Bitcoin is back in the mainstream again as China continues to clamp down on the cryptocurrency with strict regulations.
The Chinese publication Caixin has reported that China is planning to entirely ban the trading of Bitcoin and other cryptocurrencies on domestic exchanges. This follows last week’s announcement of the crackdown on Initial Coin Offerings (ICO) in the country.
“It means platforms facilitating trading between virtual currencies and legal tenders will not be allowed in China,” a source close to Chinese regulators told Caixin.
Several digital currency trading platforms have had their platforms suspended.
The value of Bitcoin has changed dramatically over the past week, dropping as low as $3,977. Over the span of 48 hours from September 8 to 10, Bitcoin saw its value drop over $700. Cryptocurrencies are known to be especially volatile, but drops of that magnitude are very few and far between.
News of China’s decision has scared potential investors, as about 18 per cent of Bitcoin transactions are completed in the Chinese yuan currency. Bitcoin is used in the country—just like many other areas of the world—as a failsafe if buyers’ own domestic currency begins to fail or lose money. The cryptocurrency also allows Chinese citizens to transfer funds outside the country, as a set limit of $50,000 USD per year has been imposed.
The ban is also not quite a true ban. Over-the-counter transactions will be allowed, so current investors will more than likely continue to dabble in trading Bitcoin. But the ban may result in newcomers being scared off from trading, limiting the overall growth of the cryptocurrency. This fear more than likely resulted in the steep drops in value.
China has had an up and down relationship with Bitcoin and cryptocurrency. It was once home to 90 per cent of global Bitcoin trading, but as regulations become stricter, it fell to 30 per cent and now 18 per cent. The country barred citizens from withdrawing Bitcoin back in February but reversed that decision four months later.
Bitcoin’s value has soared over the past year as investors begin to see its value as a digital commodity. The improved speed of transactions, as well as general awareness of the cryptocurrency, has also helped boost prices.