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Bitcoin ends day on the ropes after China clamps down on mining, trading

ForexMay 21, 2021 04:56PM ET
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© Reuters. Representations of the virtual currency Bitcoin stand on a motherboard in this picture illustration taken May 20, 2021. REUTERS/Dado Ruvic/Illustration

By Gertrude Chavez-Dreyfuss and Thyagaraju Adinarayan

NEW YORK/LONDON (Reuters) -Bitcoin extended losses on Friday afternoon, falling more than 11% after China doubled down on efforts to prevent speculative and financial risks by cracking down on mining and trading of the largest cryptocurrency.China's Financial Stability and Development Committee, chaired by Vice Premier Liu He, singled out bitcoin as the asset it needs to regulate more. The world's largest and most popular cryptocurrency recently traded down 11.59% at $35,928 after holding the $40,000 level for most of the Asian and London sessions. Since hitting an all-time high just under $65,000 in mid-April, bitcoin has fallen about 45%. It's down about 28% so far this week.

The statement, which came days after three Chinese industry bodies tightened a ban on banks and payment companies providing crypto-related services, was a sharp escalation of the country's push to stamp out speculation and fraud in virtual currencies.

Liu is the most senior Chinese official to publicly order a crackdown on bitcoin. This is the first time the government has explicitly targeted crypto mining.

"It's hard to read into the real impact of potential action by China, as these statements are being made without specifics," said John Wu, president of Ava Labs, an open-source platform for financial applications.

"That said, this statement does show the clear risk for bitcoin mining being so reliant on China, and the wills of its government."

Cryptocurrency exchanges operating in Hong Kong will have to be licensed by the city's markets regulator and will only be allowed to provide services to professional investors, according to government proposals to be presented later this year.

Earlier on Friday, China's state broadcaster CCTV warned against "systemic risks" of cryptocurrency trading in a commentary on its website.

"Bitcoin is no longer an investment tool to avoid risks. Rather, it's speculative instrument," CCTV said, adding the cryptocurrency is a lightly-regulated asset often used in black market trade, money-laundering, arms smuggling, gambling and drug dealings.

Rival cryptocurrency ether also came under pressure, trading down about 15% at $2,339.

"China has tried so often to tackle bitcoin, exchanges, and mining since 2013 that I don't think this should come as a surprise anymore," said Ruud Feltkamp, chief executive officer at crypto trading bot Cryptohopper.

"I would be surprised if it is going to have a substantial long-term effect on bitcoin."

China's latest campaign against crypto came after the U.S. Treasury Department on Thursday called for new rules that would require large cryptocurrency transfers to be reported to the Internal Revenue Service and the Federal Reserve flagged the risks cryptocurrencies posed to financial stability.

"Nerves remained heightened, and I cannot see liquidity being deeper on Saturdays and Sundays than Monday to Friday, especially after the last week," said Jeffrey Halley, senior market analyst at OANDA.

"Weekend headline risk could prompt another bout of extended wealth destruction for the weekend warriors."

Bitcoin markets operate 24/7, setting the stage for price swings at unpredictable hours, with retail and day traders driving those moves.

Bitcoin ends day on the ropes after China clamps down on mining, trading
 

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Comments (5)
Alan Rice
Alan Rice May 23, 2021 2:41PM ET
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Chinese are starting to see it. (Smart Folks.)
jake goldstein
jake goldstein May 21, 2021 6:16PM ET
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Bitcoin is laughing in the face of China.
Ferdinando Riboni
Ferdinando Riboni May 21, 2021 11:33AM ET
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Government is the New God Obey
Rajdeep Patil
Rajdeep Patil May 21, 2021 11:33AM ET
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So true
Marino MANCUSO
Marino MANCUSO May 21, 2021 11:27AM ET
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Congratulations China authorities ! it was time to regulate de cryptos ! this should have been done already 2-3 years ago in order to avoid the speculation and the disordely investment in these investments ! let's hope the US authorities wake up as well as the EU ! too many investors will loose a lot of money from now on as regulations finally is implied !
Jm Vm
Jm Vm May 21, 2021 9:12AM ET
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All crypto currency needs to be tightly regulated. It's the main way terrorists and criminals are now funding their operations and receiving payments for extortion and ransoms that make law enforcement efforts to bring them to justice more difficult.
Jon Andis
Jon Andis May 21, 2021 9:12AM ET
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seems like the ******s and criminals got along just fine before crypto. they'll always find a way to fund themselves. regulating crypto will not stop them or slow them down. they'll find another way.
Jan Rokyta
Jan Rokyta May 21, 2021 9:12AM ET
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criminal activity accounts for about 7% of all Bitcoin transactions
rushin patel
rushin patel May 21, 2021 9:12AM ET
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Jon Andis terrible argument. When there is a problem, you try to fix it.
Henrik Elektriker
Henrik Elektriker May 21, 2021 9:12AM ET
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@jmvm, main way for ********has always been in dollar denominated commodities and cash. Gl regulating crypto protocols. Just because some bad Apples uses crypto for doing bad things doesnt make everyone else bad. Should we ban dollar and regulate it to oblivion because narco trade uses it for illicit goals?
Jm Vm
Jm Vm May 21, 2021 9:12AM ET
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Henrik Elektriker Regulate it to oblivion? That's funny considering the regulations that exist with the dollar doing just fine and criminals moving toward crypto. Wow, that's really imaginative reaching for just another excuse like the rest of the crypto crowd. How absurd and funny!
 
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