Bitcoin slips over 10% as China tightens ban on cryptocurrency trading
06 Feb 2018
Bitcoin slid by more than 10 per cent on Monday after a brief rebound over the weekend, as China said it would ban cryptocurrency trading and initial coin offering (ICO) platforms altogether.
China has decided to block all websites related to cryptocurrency trading and ICOs – including foreign platforms – as it seeks to finally quash the market completely.
''To prevent financial risks, China will step up measures to remove any onshore or offshore platforms related to virtual currency trading or ICOs,'' said an article published on Sunday night by Financial News, a publication affiliated to the People's Bank of China (PBOC).
The nation has already tried to rid itself of domestic cryptocurrency exchanges. But the Financial News report said those efforts had not been fully successful.
Bitcoin was down 10.3 per cent to $7,342.50 on Monday, according to CoinDesk. The digital asset had found its way back above $9,000 on Saturday but crumbled again on Sunday. Ethereum sank 13 per cent to $729.96. Bitcoin Cash lost 16 per cent; Litecoin tumbled 13 per cent.
Bitcoin has shed nearly $10,000 in value over the past month amid an onslaught of anxiety over security, fraud and tighter regulation.
The cryptocurrency had slipped below $8,000 last week. Nouriel Roubini, an economist known for predicting the 2008 financial crisis and for doom-saying in general, said Bitcoin was "the mother of all bubbles."
Lloyds Banking Group (LYG) on Monday said it would prohibit the purchase of cryptocurrencies via credit cards. That announcement followed similar ones last week from JPMorgan Chase (JPM), Citigroup (C) and Bank of America (BAC).
In stocks related to blockchain, the record-keeping technology behind cryptocurrencies, Long Blockchain (LBCC) - formerly known as Long Island Iced Tea Corp. - fell 2.6 per cent in the stock market today.
Long Blockchain on Friday said it would not buy 1,000 Bitcoin mining machines, as it had once planned, and would instead focus on trying to merge with the tech firm Stater Blockchain. Last month, Long Blockchain said that it had formed a blockchain strategy committee to "help focus the Company's shift into blockchain technology."
The Financial News article acknowledged that recent attempts to stamp out digital currencies by shutting down domestic exchanges had failed to completely eradicate trading.
''ICOs and virtual currency trading did not completely withdraw from China following the official ban … after the closure of the domestic virtual currency exchanges, many people turned to overseas platforms to continue participating in virtual currency transactions.
''Overseas transactions and regulatory evasion have resumed … risks are still there, fuelled by illegal issuance, and even fraud and pyramid selling,'' the article said.
China's official Xinhua news agency quoted the PBOC on Monday afternoon as saying it would tighten regulations on domestic investors' participation in overseas transactions of ICOs and virtual currencies, as risks are still high in the sector.
Beijing's tougher stance – which effectively bans all forms of activity related to digital currencies – aims to put the brakes on the ICO and virtual-currency trading mania that has been sweeping China. The frenzy among retail investors led to huge price volatility and several reported incidents of fraud, causing a headache for regulators increasingly worried about social unrest.
The bitcoin bubble seemed close to bursting after it dropped to below $8,000 for the first time since November, then regained its standing, leaving some experts unnerved.
China banned both ICOs and cryptocurrency exchanges in September, but trading by individuals has remained a murky area with many businessmen relocating to Hong Kong or Japan while still raising funds from mainland investors.
Two weeks ago, the PBOC ordered financial institutions to stop providing funding to any activity related to cryptocurrencies, further tightening the noose.
