One of China’s main bitcoin exchanges, BTCC, has said it will stop trading after the Chinese government has been cracking down on cryptocurrencies over the past few weeks.
Over the past week, the price of bitcoin has fallen from highs of over nearly $5,000 to $3,395.
At the start of September, it became the first country to ban initial coin offerings or ICOs. This new trend in online investment allows entrepreneurs to raise funds through token cryptocurrencies.
The country’s central bank issued a statement on September 4 to say it had banned ICO funding as it had “seriously disrupted the economic and finance order.”
Other countries are turning against ICOs, with the UK’s Financial Conduct Authority issuing a warning. The financial watchdog said they are a form of risky investment and investors are likely to lose their entire stake if they take part.
It’s not just ICOs that China has an issue with. According to the Wall Street Journal, the Peoples Republic government is going to start shutting down domestic bitcoin exchanges, sending the price of bitcoin down to $4,108.
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This is because three Chinese exchanges, including Bitfinex, Btcchina and OkCoin, make up around 45 percent of the global market share of bitcoin.
Why is China taking on cryptocurrencies?
The government reportedly sees bitcoin as a threat to its domestic currency, the yuan.
However, there could be another reason.
The People’s Bank of China has been doing trial runs of its own cryptocurrency, meaning it could be shutting down bitcoin exchanges and ICOs so as not to disrupt its own digital currency when it launches.
Back in 2016¸ the bank told Bloomberg it was exploring the possibility of a Chinese digital currency and that it would be introduced ‘soon’.
As well, it is thought that China’s version could replace paper tender in the country. This would make sense considering the growth of digital wallets and payments in China, through apps such as Alipay and WeChat.
So China’s crackdown on digital currencies might be an attempt to ensure that its version is the strongest of all. It’ll be interesting to see how this plays out, and how a Chinese digital currency will stand up to other state-based ventures.
How is the market reacting to this?
Brave New Coin reported that the decision by BTCC to stop trading has sent the price of the cryptocurrency down to under $3,400. However, it said other Chinese exchanges, such as Okcoin and Huobi are yet to make announcements.
Is bitcoin losing steam?
The currency has gone from just over $1,000 at the start of the year to be worth nearly four times that, before its spectacular fall this week. Brave New Coin said that should selling continue over the next week, there is the potential for another “hidden bullish divergence”.