Bitcoin and other major cryptocurrencies slumped after the People’s Bank of China conveyed a statement reiterating that digital tokens can’t be used as a form of payment.
The largest token fell below $40,000 for the first time since early February, dropping as much as 10% to $38,973 on Wednesday and continuing a weeklong slide sparked by Elon Musk’s back-and-forth comments on Tesla Inc.’s holdings of the coin. Ether, Dogecoin and last week’s sensation, Internet Computer, also retreated.
“This is the latest chapter of China tightening the noose around crypto,” said Antoni Trenchev, managing partner and co-founder of Nexo in London, a crypto lender.
The statement doesn’t have any new regulatory steps, according to Yu Lingqu, a vice director at the China Development Institute think-tank in Shenzhen. The notice was conveyed by the central bank but compiled by industry associations rather than government officials, making it less powerful, according to Liu Yang, a lawyer at Beijing-based law firm DeHeng Law Offices.
“They just want caution,” said Bobby Lee, founder and chief executive officer of crypto storage provider Ballet. “They feel the market is over-hyped, there’s speculative trading, they’re looking out for the best interests of the people.”
Beijing since 2017 has abolished initial coin offerings and clamped down on virtual currency trading within its borders, forcing many exchanges overseas. The country was once home to about 90% of trades but the lion’s share of mining and major players have since fled abroad.
China has recently taken steps to issue its own digital yuan, seeking to replace cash and maintain control over a payments landscape that has become increasingly dominated by technology companies not regulated like banks.