Digital currencies have gained a lot of popularity and demand in a very short span of time. Unfortunately, the world’s largest and most popular cryptocurrency which hit an all-time high under $65,000 during mid-April has fallen to 45% of its valuation. Many people, especially the younger generation, invest and trade using digital currencies. But, China has recently imposed stricter regulations and speculative measures so that the financial risks are minimized on mining and trading of the world’s largest cryptocurrency.
The Financial Stability and Development Committee of China which is chaired by Vice Premier Liu He, said that Bitcoin needs more regulation. So, last Friday, the valuation of Bitcoin fell more than 11% after doubling the monitoring efforts. For most of the London and Asian session, the value of Bitcoin was $40,000 which dropped to $35,928.
Imposing Strict Speculation on Cryptocurrency
The Chinese Government and other officials of the country are now determined to rule out any possible loophole that will increase the chances of fraud in Cryptocurrency. Before the Chinese officials made any public statement, three Chinese industries already imposed a ban on banks and payment companies which carried out crypto-related services. This escalated the situation and finally Liu He released the order of crackdown on Bitcoin publicly. It is for the first time that crypto mining is targeted by the government.
After the statement by China, John Wu, President of Ava Labs commented that the statements made by China were not very specific. So, it might be difficult to understand the course of action or the real impact of the situation that will take place in the following days. He further added that the statement by Liu He makes it clear that Bitcoin mining is very risky in China as it relies on the will of the government.
The New Rules
With China imposing double measures on digital currencies, there are new rules proposed by the Chinese government. According to the government proposal, every cryptocurrency exchange that is operating in Hong Kong is bound to be licensed by the city’s market regulators. From now onwards, they can only provide services to professional investors. In response to this new announcement by the Chinese government, Ruud Feltkamp, chief executive officer at crypto trading bot Cryptohopper, said that, China is trying to tackle Bitcoin, its mining and trading since 2013 so again doubling down efforts to stop fraud in digital currencies is not a surprise anymore. But, he further said it will be a surprise if this has substantial long-term effect on Bitcoin.
Last Friday, China’s state broadcaster CCTV warned its audience against the systemic risks of cryptocurrency trading during a commentary on its website. The exact words that CCTV said were, “Bitcoin is no longer an investment tool to avoid risks. Rather, it’s a speculative instrument.” It further mentioned that cryptocurrency is a very lightly regulated asset which makes it a good option for trading in the black market, money laundering, drug dealing, and every other kind of illegal business. While the Chinese government is trying to enforce strict rules on Bitcoin, the rival cryptocurrency Ether is also losing its valuation.
Sudden Awareness of the Chinese government
Before China decided to declare a crackdown on Bitcoin, the U.S.Treasury Department just a day before China’s declaration announced some new rules. According to these new rules, the large cryptocurrency transfer should be reported to the Internal Revenue Service and the Federal Reserve flagged the risks cryptocurrencies posed to financial stability (Gadgets 360). The Bitcoin market operates around the clock so the traders have to be vigilant as any time unpredictable price swings might occur.
For many people, the concept of Bitcoin is not very clear. One should know that Bitcoin is a form of digital currency that does not have any relationship with the bank or government and the user can spend it in any possible way. The users also have the option to buy or sell Bitcoins in exchange for U.S. dollars and other currencies. But, seeing that digital currencies especially Bitcoin are becoming a very dominating source of monetary trading in illegal activities, the Chinese government is enforcing strict rules and regulations.
Annasha Dey is an NIT student, who apart from studying engineering is also a content writer. She has a great interest in photography, writing, reading novels, and travelling as well. She is a foodie who loves socializing and hanging out with her friends. She is also a trained Kathak dancer and a big fashion enthusiast. Dey also loves watching TV series, which includes F.R.I.E.N.D.S. and Big Bang Theory. To be a better writer she prefers to read more