Bitcoin is like cats. Either you hate it or you love it, but it leaves no one indifferent. Por now, criticism they had not gone beyond theoretical statements. However, the best-known cryptocurrency added a powerful enemy. The Chinese government.
China vs. Bitcoin
Bitcoin fell 14% to its lowest level since the beginning of February. The trigger was the rise of Chinese regulators to crack down on the use of cryptocurrencies by financial institutions.
In a joint statement released by the Internet and banking industry associations stated that financial and payment institutions should not accept cryptocurrencies as payment or offer services and products related to them. The statement was posted on none other than the WeChat account of the People's Bank of China.
There, in addition to describing the recent increase in value as "speculation" they argued that Cryptocurrencies are not "real currencies" and should not be used as such in the market.
Consulted by The Financial Times, Paul Haswell, a partner at the Hong Kong-based law firm Pinsent Masons, argues that China wants to boost its own digital currency, in addition to being concerned about the lack of controls on Bitcoin and the possibility that its users will be scammed.
In Hong Kong, a semi-autonomous Chinese territory, there are no regulations yet and the market is growing. However, in November, the city's Treasury and Financial Services Office published proposals that would prohibit retail investors from trading cryptocurrencies.
The idea is to create a digital renminbi (the Chinese currency), which would provide the central bank with a record of all monetary transactions andn real time, in addition to generating a rival cashless payment mechanism to compete with the most popular online fintech platforms.
And in your house, how are them?
Meanwhile, in the West, the view is mixed.
In the United States, regulators have made it easier for retail investors to buy cryptocurrencies and they have allowed the listing of cryptocurrency exchanges in public markets. Large US financial institutions, such as JPMorgan and Goldman Sachs, are exploring the possibility of offering investments in digital currencies to their clients.
In return, the European Central Bank indicated that the volatility of the price of bitcoin made it a risky bet, in addition to emphasizing its "exorbitant carbon footprint and its possible use for illicit purposes." He added that the risks to the financial stability of euro area institutions were limited, as they were little exposed.
The ECB further argued that the rise in the price of bitcoin far outpaced previous financial bubbles such as the 'tulip mania' and the South Seas bubble in the 1600s and 1700s. Recall that the price increased 300% in the last 12 months. And, this taking into account the recent casualties.
According to Henri Arslanian, global head of crypto at the consulting firm PwC, the price decline could continue.
I wouldn't be surprised to see other regulators and policy makers do the same as the Chinese authorities in the coming weeks by warning investors about the risks of speculative trading or the volatility of the cryptocurrency market.
There seems to be no agreement between investors. While new coins continue to enter the market every day, others such as UBS Wealth Management and Pimco voiced reservations about the potential of digital currencies as an asset class.
The reality is that while Bitcoin remained a medium of exchange in Internet transactions, its use was highly recommended. Neither cybercriminals nor regulators were interested in it. For the former, the effort to steal them did not have an adequate reward, and the latter knew that one way or another the money invested in Bitcoins was going to return to the formal circuit.
But, when it became the subject of speculation, none of the advantages were going to last long. The energy cost of producing them is immense, criminals see it as an object of attack and the states as a threat to their powers.