Cryptocurrencies crash on Asia crackdown concerns

By Samuel Indyk

Investing.com – The price of Bitcoin fell below $40,000 on Wednesday amid fears of tighter regulation in China and India. Other major cryptocurrencies also followed suit.

h2 China warning/h2

On Tuesday, the People’s Bank of China reiterated its stance that cryptocurrencies, such as Bitcoin, cannot be used as a form of payment.

The update, posted on the central bank’s official WeChat account, said virtual currencies should not and cannot be used because they’re not real currencies, adding that financial and payments institutions are not allowed to price products or services with virtual currencies.

“The Chinese position on cryptocurrencies is clear from the beginning: trading and usage of cryptocurrencies are simply forbidden,” said Swissquote senior analyst Ipek Ozkardeskaya. “Therefore, the news is nothing ‘new’, but given that crypto-traders are too sensitive to negative news nowadays, it adds to the downside pressure on cryptocurrencies.”

However, the statement arose after three Chinese state-backed financial institutions warned members to stay clear of financing activities related to popular cryptocurrencies.

The National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China issued a joint statement saying any activity related to the exchange of fiat money for cryptocurrencies providing intermediary services to facilitate trading, or conducting token-based derivatives trading, could be charged as a criminal offence in China.

h2 India regulation to ease?/h2

On the other hand, the Indian government is reportedly considering forming a fresh panel to study the possibility of regulating cryptocurrency in the country amid some suggestions that an outright ban is an outdated view.

The Economic Times reported that the committee’s ambit could be to suggest ways to regulate cryptocurrencies as digital assets instead of currency.

In March, a committee recommended that the country adopt a blanket ban on cryptocurrencies but to some in government, the recommendations made by the committee have already become outdated.

“There is a view within the government that the recommendations made by the Subhash Garg are dated and a fresh look is needed at use of cryptos rather than a total ban,” an official with knowledge of the matter told the Economic Times.

h2 Impact on prices/h2

Although news of China’s crackdown appeared to be largely a reiteration of previous regulation, and India appeared to actually be softening their stance on Bitcoin and other digital assets, cryptocurrencies sold off.

The price of Bitcoin dropped below $40,000 and its 200 day moving average around $39,600 to a low of around $38,650 before finding some support. The biggest cryptocurrency by market cap hit its lowest level since February 8^th, the day Elon Musk’s Tesla announced it had bought $1.5bln worth of Bitcoin to diversify reserves and said they would start accepting it as payment.

Last week, the Tesla (NASDAQ:TSLA) CEO announced that the electric vehicle maker would not be accepting Bitcoin as payment for its vehicles, citing the environmental impact from mining and transactions.

The second largest cryptocurrency, Ethereum, dropped below $3,000 to a low of around $2,870. The two largest coins have both shed around 30% of their value in the last week.