In a move that triggered a historic decline in Bitcoin price, China hardened its stance on cryptocurrencies on Wednesday, plunging the price below $34,000 (£24,030).
Payment firms and banks are prohibited from providing services related to cryptocurrency transactions in Beijing.
A similar warning was issued to investors on Tuesday regarding speculative crypto trading.
The decline follows a fall of more than 10% in Bitcoin last week in response to Tesla’s withdrawal of support.
Despite gaining some ground, Bitcoin was still down -10.4% at $38,131 on Wednesday.
However, other digital currencies such as Ether, which powers the Ethereum blockchain, and Dogecoin have suffered losses of up to 22% and 24% respectively.
- Another big US bank will begin trading in Bitcoin
- Tesla no longer accepts Bitcoin, according to Elon Musk.
- A crypto scammer extorts millions of dollars from Elon Musk
Tesla shares fell more than 3% on Wall Street at the same time, presumably because the electric carmaker is exposed to Bitcoin.
Around $1.5 billion worth of the crypto-currency is still held by the firm owned by Elon Musk.
Beijing clamps down
In order to combat money laundering, cryptocurrency trading has been illegal in China since 2019. Nevertheless, people can still trade in cryptocurrencies, such as Bitcoin, online, which is unsettling for Beijing.
According to Musk, crypto-currency would not damage the environment at a great cost.
A warning from three state-backed organizations, such as China’s Internet Finance Association, China’s Banking Association and the Payment and Clearing Association of China, was announced on social media on Tuesday.
They said consumers would not be protected if they suffered losses from crypto-currency investments.
Furthermore, they said recent wild swings in cryptocurrency prices “seriously undermine people’s assets” and disrupt “the normal economic and financial order”.
As reported by Markets.com, Neil Wilson said that China has long put pressure on the crypto space, but now we see it intensify – new central banks may follow as the move towards digital currencies accelerates.
Read More: We’ve All Become Crypto Enthusiasts Now
Bitcoin has been treated lightly by Western regulators so far, but that might change soon.”
A snub to Tesla
Tesla CEO Elon Musk unexpectedly announced that customers could now purchase cars with Bitcoin in March.
However, last week he reversed course and suspended the use of Bitcoin for vehicle purchases due to environmental concerns.
It’s the energy-intensive Bitcoin mining process – using high-powered computers to create the digital currency – that causes him concern. In particular, it relies on electricity that is often generated using fossil fuels.
Bitcoin mining and transactions are increasingly dependent on fossil fuels, including coal, which emits the highest levels of pollution. This is concerning to Mr Musk.
Despite the benefits of cryptocurrency, it cannot be adopted at a great cost to the environment.
According to him, the electric carmaker will not sell any of its Bitcoin and will resume cryptocurrency transactions once mining shifts to using more sustainable energy sources.
China does not allow the trading of Bitcoins, but it accounts for over 25% of the Bitcoin mining done worldwide.