people to trade], but it won’t be able to completely shut down this type of transactions,” Ms Chen remarked. She went on to say that some people could try to get around the regulations by sending money overseas and performing bitcoin transactions in other currencies.