Prices of a host of cryptocurrencies tumbled after a memo from the Chinese government saying transactions were illegal and would be banned was posted online.
Crypto watchers said the news was old – originally announced on 15 September and was already in the market – but that did not stop another round of price markdowns.
Traders highlighted the FUD ( fear, uncertainty, doubt) that is afflicting the crypto sector sparked by China’s increasingly aggressive stance.
In the memo, the People’s Bank of China (PboC) said it would seek to end “illegal activity” in cryptocurrencies.
According to the release, cryptocurrencies must not be used like traditional currencies while overseas exchanges are barred from providing services to mainland China investors.
Financial institutions, payment companies and internet firms are also banned from facilitating cryptocurrency trading.
The Chinese government will “resolutely clamp down on virtual currency speculation, and related financial activities and misbehaviour in order to safeguard people’s properties and maintain economic, financial and social order,” the PBOC added on its website and reported by Reuters.
Other government agencies said they would work with the central bank to maintain the pressure on cryptocurrency traders.
Earlier this year, China moved to stop crypto mining in the country and today the National Development and Reform Commission (NDRC) said it was instigating a ‘nationwide cleanup’ of the activity.
This will include cutting financial support and even the electricity supply to miners, it said.
Prices of bitcoin and other currencies fell hard at first but then rallied as traders said the market was getting used to this kind of rhetoric from China.
On the crypto exchanges, Bitcoin dropped 3% Ethereum 6%. Cardano was down 2%, Solana sank 6.9% and Litecoin 5.9%.
Coinbase, the US-listed exchange, also fell in pre-market trading while UK-listed crypto miner Argo Blockchain shed 13%.
Fawad Razaqzada at Thinkmarkets said the adoption of Bitcoin and other digital currencies by a growing number of companies is helping to keep the downside risks limited.
“Twitter has become the latest household name to adopt Bitcoin, allowing users to ‘tip’ their favourite creators on the social network using bitcoin.
“Although this feature was already introduced back in May, Twitter said it will now roll it out globally to all Apple iOS users this week, with Android to follow in the coming weeks.”