China has banned financial and payment service providers from making cryptocurrency transactions. After the decision, Bitcoin lost 14 percent, Ethereum and Dogecoin lost more than 20 percent in the last 24 hours. Bitcoin dropped below $ 40,000 for the first time since February.
The statement made in China, reminding that the price of cryptocurrencies has increased in recent days, it was stated that “virtual currencies are not real currencies” and “cannot be used in the market”.
China is preparing to launch its own digital currency.
Paul Haswell of Pinsent Masons, an international law firm speaking to the Financial Times, says there are three reasons for the trend in China:
“The first reason is that they have their own digital currencies. Second, their cash outflows are uncontrollable, and the third is that people are prevented from being scammed.”
Cause of the Decline in the Crypto World: Efforts to break the monopoly of e-commerce companies
China’s pressure on cryptocurrencies accelerated with the closure of the country’s bitcoin exchange in 2017.
The Chinese management has been aiming to break the monopoly of e-commerce companies such as Alibaba, Ant Group, Tencent. The government’s plan to launch its own digital currency will provide a digital payment mechanism that will rival those companies that largely provide online shopping, and allow the Bank of China to monitor all cash flow in real time.
Cryptocurrency manager Henri Arslanian of consulting firm PricewaterhouseCoopers (PWC) said, “I wouldn’t be surprised if we see restrictions of the kind China imposed by other regulators and governments in the coming weeks, either through speculative trading or the volatility of crypto markets.”
“However, the truth is that institutional players and investors continue to enter this field and this situation does not seem to change in the near future,” Arslanian said.
On the other hand, the world’s most advanced digital payment systems are thought to belong to China. China is also on the verge of transforming into a cashless society. In 2019, four out of five payments in China were made through Tencent’s WeChat and Alibaba’s Alipay apps.
There are fears among Bitcoin enthusiasts that the “Digital Yuan” will be used by the Chinese government as a means of control. Authorities will have the opportunity to see in real time how money is spent and cash flow through the official digital currency.
Bitcoin and cryptocurrencies have lost value after Tesla CEO Elon Musk announced last week that Tesla car sales will no longer be made with cryptocurrencies.