Bitcoin, Ethereum, and other cryptocurrencies crashed on Friday after China announced a fierce clamp down on the market in its bid to fend off financial risks.
The world’s biggest cryptocurrency, Bitcoin, plunged by over 11% to $37,429, while Ethereum, the world’s second-largest cryptocurrency, crashed by over 13% to $2,552.
Dogecoin fell by as much as 15% to $0.34 during the trading session on Friday.
The crash was triggered by Chinese Vice-Premier Liu Hu’s statement that China would severely crackdown on illegal securities activities and severely punish illegal financial activities adding that the country hopes to maintain the stability of the stock, bond and forex markets.
He promised a crackdown on Bitcoin mining and trading as part of China’s plans to prevent and control financial risks.
The comments from Lui followed statements from 3 state-backed organisations, earlier this week, that warned that digital currencies were not real, should not be used for purchases, and could face regulatory changes from banks and other authorities.
The country’s central bank issued a statement on its WeChat account reiterating that financial institutions should not accept or deal with cryptocurrencies.
A senior investment and market analyst, Susannah Streeter said, “China’s ban on banks and payment firms from providing crypto transaction services is a major blow for Bitcoin’s use case and that of its rivals.’’
The announcement by China is also following a proposal by the government in Hong Kong that cryptocurrency exchanges operating in the country will have to be licensed by the city’s markets regulator and will only be allowed to provide services to professional investors.
Under the new rules, which were announced after months of discussions, only professional investors with a portfolio upwards of $1m will be able to use the platforms.
Timeline of China’s Cryptocurrency Ban
It can be recalled that on Tuesday, China financial industry bodies namely, the National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China banned cryptocurrency business as they declared that financial and payment institutions must not conduct cryptocurrency-related businesses.
Cryptocurrencies have been struggling to regain losses from a massive sell-off earlier in the week, which saw the crypto world lose 20% of its value as a deep correction hit the market. Bitcoin fell below $32,000 on Wednesday, while Ethereum dropped as much as 30%.