After an intense call by a China to crack down on mining and trading of bitcoin, the price of the crypto currency tumbled significantly on Friday. Tighter regulation is needed to protect the financial system of the country, Chinese Vice Premier Liu He and the State Council said in a statement.
It is necessary to “crack down on Bitcoin mining and trading behavior, and resolutely prevent the transmission of individual risks to the social field”, said the statement that was released late on Friday in China.
With the news of the statement circulating across the world resulted in the price of bitcoin on Coin Metrics dropped by more than 8.5 per cent which was part of a broader drop in the price of the cyber currency which has saw its value drop more than 40 per cent from the peak. Other digital currencies were also hit by the fall. With the drop in the overall asset class, the prices of Ethereum and Dogecoin both went down by more than 11 per cent.
A day before the statement on bitcoin from China, officials in the United States also called for tougher actions against those who were using bitcoin for conducting “illegal activity broadly including tax evasion.” Just as with cash, any crypto transfers of more than $10,000 will now have to be reported, the US Treasury Department said.
There were a number of issues at the core of concerns surrounding bitcoin in China. There is rampant use of computers in China for mining of bitcoin which uses up massive amounts of energy. Butcoin mining comprises of solving complex mathematical problems to unlock the cryptocurrency.
Worries over how bitcoin and other digital currencies are used in illicit ways have ben expressed by authorities around the world.
“It is necessary to maintain the smooth operation of the stock, debt, and foreign exchange markets, severely crack down on illegal securities activities, and severely punish illegal financial activities,” the statement said.
The central bank of China is among the very few central banks in the world that had developed its own digital currency which has been backed by the yuan as a part of the strategy and efforts of the Chinese authorities to streamline the burgeoning digital currency space.
Lon the other hand the central bank of the US – the Federal Reserve said this Thursday that a paper that will outline the research conducted by the bank into the prospect of central bank digital currency will soon be released by it.
(Adapted from CNBC.com)