China's financial regulators ban provision of services related to cryptocurrencies - Kakiforex | Forex markets for the smart money. China's financial regulators ban provision of services related to cryptocurrencies China's financial regulators ban provision of services related to cryptocurrencies

May 20, 2021

China's financial regulators ban provision of services related to cryptocurrencies

 A few months ago, there were rumors that the largest central banks in the world could prohibit owning bitcoin, mining it, and carrying out trading operations using cryptocurrencies. In fact, these rumors have been circulating for several years, since it is simply unprofitable for governments and central banks to have such a currency in their country that is beyond their control. In addition to the banal arguments that illegal transactions, terrorist financing, and money laundering are carried out with the help of bitcoin and other cryptocurrencies, there is another argument. The governments of the country always need to know who owns how much money and who where to spend this money. With the advent of cryptocurrencies, it has become very difficult to gain control over this data. Of course, there are technologies and ways to obtain such information. However, if all the necessary answers with the help of the existing banking system can be obtained quite easily and simply, then with the advent of cryptocurrencies, it has become much more difficult to track cash flows. Therefore, the question of a possible ban on certain operations with bitcoin and its counterparts, as they say, was in the air for a very long time. In the past year, many "crypto experts" have repeatedly stated that no central bank will be able to prohibit bitcoin or transactions with it, since it is already too deeply integrated into the current financial system. But, as practice shows, "never say never." It became known this morning that financial regulators in China have banned financial institutions in their country from providing services that are associated with "digital assets". These are the regulators that oversee financial transactions, the payments market and clearing. Thus, from now on, Chinese companies are prohibited from providing storage, transfer, and payment services related to cryptocurrencies. They are also prohibited from releasing new products that are somehow related to digital assets. The corresponding statement said that cryptocurrencies have no real and fair value, they are easy to manipulate (like Elon Musk does), and trading contracts are not protected by law. If anyone does not know, the vast majority of mining facilities are located in China. About a month ago, Bitcoin collapsed simply due to the fact that in one district of China (Xinjiang), power outages began, due to which the mining farms could not continue their work. And Xinjiang County is the largest mining farm in China. It accounts for about 30% of the capacity. What will happen now that financial institutions are banned from dealing with digital assets in all of China?


Technically, Bitcoin on the 4-hour timeframe is exhibiting an even more impressive fall. In principle, the target is now the level of $30,500, which we marked on the daily timeframe. Given the fundamental background, Bitcoin could indeed plummet well below current levels.