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Bitcoin Dramatically Plummets After China's Crackdown on Cryptocurrencies

The digital currencies can't be used as a form of payment in major financial institutions in the country.

As cryptocurrencies keep garnering attention, China has taken a different stance. The country has banned financial institutions from allowing any cryptocurrency transactions including conducting business or offering any services with digital currencies. 

The announcement was made on Tuesday, May 18, and was prompted by the recent volatility in the crypto market, a Forbes report stated. China's announcement further exacerbated the market's volatility, as Bitcoin's price dropped by 10 percent on Wednesday, as CoinMarketCap pointed out. At its lowest, it saw 38,570 USD a couple of hours ago. In fact, most cryptocurrencies' worth dropped, as can be seen on CoinMarketCap's charts.

China's joint announcement, made by three Chinese industry groups, explained that banks, payment platforms, and lending companies are banned from offering any cryptocurrency-related transactions, from trading to clearing. 

China's announcement

According to the announcement, the main issue with the digital currency market is its extreme volatility. 

"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," said the statement (in Mandarin). 

This ban doesn't mean that people in China aren't able to hold cryptocurrencies, unlike India's potential decision to completely ban any individual from owning, trading, or mining digital currencies. 

However, yesterday's move wasn't the first one China has taken against cryptocurrencies. Its negative relationship with digital tokens began back in 2017, when the nation closed down its cryptocurrency exchanges, CNBC report explains

Since then, many institutions in China have been reluctant to dip their toes in the crypto pool. And in 2019, the People's Bank of China issued a statement in which it said it would block all access to domestic and international cryptocurrency exchanges.

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So it's clear to see that China is still not sold on the relatively new digital currency market. It doesn't help when individuals like Elon Musk join in on the conversation, further adding fuel to the already-volatile crypto fire.

Musk's posts on Twitter first stating that Tesla would accept Bitcoin as a form of payment in March, only to retract that offering in May, sent the cryptocurrency tumbling to new lows last week.

However, as The Independent pointed out, even though Bitcoin fell this week, it's still trading much higher than this time last year, when it was trading below $10,000. 

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