Cryptocurrency investors are seeing red this morning after The People’s Bank of China (PBOC) on Monday told the country’s biggest financial institutions to stop facilitating virtual currency transactions. The value of Dogecoin (CCC:DOGE-USD) has depreciated more than 15.5% in the last 24 hours.
Polkadot (CCC:DOT-USD) was off by 11.5% while the two biggest cryptocurrencies by market capitalization, Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD), were down by 5.34% and 7.5%, respectively.
So why is crypto crashing today? The Beijing central bank told the largest Chinese banks that they cannot provide products or services — including trading, clearing and settlement for crypto transactions. The lenders also must identify the capital accounts of virtual-currency exchanges and OTC dealers. They also must cut off the payment link for transaction funds as soon as possible, it said.
The PBOC’s rationale? Nothing necessarily new, but policymakers seem to be again concerned that virtual currency transactions pose a a risk for use in illegal cross-border transactions and money laundering.
Why Is Crypto Crashing Today? Drop Follows Mining Woes.
The PBOC move comes in the wake of an earlier move on cryptocurrency mining activities in Sichuan province, the world’s largest hydro-powered Bitcoin mining area, as a locality sought to curtail the activity.
CoinDesk reported that the Agricultural Bank of China was among the first of the country’s lenders to act on the PBOC order. In an announcement early Monday, the bank, one of China’s “big four,” cited the central bank guidance for a continuation of its crackdown on crypto transactions.
Chinese regulators are not the only ones casting a cloud on crypto.
Earlier this month, banks looking to expand into the world of cryptocurrencies got a pointed reminder of the risks involved with the assets, as the Basel Committee on Banking Supervision on June 10 stated that they are planning to assign Bitcoin and other crypto products the toughest capital requirements for any banks holding it, Bloomberg reported.
The warnings came as many of the major U.S. banks report clients showing an increasing interest in the assets, forcing the likes of JPMorgan Chase (NYSE:JPM) and Goldman Sachs (NYSE:GS) to consider how best to offer exposure to the growing-yet-unstable asset class.
On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, including previous stints with Bloomberg News and as a buyside equity research editor. His Substack newsletter, TLV Strategist, covers the Israel business scene.
