“They will say that I have shed innocent blood. What's blood for, if not for shedding?” This iconic line from the classic horror film, Candyman, is also appropriate for China’s recent response to bitcoin and other cryptocurrencies. Beijing reached for a dagger and inserted it into the digital flesh of the crypto world, leading to panic in the streets and hemorrhaging on crypto exchanges everywhere. Bitcoin cratered as much as 30% to around $30,000.
China Sheds Digital Blood
On May 17, the People's Bank of China (PBoC) published a statement that confirmed bitcoin and other digital currencies could not be used as a payment method, reiterating that cryptos are not authentic currencies. In addition, the central bank prohibited financial institutions and payment businesses from offering services related to crypto transactions, like clearing, registration, settlement, and trading. Officials also warned investors against speculative crypto trading.
For years, Beijing has restricted crypto exchanges and initial coin offerings (ICOs). So far, it has refrained from prohibiting individuals from holding cryptocurrencies. “Recently, crypto currency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people’s property and disrupting the normal economic and financial order,” the PBoC said in a statement.
On May 21, Chinese authorities recommended amplifying the government's efforts on cracking down on mining and crypto trading. Chinese Vice Premier Liu He and the State Council argued that virtual currencies require additional regulations to shield the financial system, such as stocks and the foreign exchange marks, from "the transmission of individual risks to the social field."
It is only a matter of time before China announces a complete ban on bitcoin and its industry competitors.
Yellen to the Clouds About Bitcoin
Will the U.S. government throw down the hammer on bitcoin, or will it tear the skin of the cryptocurrency bit by bit? The opinion is split on whether regulators will clamp down on the crypto market, mainly because of how mainstream and accepted bitcoin has become over the last year. Everyone is on the digital token these days, from young kids on Reddit to billionaire hedge fund titans. But Uncle Sam wants a piece of the pie.
The Treasury Department announced it would mandate that any transfer worth $10,000 or more must be reported to the Internal Revenue Service (IRS). The Treasury issued a news release on the decision, noting that the industry "poses a significant detection problem by facilitating illegal activity broadly including tax evasion.
"This is why the President’s proposal includes additional resources for the IRS to address the growth of cryptoassets. Within the context of the new financial account reporting regime, cryptocurrencies and cryptoasset exchange accounts and payment service accounts that accept cryptocurrencies would be covered. Further, as with cash transactions, businesses that receive cryptoassets with a fair market value of more than $10,000 would also be reported on.”
This comes soon after the administration confirmed that it plans to target tax evasion and encourage better compliance. But this could be the first step in the federal government's broader efforts to heighten regulations on bitcoin, other cryptocurrencies, and exchanges. It could be soon that Congress grants the Securities and Exchange Commission (SEC) broader regulatory jurisdiction.
It is a double-edged sword. On the one hand, it would likely negatively affect the crypto market in the short term. But, on the other hand, it would proffer additional legitimacy to the asset class.
Dogefather Elon Musk Trolls Bitcoin?
Has Elon Musk converted from the Bitfather to the Dogefather? In February, Tesla Motors announced that it acquired $1.5 billion in bitcoin, and it would allow customers to purchase vehicles in the digital currency. Naturally, this sparked a tremendous rally in prices, allowing the peer-to-peer decentralized virtual currency to top $60,000. But Musk might have either gotten bored with bitcoin, or his trolling spirit may have fallen in love with another meme cryptocurrency: dogecoin.
Over the last week, Musk has begun to complain about bitcoin, arguing that it has become too centralized and concentrated in the hands of a few. This is a sound piece of analysis since the whales of Wall Street, according to Bloomberg, now “control 95% of the digital asset.” But that was not the worst thing Musk tweeted.
Somebody on Twitter warned that Tesla would tell shareholders in the next quarterly earnings report that it offloaded some of its bitcoin holdings. Musk replied on the social network, “Indeed.” This ignited a firestorm and a selloff, which prompted one of the world’s richest men to assure everyone that Tesla has not sold any of its bitcoins. He also later tweeted the “diamond hands” emoji during the crypto collapse, a message that investors believe in the profitability of their security and will hold it during the best of times and the worst of times.
Still, it is dangerous for an asset to live and die by the words and emojis of one person. Well, unless that same individual can take the investment to the moon.
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Read more from Andrew Moran.
