<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/08/106911087-16263029762021-07-12t182451z_1049474836_rc26jo9ua1af_rtrmadp_0_fintech-crypto-flows.jpeg" alt="" class="wp-image-411455" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/08/106911087-16263029762021-07-12t182451z_1049474836_rc26jo9ua1af_rtrmadp_0_fintech-crypto-flows.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/08/106911087-16263029762021-07-12t182451z_1049474836_rc26jo9ua1af_rtrmadp_0_fintech-crypto-flows-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/08/106911087-16263029762021-07-12t182451z_1049474836_rc26jo9ua1af_rtrmadp_0_fintech-crypto-flows-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Dado Ruvic | Reuters</figcaption></figure>



<a href="https://www.cnbcafrica.com/quotes/btc=x/">Bitcoin</a> topped $48,000 over the weekend, its highest level since mid-May but pared some of those gains on Monday.



On Saturday, the digital coin hit $48,126.47, its highest level since May 17, according to Coindesk data. Around 2:49 a.m. ET on Monday, bitcoin was trading at $47,442.40



The bitcoin recovery comes after it sold off heavily in June and July, even <a href="https://www.cnbcafrica.com/2021/90-billion-wiped-off-crypto-market-as-bitcoin-drops-below-30000-for-first-time-in-nearly-a-month/">dropping below $30,000</a> following a record high of over $64,000 in April.



“I do believe this (bitcoin’s rise) is the result of massive accumulation” when bitcoin was trading around $29,000 to $30,000, according to Vijay Ayyar, head of business development at cryptocurrency exchange Luno.



Bitcoin’s rise helped push the value of the entire cryptocurrency market above $2 trillion on Saturday for the first time since mid-May, according to data from CoinMarketCap which tracks the prices of digital coins.



The crypto market has faced a number of headwinds over the summer. One of the biggest was the renewed regulatory scrutiny on the industry from authorities in China which has forced bitcoin mining operations to shut down and move elsewhere. That was one of the biggest reasons for bitcoin dropping below the $30,000 level.



Meanwhile, the U.S. Senate passed a massive infrastructure bill last week without any of the proposed amendments on crypto tax reporting that had delayed its passage. That was seen as a blow for the crypto community, but some said it showed the U.S. government was taking the industry seriously.



These “fundamental regulatory roadblocks” have “clipped the market’s wings” in the near term, said Jehan Chu, founder of cryptocurrency-focused venture capital and trading firm Kenetic Capital.



He said that while bitcoin may surge to $55,000, investors should expect a “significant pullback to sub-$30k levels, resetting the stage for a long steady march” to $100,000 in 2022.



More negative news came this month after <a href="https://www.cnbc.com/2021/08/12/poly-network-hacker-behind-600-million-crypto-heist-did-it-for-fun.html">hackers stole $600 million</a> in one of the biggest cryptocurrency heists in history. But in a bizarre turn of the events, the hackers eventually returned nearly all of the stolen money.



This didn’t seem to faze the bitcoin bulls.



Luno’s Ayyar said that bitcoin is approaching resistance levels between $48,000 and $50,000.



“I wouldn’t expect bitcoin to run through in one shot,” Ayyar said, adding that if it does break that level of support, then the digital coin is “definitely looking to go back to all-time highs.”

106911087-16263029762021-07-12t182451z_1049474836_rc26jo9ua1af_rtrmadp_0_fintech-crypto-flows

Crypto market tops $2 trillion for the first time in nearly 3 months as bitcoin rallies

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106911986-1626436738459-gettyimages-1232552144-omarques_26042021_financekrk_5.jpeg" alt="" class="wp-image-410871" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106911986-1626436738459-gettyimages-1232552144-omarques_26042021_financekrk_5.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106911986-1626436738459-gettyimages-1232552144-omarques_26042021_financekrk_5-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106911986-1626436738459-gettyimages-1232552144-omarques_26042021_financekrk_5-140x80.jpeg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>The logo of cryptocurrency exchange Binance displayed on a smartphone with stock market percentages in the background. Omar Marques | SOPA Images | LightRocket via Getty Images</figcaption></figure>



Major cryptocurrency exchange Binance said on Friday it would wind down its futures and derivatives products offerings across Europe, a move that comes after unprecedented pressure from regulators.



Binance users in Germany, Italy and the Netherlands will, with immediate effect, not be able to open new futures or derivatives products accounts, the exchange said in a statement on its website.



Users from these countries will, from a date to be announced later, have 90 days to close their open positions, Binance said.



Read more: <a href="https://www.cnbcafrica.com/2021/binance-ceo-says-compliance-is-a-journey-as-worlds-largest-crypto-exchange-faces-growing-crackdown/">Binance, the world’s largest cryptocurrency exchange, is launching an NFT marketplace</a>



The move comes amid growing pressure on Binance from financial authorities across the world, including Britain, Germany, Hong Kong and Italy.



In the wake of the unprecedented crackdown, Binance said on Monday it would stop offering cryptocurrency margin trading involving the Australian dollar, euro and sterling.



The exchange had said earlier this month it stopped selling digital tokens linked to shares, after regulators cracked down on the cryptocurrency exchange platform’s “stock tokens” offerings.

106911986-1626436738459-gettyimages-1232552144-omarques_26042021_financekrk_5

Crypto exchange Binance to wind down derivatives in Europe

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="546" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/51008793946_8a23be8a2d_k-820x546.jpg" alt="" class="wp-image-410559" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/51008793946_8a23be8a2d_k-820x546.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/51008793946_8a23be8a2d_k-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/51008793946_8a23be8a2d_k-120x80.jpg 120w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/51008793946_8a23be8a2d_k-768x511.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/51008793946_8a23be8a2d_k-1536x1022.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/51008793946_8a23be8a2d_k.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Close-up of physical coins of Bitcoin, Litecoin and Ethereum in a wallet full of FIAT money coins. Photo: via Flickr</figcaption></figure>



New digital forms of money have the potential to provide cheaper and faster payments, enhance financial inclusion, improve resilience and competition among payment providers, and facilitate cross-border transfers.



But doing so is not straightforward. It requires significant investment as well as difficult policy choices, such as clarifying the role of the public and private sectors in providing and regulating digital forms of money.



Some countries may be tempted by a shortcut: adopting cryptoassets as national currencies. Many are indeed secure, easy to access, and cheap to transact. We believe, however, that in most cases risks and costs outweigh potential benefits.



Cryptoassets are privately issued tokens based on cryptographic techniques and denominated in their own unit of account. Their value can be extremely volatile. Bitcoin, for instance, reached a peak of $65,000 in April and crashed to less than half that value two months later.



And yet, Bitcoin lives on. For some, it is an opportunity to transact anonymously—for good or bad. For others, it is a means to diversify portfolios and hold a speculative asset that can bring riches but also significant losses.



Cryptoassets are thus fundamentally different from other kinds of&nbsp;<a href="https://www.imf.org/en/Publications/fintech-notes/Issues/2019/07/12/The-Rise-of-Digital-Money-47097?utm_medium=email&amp;utm_source=govdelivery">digital money</a>. Central banks, for instance, are considering issuing&nbsp;<a href="https://www.imf.org/external/pubs/ft/fandd/2021/03/what-are-central-bank-digital-currencies-mancini-griffoli.htm?utm_medium=email&amp;utm_source=govdelivery">digital currencies</a>—digital money issued in the form of a liability of the central bank. Private companies are also pushing the frontier, with money that can be&nbsp;<a href="https://www.imf.org/external/pubs/ft/fandd/2021/06/online/digital-money-new-era-adrian-mancini-griffoli.htm?utm_medium=email&amp;utm_source=govdelivery">sent over mobile phones</a>, popular in East Africa and China, and with stablecoins, whose value depends on the safety and liquidity of backing assets.



<h2 class="wp-block-heading">Cryptoassets as legal tender?</h2>



Bitcoin and its peers have mostly remained on the fringes of finance and payments, yet some countries are actively considering granting cryptoassets legal tender status, and even making these a second (or potentially only) national currency.



If a cryptoasset were granted legal tender status, it would have to be accepted by creditors in payment of monetary obligations, including taxes, similar to notes and coins (currency) issued by the central bank.



Countries can even go further by passing laws to encourage the use of cryptoassets as a national currency, that is, as an official monetary unit (in which monetary obligations can be expressed), and a mandatory means of payment for everyday purchases.



Read more: <a href="https://www.cnbcafrica.com/2021/bitcoin-tops-39000-for-the-first-time-in-nearly-6-weeks-adding-114-billion-to-the-crypto-market/">Bitcoin tops $39,000 for the first time in nearly 6 weeks, adding $114 billion to the crypto market</a>



Cryptoassets are unlikely to catch on in countries with stable inflation and exchange rates, and credible institutions. Households and businesses would have very little incentive to price or save in a parallel cryptoasset such as Bitcoin, even if it were given legal tender or currency status. Their value is just too volatile and unrelated to the real economy.



Even in relatively less stable economies, the use of a globally recognized reserve currency such as the dollar or euro would likely be more alluring than adopting a cryptoasset.



A cryptoasset might catch on as a vehicle for unbanked people to make payments, but not to store value. It would be immediately exchanged into real currency upon receipt.



Then again, real currency may not always be readily available, nor easily transferable. Moreover, in some countries, laws forbid or restrict payments in other forms of money. These could tip the balance towards widespread use of cryptoassets.



<h2 class="wp-block-heading">Proceed with caution</h2>



The most direct cost of widespread adoption of a cryptoasset such as Bitcoin is to macroeconomic stability. If goods and services were priced in both a real currency and a cryptoasset, households and businesses would spend significant time and resources choosing which money to hold as opposed to engaging in productive activities. Similarly, government revenues would be exposed to exchange rate risk if taxes were quoted in advance in a cryptoasset while expenditures remained mostly in the local currency, or vice versa.



Also, monetary policy would lose bite. Central banks cannot set interest rates on a foreign currency. Usually, when a country adopts a foreign currency as its own, it “imports” the credibility of the foreign monetary policy and hope to bring its economy–and interest rates–in line with the foreign business cycle. Neither of these is possible in the case of widespread cryptoasset adoption.



As a result, domestic prices could become highly unstable. Even if all prices were quoted in, say, Bitcoin, the prices of imported goods and services would still fluctuate massively, following the whims of market valuations.



Financial integrity could also suffer. Without robust anti-money laundering and combating the financing of terrorism measures, cryptoassets can be used to launder ill-gotten money, fund terrorism, and evade taxes. This could pose risks to a country’s financial system, fiscal balance, and relationships with foreign countries and correspondent banks.



The Financial Action Task Force has set a standard for how virtual assets and related service providers should be regulated to limit financial integrity risks. But enforcement of that standard is not yet consistent across countries, which can be problematic given the potential for cross-border activities.



Further legal issues arise. Legal tender status requires that a means of payment be widely accessible. However, internet access and technology needed to transfer cryptoassets remains scarce in many countries, raising issues about fairness and financial inclusion. Moreover, the official monetary unit must be sufficiently stable in value to facilitate its use for medium- to long-term monetary obligations. And changes to a country’s legal tender status and monetary unit typically require complex and widespread changes to monetary law to avoid creating a disjointed legal system.



Read more: <a href="https://www.cnbcafrica.com/2021/90-billion-wiped-off-crypto-market-as-bitcoin-drops-below-30000-for-first-time-in-nearly-a-month/">$90 billion wiped off crypto market as bitcoin drops below</a> <a href="https://www.cnbcafrica.com/2021/90-billion-wiped-off-crypto-market-as-bitcoin-drops-below-30000-for-first-time-in-nearly-a-month/">$30,000 for first time in nearly a month</a>



In addition, banks and other financial institutions could be exposed to the massive fluctuations in cryptoasset prices. It is not clear whether prudential regulation against exposures to foreign currency or risky assets in banks could be upheld if Bitcoin, for instance, were given legal tender status.&nbsp;



Moreover, widespread cryptoasset use would undermine consumer protection. Households and businesses could lose wealth through large swings in value, fraud, or cyber-attacks. While the technology underlying cryptoassets has proven extremely robust, technical glitches could occur. In the case of Bitcoin, recourse is difficult as there is no legal issuer.



Finally, mined cryptoassets such as Bitcoin require an enormous amount of electricity to power the computer networks that verify transactions. The ecological implications of adopting these cryptoassets as a national currency could be dire.



<h2 class="wp-block-heading" id="h-striking-a-balance">Striking a balance</h2>



As national currency, cryptoassets—including Bitcoin—come with substantial risks to macro-financial stability, financial integrity, consumer protection, and the environment. The advantages of their underlying technologies, including the potential for cheaper and more inclusive financial services, should not be overlooked. Governments, however, need to step up to provide these services, and leverage new digital forms of money while preserving stability, efficiency, equality, and environmental sustainability. Attempting to make cryptoassets a national currency is an inadvisable shortcut.



<a href="https://blogs.imf.org/bloggers/tobias-adrian/?utm_medium=email&amp;utm_source=govdelivery" target="_blank" rel="noreferrer noopener">Tobias Adrian</a>&nbsp;is the Financial Counsellor and Director of the IMF’s Monetary and Capital Markets Department.



<a href="https://blogs.imf.org/bloggers/26101-2/?utm_medium=email&amp;utm_source=govdelivery" target="_blank" rel="noreferrer noopener">Rhoda Weeks-Brown</a>&nbsp;is General Counsel and Director of the IMF’s Legal Department.

51008793946_8a23be8a2d_k

Cryptoassets as National Currency? A Step Too Far

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106914167-1626861873395-gettyimages-1234061399-sindeyev-notitle210719_npeAJ.jpeg" alt="" class="wp-image-410239" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106914167-1626861873395-gettyimages-1234061399-sindeyev-notitle210719_npeAJ.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106914167-1626861873395-gettyimages-1234061399-sindeyev-notitle210719_npeAJ-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106914167-1626861873395-gettyimages-1234061399-sindeyev-notitle210719_npeAJ-140x80.jpeg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>A bitcoin sign with a graph pictured in the background.
STR | NurPhoto via Getty Images</figcaption></figure>



<a href="https://www.cnbcafrica.com/quotes/btc=x/">Bitcoin&nbsp;</a>surged Sunday evening topping $39,000 for the first time since mid-June as sentiment turned bullish following a recent sell-off.



The cryptocurrency was trading at around $38,059.84 at 11:05 p.m. ET, according to CoinDesk data, up nearly 11% from the same time 24-hours prior. Bitcoin had previously hit a 24-hour high of $39,544.29, the highest level since June 16.



Bitcoin’s rally lifted other cryptocurrencies with&nbsp;<a href="https://www.cnbcafrica.com/quotes/eth=x/">ether&nbsp;</a>up 5.9% above $2,299.55. The entire cryptocurrency market added over $114 billion in value in 24 hours as of 11:05 p.m. ET, according to data from Coinmarketcap.com.



The rally comes after<a href="https://www.cnbcafrica.com/2021/catch-these-key-levels-for-bitcoin-next-after-its-break-below-30000-traders-say/">&nbsp;bitcoin recently fell below $30,000</a>&nbsp;after a global sell-off in stocks, sparking fears that it could plunge even further.



“I think we saw an accumulation period around 29-30K, indicating bullishness and a potential move towards $40K for Bitcoin,” said Vijay Ayyar, head of business development at cryptocurrency exchange Luno.



<h2 class="wp-block-heading" id="h-musk-dorsey-wood-in-focus"><a></a>Musk, Dorsey, Wood in focus</h2>



Twitter CEO&nbsp;<a href="https://www.cnbc.com/2021/07/21/jack-dorsey-hopes-bitcoin-will-help-bring-about-world-peace.html">Jack </a><a href="https://www.cnbcafrica.com/2021/ethereum-price-rises-after-elon-musk-confirms-he-owns-the-cryptocurrency/">Dorsey</a>, Tesla CEO Elon Musk and ARK Invest CEO Cathie Wood all recently spoke during a closely watched bitcoin conference called “The B-Word.”



Musk said that Tesla would&nbsp;<a href="https://www.cnbc.com/2021/07/21/elon-musk-says-tesla-will-likely-start-accepting-bitcoin-again.html">likely start accepting bitcoin for vehicle purchases again</a>&nbsp;as a greater share of bitcoin mining switches to renewable energy. In May, Tesla suspended vehicle purchases using the cryptocurrency out of concern over the&nbsp;<a href="https://www.cnbcafrica.com/2021/as-much-as-365-billion-wiped-off-cryptocurrency-market-after-tesla-stops-car-purchases-with-bitcoin/">“rapidly increasing use of fossil fuels for bitcoin mining.”</a>



Bitcoin mining is the energy-intensive process of creating new coins, which involves solving complex math problems. The computational power required to do so also consumes a lot of energy.



“The Chinese trading day has opened up, and the Elon/Jack/Cathie talk was super bullish,” said Alex Brammer of Luxor Mining, a cryptocurrency pool built for advanced miners.



There have been other bullish headlines for bitcoin. E-commerce giant Amazon is&nbsp;<a href="https://www.cnbc.com/2021/07/23/amazon-is-hiring-a-digital-currency-and-blockchain-expert.html">looking to add a digital currency and blockchain expert to its payments team</a>, suggesting it could be taking a closer look at bitcoin and other cryptocurrencies. An Amazon spokesperson said that the company is “inspired by the innovation happening in the cryptocurrency space and are exploring what this could look like on Amazon.”



These bullish moves have also contributed to a so-called “short squeeze,” according to bitcoin mining engineer&nbsp;Brandon Arvanaghi.



Investors who short bitcoin are betting that the price will fall further. But if the price goes higher, these investors look to cut losses and exit their short positions, which helps to push the price even higher.



“I think the extent of the jump was probably driven by over-leverage shorts,” Luno’s Ayyar said.



Meanwhile, some of the issues that have weighed on bitcoin’s price have begun to clear up. Over the past few months,&nbsp;<a href="https://www.cnbcafrica.com/2021/chinas-renewed-crypto-crackdown-wipes-nearly-300-billion-off-the-market-as-bitcoin-slides/">China has renewed its crackdown on cryptocurrencies</a>&nbsp;targeting mining and trading. And&nbsp;<a href="https://www.cnbc.com/2021/07/20/bitcoin-mining-environmental-impact-new-study.html">concerns over the carbon footprint of bitcoin mining are starting to wane</a>.



Luxor Mining’s Brammer said the uncertainty around the environmental impact of mining and the Chinese regulatory concerns have “worn off.”

bitcoin

Bitcoin tops $39,000 for the first time in nearly 6 weeks, adding $114 billion to the crypto market

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106914581-1626892622787-bit.jpg" alt="" class="wp-image-410308" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106914581-1626892622787-bit.jpg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106914581-1626892622787-bit-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106914581-1626892622787-bit-140x80.jpg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>A still from The B Word showing Elon Musk. Source: The B Word</figcaption></figure>



The price of ethereum rose Wednesday afternoon after&nbsp;Tesla&nbsp;and SpaceX CEO Elon Musk said he owns the cryptocurrency at&nbsp;The B Word conference, an event hosted by the Crypto Council for Innovation.



Ethereum, which was already rallying on the day, touched its high of the session after Musk’s mention. It was last up more than 12% and near the highs of the day.



Musk also repeated his support for cryptocurrency in general, despite potential environmental risks, saying, “One thing you do need to watch out for with crypto, especially <a href="https://www.cnbcafrica.com/quotes/btc=x/">bitcoin</a>, using proof of work, using energy that’s a bit too much and not necessarily good for the environment.”



<h3 class="wp-block-heading" id="h-read-more-ethereum-hits-new-record-high-above-3-400-extending-its-more-than-300-rally-this-year">Read more: <a href="https://www.cnbcafrica.com/2021/ethereum-hits-new-record-high-above-3400-extending-its-more-than-300-rally-this-year/">Ethereum hits new record high above $3,400, extending its more than 300% rally this year</a></h3>



As bitcoin mining is increasingly powered by renewable energy,&nbsp;Musk said, Tesla will likely move to accept bitcoin for transactions once again.



Musk also said that at this time, the only publicly traded stock he owns is Tesla’s, and that he personally owns some bitcoin, dogecoin and ethereum. “The only significant thing I own outside of&nbsp;Tesla&nbsp;is SpaceX,” he noted, having helped create both companies.



He also said he has been holding his bitcoin long term.



“If the price of bitcoin goes down I lose money. I might pump but I don’t dump,” Musk said. “I definitely do not believe in getting the price high and selling or anything like that. I would like to see bitcoin succeed.”



<h3 class="wp-block-heading">Read more: <a href="Ethereum: What is it and how is it different to bitcoin?">Ethereum: What is it and how is it different to bitcoin?</a></h3>



Musk also confirmed that both Tesla and SpaceX own bitcoin, and no other cryptocurrency at this time.



The B Word conference was established to “demystify,” “de-stigmatize” and “correct the mainstream narrative” around the cryptocurrency bitcoin and promote its institutional acceptance and use.



Musk spoke on a panel alongside Jack Dorsey, CEO of payments company Square and Musk’s favorite social media platform Twitter, along with Ark Invest founder and CEO Cathie Wood, who answered questions from moderator and&nbsp;Square&nbsp;Crypto lead Steve Lee.

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Ethereum price rises after Elon Musk confirms he owns the cryptocurrency

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106914167-1626861873395-gettyimages-1234061399-sindeyev-notitle210719_npeAJ.jpeg" alt="" class="wp-image-410239" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106914167-1626861873395-gettyimages-1234061399-sindeyev-notitle210719_npeAJ.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106914167-1626861873395-gettyimages-1234061399-sindeyev-notitle210719_npeAJ-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106914167-1626861873395-gettyimages-1234061399-sindeyev-notitle210719_npeAJ-140x80.jpeg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>A bitcoin sign with a graph pictured in the background. STR | NurPhoto via Getty Images</figcaption></figure>



Bitcoin and other cryptocurrencies recovered on Wednesday after a brutal sell-off, with the world’s biggest digital coin climbing back above $30,000.



The price of bitcoin rose almost 4% in the last 24 hours, to $30,798 at 5:25 a.m. ET, according to Coin Metrics data. Smaller cryptocurrencies ether and XRP also rebounded, up around 7% and 3% respectively.



The crypto market saw significant selling on Tuesday, with bitcoin <a href="https://www.cnbcafrica.com/2021/90-billion-wiped-off-crypto-market-as-bitcoin-drops-below-30000-for-first-time-in-nearly-a-month/">falling below the $30,000 mark</a> for the first time since June 22.



The plunge came on the back of news that the New Jersey attorney general issued a&nbsp;<a href="https://www.forbes.com/sites/stevenehrlich/2021/07/19/new-jersey-attorney-general-prepares-cease-and-desist-order-against-multi-billion-dollar-bitcoin-financial-services-platform/" target="_blank" rel="noreferrer noopener">cease and desist letter</a>&nbsp;to crypto lending firm BlockFi, ordering it to stop offering interest-bearing accounts.



The reason for the move higher Wednesday wasn’t immediately clear. Cryptocurrencies often undergo severe price swings. Bitcoin, for example, rallied to an all-time high of almost $65,000 in April before halving in value in the months that followed.



<h2 class="wp-block-heading" id="h-dead-cat-bounce"><a></a>‘Dead cat bounce’</h2>



Vijay Ayyar, head of Asia-Pacific at cryptocurrency exchange Luno, said Wednesday’s price move was likely a “dead cat bounce,” where an asset briefly recovers from a prolonged decline before continuing to slide.



Unless bitcoin can climb above $32,000, Ayyar expects more downside, with the top cryptocurrency potentially tumbling as low as $24,000.



“We saw broad market rallies across the board last night as well, and I think crypto is just playing off of that,” Ayyar told CNBC.



“In general, there are lot of macro factors weighing down on risk-on assets at the moment — inflation worries, Covid, and with crypto we’ve got more specific worries such as much more regulatory oversight.”



<h2 class="wp-block-heading"><a></a>Regulatory pressure</h2>



Cryptocurrencies have been on a downward trajectory amid a growing crackdown on the industry from regulators around the world.



In China, authorities have sought to stamp out crypto mining, the process which validates transactions and produces new coins. Meanwhile, Binance, the world’s largest crypto exchange, is facing&nbsp;<a href="https://www.cnbc.com/2021/06/28/cryptocurrency-exchange-binance-banned-by-uk-regulator.html">intensifying pressure</a>&nbsp;from regulators in the U.K., Italy and elsewhere.

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Bitcoin extends gains, touching $32,000 as cryptocurrencies rebound from sell-off

<figure class="wp-block-image size-full is-resized"><img loading="lazy" decoding="async" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/05/bitcoin-1.jpeg" alt="" class="wp-image-404731" width="653" height="367" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/05/bitcoin-1.jpeg 630w, https://cms.cnbcafrica.com/wp-content/uploads/2021/05/bitcoin-1-300x169.jpeg 300w" sizes="auto, (max-width: 653px) 100vw, 653px" /><figcaption>Bitcoin Photo: via Flickr</figcaption></figure>



<a href="https://www.cnbcafrica.com/2021/90-billion-wiped-off-crypto-market-as-bitcoin-drops-below-30000-for-first-time-in-nearly-a-month/">Bitcoin fell again</a> on Tuesday, this time breaking below the critical $30,000 level.



That price has been highlighted by institutional investors as a key level of support.



Despite the market rebounding slightly on Tuesday, this move in bitcoin comes as investors look to mitigate risk with the spread of the delta Covid variant putting additional pressure on the broader market.&nbsp;



Other cryptocurrencies were also lower Tuesday.&nbsp;<a href="https://www.cnbc.com/quotes/ETH.CM=">Ether</a>,&nbsp;<a href="https://www.cnbc.com/quotes/LTC.CM=">litecoin</a>&nbsp;and&nbsp;<a href="https://www.cnbc.com/quotes/DOGE.CM=">dogecoin</a>&nbsp;all spent the day in the red.&nbsp;



In an interview with CNBC’s&nbsp;<a href="https://www.cnbc.com/trading-nation/">“Trading Nation,”</a>&nbsp;Delano Saporu, founder of New Street Advisors, said he sees more pain ahead for bitcoin.&nbsp;



“I think you probably have more downside, maybe to around the $22,000 range [to] the $17,000 range for bitcoin going back to Dec. 20 of last year,” he said Tuesday. However, “from there, I do think there’ll be upside,” he said.



While short-term traders who invested in bitcoin at its highs are feeling the pain now, Saporu sees the cryptocurrency paying off for long-term investors. 



“A lot of people that were speculating when the price was really at its highs and they were jumping in at that time were really looking for a quick profit,” he said. “They were wrong at that time.”



In the same interview, Fairlead Strategies founder Katie Stockton said bitcoin investors may feel the squeeze for a little longer.



“It marks the bottom boundary of a consolidation phase,” she said of the move below $30,000. “With that, it becomes what I call ‘ripe for a shakeout.’”&nbsp;



According to Stockton, a shakeout is a “false breakdown” where the price of an investment dips below a support level. Following this dip, the price might quickly snap back once the market “shakes out those weak holders of bitcoin,” she said.



If bitcoin bounces back this week, she said, that would be a sign that this sell-off was temporary.



In addition, her model indicates that bitcoin is headed higher. She pointed to a secondary support level at around $27,000, which would be important to define its long-term uptrend.



Stockton added that she needs to see momentum turn for proof that this consolidation phase is bottoming. She predicts this would happen when bitcoin breaks out above the 50-day moving average, which is approximately $34,500 at current levels.&nbsp;



“That would be a convincing turnaround for bitcoin,” she added.



Disclosure:&nbsp;Delano&nbsp;Saporu holds bitcoin.



<a href="https://www.cnbc.com/stocks-disclaimer.html">Disclaimer</a>

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Catch these key levels for bitcoin next after its break below $30,000, traders say

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="615" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1231063275-820x615.jpeg" alt="" class="wp-image-397323" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1231063275-820x615.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1231063275-300x225.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1231063275-768x576.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1231063275-1536x1152.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1231063275-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>UKRAINE &#8211; 2021/02/09: In this photo illustration, BTCUSD / Bitcoin USD price information seen displayed on a smartphone with a Bitcoin logo in the background. (Photo Illustration by Igor Golovniov/SOPA Images/LightRocket via Getty Images)</figcaption></figure>



<a href="https://www.cnbcafrica.com/quotes/btc=x/">Bitcoin</a>&nbsp;fell below $30,000 for the first time since Jun. 22 on Monday dragging other digital coins lower.



About $90 billion was wiped off the entire cryptocurrency market in 24 hours as of 11:34 p.m. ET, according to CoinMarketCap data.



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<h3 class="wp-block-heading" id="h-watch-binance-ceo-on-covid-19-and-trading-crypto-in-africa">Watch: Binance CEO on COVID-19 and trading crypto in Africa</h3>


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Bitcoin was down nearly 6% while ether fell 8% and XRP tanked almost 10%, according to CoinDesk data.



The plunge in bitcoin came after a big sell-off in global stock markets. On Monday, the&nbsp;<a href="https://www.cnbc.com/quotes/.DJI">Dow Jones Industrial Average</a>&nbsp;had its&nbsp;<a href="https://www.cnbc.com/2021/07/18/stock-market-futures-open-to-close-news.html">worst day since last October</a>.



“There’s been a broad sell-off in global markets, risk assets are down across the board,” Annabelle Huang, partner at cryptocurrency financial services firm Amber Group, said.



There are “concerns of the quality and strength of economic recovery” and “broader risk assets turned weaker including high yields,” Huang said. “Coupled with recent BTC (bitcoin) weakness, this just sent crypto market down further.”



Since bitcoin’s all-time high of nearly $65,000 in mid-April, its price has plunged over 50%.



<a href="https://www.cnbcafrica.com/2021/bitcoin-drops-as-china-intensifies-crypto-mining-crackdown/">A renewed crackdown in China on cryptocurrency trading</a> and mining has weighed on the bitcoin price.



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<h3 class="wp-block-heading" id="block-779d632e-6017-468a-bff0-922f4323bc7a">Watch: Crypto in Africa &#8211; Where are the oppurtunities</h3>


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Major regions responsible for&nbsp;<a href="https://www.cnbc.com/2021/06/15/chinas-bitcoin-miner-exodus-.html">bitcoin mining in China have forced operations to shut down</a>. Bitcoin mining is an energy-intensive process that facilitates bitcoin transactions and creates new coins.



<a href="https://www.cnbc.com/2021/06/21/china-central-bank-urges-alipay-banks-to-crack-down-on-crypto.html">China’s central bank has also spoken to finance and fintech companies</a>&nbsp;reminding them not to offer crytpo-related services to customers.



<a href="https://www.cnbc.com/2017/09/11/bitcoin-price-falls-on-reports-that-china-is-closing-local-exchanges.html">China banned local cryptocurrency exchanges in 2017</a>&nbsp;forcing them to move offshore. That&nbsp;<a href="https://www.cnbc.com/2021/05/26/chinese-bitcoin-traders-wield-enormous-influence-despite-crackdown.html">did not stop Chinese traders buying and selling digital coins</a>. But the tough actions this year from Chinese regulators has looked to further tighten restrictions on trading and mining.

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$90 billion wiped off crypto market as bitcoin drops below $30,000 for first time in nearly a month

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106837526-1612866638564-gettyimages-1294702554-yn_cryptoimages_016.jpeg" alt="" class="wp-image-409576" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106837526-1612866638564-gettyimages-1294702554-yn_cryptoimages_016.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106837526-1612866638564-gettyimages-1294702554-yn_cryptoimages_016-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106837526-1612866638564-gettyimages-1294702554-yn_cryptoimages_016-140x80.jpeg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>A visual representation of digital currencies. Yuriko Nakao | Getty Images</figcaption></figure>



LONDON — Cryptocurrencies aren’t yet big enough to pose a systemic risk to financial stability, Bank of England Deputy Governor Jon Cunliffe said Wednesday.



“The speculative boom in crypto is very noticeable but I don’t think it’s crossed the boundary into financial stability risk,” Cunliffe told CNBC’s Joumanna Bercetche in an exclusive interview.



<a href="https://www.cnbc.com/bitcoin/">Bitcoin</a>&nbsp;and other digital currencies shot up in value at the start of the year, briefly becoming a $2.5 trillion market. Backers of bitcoin claimed it could offer an alternative store of value as savers struggle to find yield due to ultra-low interest rates.



However, cryptocurrencies are highly volatile, and the market has lost more than $1 trillion in value since May. Bitcoin has fallen from a record high of nearly $65,000 reached in April to around $32,500 as of Wednesday.



Regulators have increasingly been sounding the alarm about crypto. China in particular has sought to crack down on the industry, in a&nbsp;<a href="https://www.cnbc.com/2021/06/22/china-crypto-crackdown-wipes-nearly-300-billion-off-market-btc-slides.html">series of measures</a>&nbsp;that have weighed on investor sentiment in recent weeks.



Meanwhile, Binance, the world’s largest crypto exchange, was&nbsp;<a href="https://www.cnbc.com/2021/06/28/cryptocurrency-exchange-binance-banned-by-uk-regulator.html">banned from operating in the U.K.</a>&nbsp;by the Financial Conduct Authority last month. Binance was one of many exchanges that failed to register with the regulator due to not meeting anti-money laundering requirements.



Cunliffe said crypto speculation was mainly limited to retail investors for now, reiterating the central bank’s position that people investing in digital assets should be prepared to lose all their money.



“There are issues of investor protection here. These are highly speculative assets,” he said. “But they’re not of the size that they would cause financial stability risk, and they’re not connected deeply into the standing financial system.”



“Were we to start to see those links develop, were we to start to see it move out of retail more into wholesale and see the financial sector more exposed, then I think you might start to think about risk in that sense,” he added.



The Bank of England official added a distinction should be drawn between speculative crypto assets like bitcoin and so-called “stablecoins” which are backed by existing financial assets.



Tether, for example, is the world’s largest stablecoin with more than $60 billion worth of tokens in circulation. It is meant to be backed 1:1 by U.S. dollars to maintain a stable value, however tether has&nbsp;<a href="https://www.cnbc.com/2021/07/07/tether-cryptocurrency-usdt-what-you-need-to-know.html">garnered controversy</a>&nbsp;due to concerns it doesn’t have enough reserves to justify its dollar peg.



Cunliffe said he thinks stablecoins should come under regulatory supervision.



“I think the international community needs to at least be developing standards to actually be able to distinguish but also to have regulatory standards for that sort of product,” he said.



It comes as several central banks around the world —&nbsp;<a href="https://www.cnbc.com/2021/04/19/uk-to-explore-issuing-its-own-digital-currency-amid-bitcoin-boom.html">including the Bank of England</a>&nbsp;— are exploring digital currencies of their own, in response to dwindling cash use and growing interest in crypto.

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Cryptocurrencies don’t yet pose a threat to financial stability, Bank of England’s Cunliffe says

<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/101678327-187917928.jpg" alt="" class="wp-image-409506" width="740" height="416" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/101678327-187917928.jpg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/101678327-187917928-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/101678327-187917928-140x80.jpg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Nassim Nicholas Taleb, New York University professor and author Jerome Favre | Bloomberg | Getty Images</figcaption></figure>



Nassim Nicholas Taleb has reversed his stance on bitcoin.



The author of “The Black Swan” said in a recent&nbsp;<a href="https://www.fooledbyrandomness.com/BTC-QF.pdf" target="_blank" rel="noreferrer noopener">paper</a>&nbsp;that the largest cryptocurrency by market cap has failed to satisfy the notions of it as a currency without government, as a hedge against inflation and as a safe haven investment.



“Few assets in financial history have been more fragile than bitcoin,” he said.



Taleb had previously spoken more favorably on bitcoin, particularly on its potential to help people circumvent capital controls in markets that rely on them to manage their exchange rates. He called it “the first organic currency” in the foreword of “The Bitcoin Standard” in 2018 and “an insurance policy” against government control over currency.



In his recent paper, “Bitcoin, Currencies, and Fragility,” published in late June, Taleb, a probability researcher and former longtime quantitative trader, says bitcoin is worth “exactly zero” partly because it requires a sustained amount of interest to maintain it.



By contrast, “gold and other precious metals are largely maintenance free, do not degrade over an historical horizon, and do not require maintenance to refresh their physical properties over time,” he said.



<h2 class="wp-block-heading" id="h-volatility-as-a-key-characteristic">Volatility as a key characteristic</h2>



Bitcoin was created in 2008 and has always been notoriously volatile, though the Covid-19 pandemic year is the first time it has experienced such extreme volatility in the face of a global economic crisis.



Taleb noted that in March 2020 bitcoin dropped further than the stock market and recovered with it “upon the massive injection of liquidity.” That’s “sufficient evidence that it cannot remotely be used as a tail hedge against systemic risk,” he said.



He said bitcoin tends to respond to liquidity and that it’s unclear what would happen if the internet experienced even a regional outage, particularly if it took place during a financial collapse.



Taleb noted bitcoin “has maintained extremely high volatility” of between 60% and 100% “throughout its life,” though that doesn’t mean a cryptocurrency can’t “displace fiat” — that is, money backed by the government that issues it but not backed by a physical commodity such as gold.



“It is indeed desirable to have at least one real currency without a government,” he wrote in his paper. “But the new currency just needs to be more appealing as a store of value by tracking a weighted basket of goods and services with minimum error.”



People also conflate the success of bitcoin as a digital currency with the success of bitcoin as a speculative investment. To be a currency would require it to have some stability and usability, Taleb said.



Taleb is&nbsp;distinguished professor of risk engineering at New York University’s Tandon School of Engineering and a scientific advisor for Universa Investments. &nbsp;



The price of <a href="https://www.cnbcafrica.com/quotes/btc=x">bitcoin</a> was about $32,000 Tuesday morning and has been hovering between $32,000 and $36,000 for about a month, after briefly touching $40,000 in mid-June.



Cryptocurrency exchange data shows bitcoin trading fell more than 40% in June of this year, according to CryptoCompare. In the same month, the price of bitcoin hit a monthly low of $28,908.



Still, June volume ranks in&nbsp;<a href="https://www.cnbc.com/2021/07/12/cryptocurrency-trading-volume-plunges-as-interest-wanes-following-bitcoin-price-drop.html">the top five months of volume recorded ever</a>, according to Kaiko data.

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‘Black Swan’ author Nassim Taleb says bitcoin is worth zero and fails as a currency and a hedge

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/105900013-1557315786407gettyimages-903631430.jpeg" alt="" class="wp-image-408856" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/105900013-1557315786407gettyimages-903631430.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/105900013-1557315786407gettyimages-903631430-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/105900013-1557315786407gettyimages-903631430-140x80.jpeg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Changpeng Zhao, CEO of Binance, speaks during a TV interview in Tokyo, Japan, on Thursday, Jan. 11, 2018. Akio Kon | Bloomberg | Getty Images</figcaption></figure>



The boss of Binance on Wednesday said the cryptocurrency exchange hasn’t gotten everything right and has plenty of room to grow, following a crackdown from regulators around the world.



“Compliance is a journey – especially in new sectors like crypto,” Changpeng Zhao, CEO of Binance, said in a&nbsp;<a href="https://www.binance.com/en/blog/421499824684902301/A-letter-from-our-CEO-Reflecting-on-Progress-and-the-Road-Ahead" target="_blank" rel="noreferrer noopener">blog post</a>.



“The industry still has a lot of uncertainty,” he added. “We also recognize that with the growth comes more complexity and more responsibility.”



Last month, the U.K.’s Financial Conduct Authority&nbsp;<a href="https://www.cnbc.com/2021/06/28/cryptocurrency-exchange-binance-banned-by-uk-regulator.html">restricted Binance</a>&nbsp;from carrying out regulated activities in the country. Binance’s U.K. unit withdrew its application to register with the regulator in May due to not meeting anti-money laundering requirements.



Binance, the world’s largest crypto exchange by trading volumes, was ordered to add a notice in a prominent place on its website and app showing U.K. users that it is not permitted to carry out any regulated activity in the U.K.



Meanwhile, regulators in Canada, Japan and Thailand have also issued warnings to the company.



Japan’s Financial Services Agency said the crypto exchange was operating in the country without its permission, while Canada’s Ontario Securities Commission accused it of failing to comply with local regulations.



Last week, Thailand’s Securities and Exchange Commission filed a criminal complaint against Binance, alleging the firm was operating in the country without authorization.



“As a four-year-old startup, Binance still has a lot of room to grow,” Zhao said. “Binance has grown very quickly and we haven’t always got everything exactly right, but we are learning and improving every day.”



“We hope to clarify and reiterate our commitment to partner with regulators, and that we are proactively hiring more talent, putting in place more systems and processes to protect our users,” he added.



Zhao said Binance was taking a number of steps to improve its regulatory compliance. Those include ramping up hiring, partnering with anti-crime organizations and localizing operations in markets like the U.S.



Increased regulatory scrutiny has weighed on the nascent crypto market in recent months. China has cracked down on digital currency mining amid concerns over its environmental impact, for example.



Cryptocurrencies had a solid start to the year, with&nbsp;<a href="https://www.cnbc.com/quotes/BTC.CM=">bitcoin</a>&nbsp;rallying to an all-time high of almost $65,000 in April. But they’ve since fallen sharply, with the overall crypto market capitalization losing more than $1 trillion in the last two months.

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Binance CEO says ‘compliance is a journey’ as world’s largest crypto exchange faces growing crackdown

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106886635-1621609982766-106886635-1621609529179-gettyimages-1231989966-BC_ChineseFlag2021_4289.jpg" alt="" class="wp-image-408812" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106886635-1621609982766-106886635-1621609529179-gettyimages-1231989966-BC_ChineseFlag2021_4289.jpg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106886635-1621609982766-106886635-1621609529179-gettyimages-1231989966-BC_ChineseFlag2021_4289-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106886635-1621609982766-106886635-1621609529179-gettyimages-1231989966-BC_ChineseFlag2021_4289-140x80.jpg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Budrul Chukrut | LightRocket | Getty Images</figcaption></figure>



China’s central bank said Tuesday it had called for the shutdown of a company that “was suspected of providing software services for virtual currency transactions.”&nbsp;<a href="https://mp.weixin.qq.com/s/jJbuBjDYMxvbZdR71jBKlQ" target="_blank" rel="noreferrer noopener">The statement</a>, issued by the Beijing office of the People’s Bank of China, also warned institutions not to provide other services related to virtual currency, including providing business premises or marketing.



Lashing out against digital currencies is nothing new for the authoritarian state.



In&nbsp;<a href="https://www.cnbc.com/2013/12/18/bitcoin-price-halves-as-china-clampdown-escalates.html">2013</a>, the country ordered third-party payment providers to stop using bitcoin. Chinese authorities put a stop to token sales in&nbsp;<a href="https://www.cnbc.com/2017/09/19/chinas-bitcoin-clampdown-is-likely-here-to-stay-analysts-say.html">2017</a>&nbsp;and pledged to continue to&nbsp;<a href="http://shanghai.pbc.gov.cn/fzhshanghai/113571/3926566/index.html" target="_blank" rel="noreferrer noopener">target crypto exchanges</a>&nbsp;in 2019.



But typically, each time Beijing has lashed out at the crypto industry, the sting has worn off and the rules eventually softened.



This time, however, appears to be different.



<a href="https://www.cnbc.com/2021/05/18/china-bans-financial-payment-institutions-from-cryptocurrency-business.html">In May</a>, China banned financial institutions and payment companies from providing crypto-related services. <a href="http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4273265/index.html" target="_blank" rel="noreferrer noopener">In June</a>, there were <a href="https://www.cnbc.com/2021/06/10/china-arrests-over-1100-suspects-for-crypto-related-money-laundering.html">mass arrests in China</a> of people suspected of using cryptocurrencies in nefarious ways. That same month, <a href="https://www.cnbc.com/2021/06/21/china-central-bank-urges-alipay-banks-to-crack-down-on-crypto.html">regulators dialed up the pressure</a> on banks and payment businesses to stop providing cryptocurrency services, and Weibo, the Twitter of China, <a href="https://www.cnbctv18.com/cryptocurrency/china-blocks-several-cryptocurrency-related-social-media-accounts-amid-crackdown-9565901.htm" target="_blank" rel="noreferrer noopener">suspended crypto-related accounts</a>.



As of July, half the world’s bitcoin miners&nbsp;<a href="https://www.blockchain.com/charts/hash-rate" target="_blank" rel="noreferrer noopener">have now gone dark</a>&nbsp;following Beijing’s<a href="https://www.cnbc.com/2021/06/15/chinas-bitcoin-miner-exodus-.html">&nbsp;call for a severe crackdown</a>&nbsp;on bitcoin mining and trading.



“China’s government is doing everything they can to ensure that bitcoin and other cryptocurrencies disappear from the Chinese financial systems and economy,” said Fred Thiel, Marathon Digital Holdings CEO and Bitcoin Mining Council member.



<h2 class="wp-block-heading" id="h-why-now">Why now?</h2>



So why China has essentially declared war on cryptocurrencies in 2021?



“We’re all wondering,” said Nic Carter, founding partner at Castle Island Ventures.



One theory is that it’s part of a broader law-and-order push ahead of the hundredth anniversary of the Chinese Communist Party this year.



“They’re cracking down on all sorts of undesirable behavior,” Carter said.



Crypto has long been synonymous with crime in the mainland.



“The largest-ever Ponzi in crypto was likely Plus Token, which was a Chinese project,” he said.



In that scheme, scammers swindled $5.7 billion from investors and dozens were arrested. “That will be lingering in their memory,.”



Another theory is that China is clearing the runway for its very own digital yuan, a central bank digital currency that’s been <a href="https://www.cnbc.com/2021/06/02/china-digital-currency-beijing-to-hand-out-6point2-million-in-trial.html">in development since 2014</a>.



“Part of this is to ensure the adoption of China’s central bank digital currency, and part of this is most probably to ensure financial surveillance activities are able to see all economic activity,” explained Thiel. The digital yuan could, theoretically, enable the government greater power to track spending in real-time.



But Carter argues that bitcoin and the digital yuan are different to the point that they can’t really be considered direct competitors.



“That’s certainly the most commonly cited reason,” Carter said. “I just don’t know if I believe it. They’re such distinct systems from each other.”



The most likely motivator, according to Carter, is that Beijing is looking to stem capital outflows via stablecoins and cryptocurrencies. “China choking off the flow of yuan to crypto is a big deal,” he said.



<h2 class="wp-block-heading">The price of bitcoin</h2>



When it comes to the price of bitcoin, stemming all Chinese retail into crypto “totally moves the needle,” according to Carter.



“I think that actually explains a lot of the market weakness and the sell-off,” he said. “The good news is that as the crackdown has accelerated, bitcoin has stayed pretty flat, which suggests the market has digested this information.”



Thiel believes that prohibiting bitcoin and crypto will actually help bitcoin in the long-term.



“If China’s goal was to kill bitcoin by shutting down 50% of the mining capacity and prohibiting trading – thus crashing its value to punish Chinese holders (a la Didi post IPO and Ant Financial),” it didn’t work. “Instead, bitcoin proved its resiliency and the trades just moved offshore and miners elsewhere will take up the slack.”



Alyse Killeen, founder and managing partner of bitcoin-focused venture firm Stillmark, points out that this whole conversation may be a moot point, as a government’s capacity to effect a bitcoin ban will only continue to erode over time.



“I’d expect this type of news to have less of an impact on bitcoin’s exchange rate than it has historically,” she said. “It’s also true that there has been some level of industry inoculation to this news – bitcoin has been banned many times in many geographies, and yet today adoption is outpacing internet adoption at a similar lifecycle stage.”

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China’s war on bitcoin just hit a new level with its latest crypto crackdown

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106905363-1625143405663-gettyimages-1233100876-CRYPTO_MARKET.jpeg" alt="" class="wp-image-408808" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106905363-1625143405663-gettyimages-1233100876-CRYPTO_MARKET.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106905363-1625143405663-gettyimages-1233100876-CRYPTO_MARKET-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106905363-1625143405663-gettyimages-1233100876-CRYPTO_MARKET-140x80.jpeg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>The Tether price displayed on cryptocurrency exchange Kraken’s website. Tiffany Hagler | Bloomberg via Getty Images</figcaption></figure>



Tether is the third-biggest cryptocurrency in the world by market value. And it’s got some economists — including an official at the U.S. Federal Reserve — worried.



Last month, Boston Fed President Eric Rosengren&nbsp;<a href="https://www.coindesk.com/us-fed-official-calls-tether-a-challenge-to-financial-stability" target="_blank" rel="noreferrer noopener">raised the alarm</a>&nbsp;about tether, calling it a potential financial stability risk. Meanwhile, some investors believe a loss of confidence in tether could be crypto’s “<a href="https://muellerberndt.medium.com/is-tether-a-black-swan-51095720b01c" target="_blank" rel="noreferrer noopener">black swan</a>,” an unpredictable event that would severely impact the market.



The issues surrounding tether hold significant implications for the nascent cryptocurrency world. And economists increasingly fear that it could also impact markets beyond digital currencies. Here’s what you need to know:



<h2 class="wp-block-heading" id="h-what-is-tether">What is tether?</h2>



Chances are you’ve heard a thing or two about bitcoin. But what about tether?



Like bitcoin, tether is a cryptocurrency. In fact, it’s the world’s third-biggest digital coin by market value. But it’s very different from&nbsp;<a href="https://www.cnbc.com/bitcoin/">bitcoin</a>&nbsp;and other virtual currencies.



Tether is what’s known as a stablecoin. These are digital currencies that are tied to real-world assets — the U.S. dollar, for example — to maintain a stable value, unlike most cryptocurrencies which are known to be volatile. <a href="https://www.cnbc.com/quotes/BTC.CM=">Bitcoin</a>, for example, rose to an all-time high of nearly $65,000 in April and has since almost halved in value.



Tether was designed to be pegged to the dollar. While other cryptocurrencies often fluctuate in value, tether’s price is usually equivalent to $1. This&nbsp;<a href="https://www.cnbc.com/2018/10/15/bitcoin-other-cryptocurrencies-jump-as-dollar-pegged-tether-falls.html">isn’t always the case</a>&nbsp;though, and wobbles in the value of tether have spooked investors in the past.



Crypto traders often use tether to buy cryptocurrencies, as an alternative to the greenback. This essentially provides them with a way to seek safety in a more stable asset during times of sharp volatility in the crypto market.



However, crypto isn’t regulated, and many banks avoid doing business with digital currency exchanges due to the level of risk involved. That’s where stablecoins tend to come in.



<h2 class="wp-block-heading">Why is it controversial?</h2>



Some investors and economists are worried tether’s issuer doesn’t have enough dollar reserves to justify its dollar peg.



In May, Tether broke down the reserves for its stablecoin. The firm revealed that only a fraction of its holdings — 2.9%, to be exact — were in cash, while the vast majority was in commercial paper, a form of unsecured, short-term debt.



That would place Tether in the top 10 biggest holders of commercial paper in the world, according to&nbsp;<a href="https://www.cnbc.com/quotes/JPM" target="_blank" rel="noreferrer noopener">JPMorgan</a>. Tether has been compared to traditional money-market funds — but without any regulation.



With more than $60 billion worth of tokens in circulation, Tether has more deposits than that of&nbsp;<a href="https://www.bloomberg.com/news/articles/2021-05-01/crypto-s-shadow-currency-surges-past-deposits-of-most-u-s-banks" target="_blank" rel="noreferrer noopener">many U.S. banks</a>.



There have&nbsp;<a href="https://www.cnbc.com/2018/02/02/tether-what-you-need-to-know-about-the-cryptocurrency-worrying-markets.html">long been concerns</a>&nbsp;about whether tether is being used to&nbsp;<a href="https://www.cnbc.com/2018/11/20/regulators-investigate-whether-bitcoin-price-was-propped-up-illegally.html">manipulate bitcoin prices</a>, with&nbsp;<a href="https://www.cnbc.com/2018/06/13/much-of-bitcoins-2017-boom-was-market-manipulation-researcher-says.html">one study</a>&nbsp;claiming the token was used to prop up bitcoin during key price declines in its monster 2017 rally.



Earlier this year, the New York attorney general’s office <a href="https://www.cnbc.com/2021/02/23/tether-bitfinex-reach-settlement-with-new-york-attorney-general.html">reached a settlement with Tether and Bitfinex</a>, an affiliated digital currency exchange.



The state’s top law enforcement official had accused the firms of moving hundreds of millions of dollars to&nbsp;<a href="https://www.cnbc.com/2019/04/26/cryptocurrency-bitcoin-price-falls-on-ny-ag-bitfinex-probe.html">cover up $850 million of losses</a>.



Tether and Bitfinex agreed to pay $18.5 million in the settlement and were barred from operating in New York state, however the companies didn’t admit to any wrongdoing.



<h2 class="wp-block-heading">Market contagion</h2>



Analysts at JPMorgan have previously warned that a sudden loss of confidence in tether could result in a “severe liquidity shock to the broader cryptocurrency market.”



But there are also concerns that a sudden increase of tether withdrawals could lead to a potential market contagion, affecting assets beyond crypto.



In June, Rosengren mentioned tether and other stablecoins as one of several potential risks to financial stability.



“These stablecoins are becoming more popular,” he said during a presentation.



“A future crisis could easily be triggered as these become a more important sector of the financial market, unless we start regulating them and making sure that there’s actually a lot more stable stability to what’s being marketed to the general public as a stablecoin,” Rosengren added.



Last week, Fitch Ratings warned a sudden mass redemption of tether tokens could destabilize short-term credit markets.



“Fewer risks are posed by coins that are fully backed by safe, highly liquid assets, although authorities may still be concerned if the footprint is potentially global or systemic,” the U.S. credit rating agency said.



“Whereas stablecoins that use fractional reserves or adopt higher-risk asset allocation may face a greater run risk.”



Tether isn’t the only stablecoin out there, but it’s by far the biggest and most popular one. Others include USD Coin and Binance USD.

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Why tether, the world’s third-biggest cryptocurrency, has got economists worried

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106887563-1621887067804-gettyimages-843200050-UK_BITCOINS-1.jpeg" alt="" class="wp-image-408430" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106887563-1621887067804-gettyimages-843200050-UK_BITCOINS-1.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106887563-1621887067804-gettyimages-843200050-UK_BITCOINS-1-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106887563-1621887067804-gettyimages-843200050-UK_BITCOINS-1-140x80.jpeg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Chris Ratcliffe/Bloomberg via Getty Images</figcaption></figure>



<a href="https://www.cnbc.com/bitcoin/">Bitcoin</a> had a solid start to 2021, hitting an all-time high of nearly $65,000 in April. But the digital coin closed out the first half of the year down about 47% from its record — and a number of looming risks could result in further pain ahead.



While proponents appear to be holding onto&nbsp;<a href="https://www.cnbc.com/quotes/BTC.CM=">bitcoin</a>&nbsp;for now, other investors are wary about wild volatility in the market and what it means for their portfolios. With that in mind, here are five of the biggest risks facing the cryptocurrency as we enter the second half of the year.



<h2 class="wp-block-heading" id="h-regulation">Regulation</h2>



One of the biggest risks for bitcoin right now is regulation.



In recent weeks, China has&nbsp;<a href="https://www.cnbc.com/2021/06/22/china-crypto-crackdown-wipes-nearly-300-billion-off-market-btc-slides.html">clamped down on its cryptocurrency industry</a>, shuttering energy-intensive crypto mining operations and ordering major banks and payment firms like Alipay not to do business with crypto companies.



Last week, the global crypto crackdown&nbsp;<a href="https://www.cnbc.com/2021/06/28/cryptocurrency-exchange-binance-banned-by-uk-regulator.html">spread to the U.K.</a>, where regulators banned leading digital currency exchange Binance from undertaking regulated activities.



Simon Yu, co-founder and CEO of crypto cashback start-up StormX, told CNBC that China’s moves should be viewed as a “positive” thing for bitcoin and other cryptocurrencies like <a href="https://www.cnbc.com/quotes/ETH.CM=">ether</a> as it will lead to more decentralization. However, he added that “over-regulation” of crypto in the United States could be a problem.



“As a country, the U.S. has too many departments regulating it from different angles — is crypto a security? A commodity? A property?” Yu said. “As of now, the U.S. hasn’t figured out how to properly regulate the industry, which oftentimes leads to decisions that are difficult for crypto to operate.”



U.S. Treasury Secretary Janet Yellen and other officials have recently warned about the use of cryptocurrencies for illicit transactions.



Last year, former President Donald Trump’s administration proposed an anti-money laundering rule that would require people who hold their crypto in a private digital wallet to undergo identity checks if they make transactions of $3,000 or more.



“We’ve long warned that shifting investor sentiment or regulatory crackdowns could pop bubble-like crypto markets,”&nbsp;<a href="https://www.cnbc.com/quotes/UBSG-CH" target="_blank" rel="noreferrer noopener">UBS</a>&nbsp;<a href="https://www.cnbc.com/2021/06/29/ubs-forget-crypto-this-is-the-next-big-thing-for-investors.html">wrote in a note</a>&nbsp;this week.



<h2 class="wp-block-heading">Volatility</h2>



Another big risk is persistent, extreme swings in the price of bitcoin and other digital currencies.



Bitcoin rallied to an all-time record of around $64,829 in April this year, on the day of crypto exchange&nbsp;<a href="https://www.cnbc.com/quotes/COIN" target="_blank" rel="noreferrer noopener">Coinbase’s</a>&nbsp;blockbuster debut. It then&nbsp;<a href="https://www.cnbc.com/2021/06/22/bitcoin-falls-again-breaking-below-key-30000-level-that-traders-say-could-lead-to-more-losses.html">tumbled as low as $28,911</a>&nbsp;in June, briefly sliding below $30,000 and turning negative for the year. It’s since risen back above $34,000.



Bitcoin bulls see it as a kind of “digital gold” — an asset uncorrelated to the wider marker that could provide sizable returns in times of economic turbulence. But while volatility can be good when the price of an asset is going up, it goes both ways.



While you would have doubled your money if you bought bitcoin in January and cashed out in April, today those year-to-date returns would be 18%. Still, that’s above the performance of the <a href="https://www.cnbc.com/quotes/.SPX">S&amp;P 500</a> index, which is up 16% since the start of the year. And over the last 12 months, bitcoin has more than tripled in price.



“Limited, highly inelastic supply on single cryptos can exacerbate volatility,” says UBS. “Limited real world use and extraordinary price volatility also indicate many buyers are seeking speculative gains.”



Meanwhile, the trend of traders who have made highly-leveraged bets on bitcoin getting flushed out of the market has led to&nbsp;<a href="https://www.cnbc.com/2021/05/25/bitcoin-crashes-driven-by-big-margin-bets-new-crypto-banking.html">intense price fluctuations</a>&nbsp;this year.



While continuous volatility could put off some investors, Ross Middleton, chief financial officer of decentralized finance platform DeversiFi, said that volatility in itself isn’t a barrier to institutional adoption.



Volatility “can actually be a significant draw as the potential for large price movements means that funds can make significant profits with a relatively small allocation compared to the size of their overall portfolio,” he told CNBC.



“The longer that Bitcoin moves sidewards in the $30-$40k range,” Middleton added, “the greater the perceived ‘base-building’ and the sooner that new capital will flow into both the asset and the wider crypto market.”



<h2 class="wp-block-heading">Environmental concerns</h2>



Questions surrounding bitcoin’s impact on the environment could be another big headwind for the cryptocurrency.



Bitcoin mining equipment&nbsp;<a href="https://www.cnbc.com/2021/02/05/bitcoin-btc-surge-renews-worries-about-its-massive-carbon-footprint.html">requires lots of electricity to run</a>, and bitcoin’s energy consumption has risen considerably over the years in tandem with its price.



While bitcoin’s critics have long warned of its <a href="https://www.cnbc.com/2021/02/05/bitcoin-btc-surge-renews-worries-about-its-massive-carbon-footprint.html">huge carbon footprint</a>, Tesla CEO Elon Musk <a href="https://www.cnbc.com/2021/05/13/why-elon-musk-is-worried-about-bitcoin-environmental-impact.html">brought the issue back to the fore</a> this year.



Musk’s electric car firm stunned both fans and skeptics of bitcoin this year when it&nbsp;<a href="https://www.cnbc.com/2021/02/08/tesla-buys-1point5-billion-in-bitcoin.html">bought $1.5 billion worth</a>&nbsp;of the digital currency and began&nbsp;<a href="https://www.cnbc.com/2021/03/24/elon-musk-says-people-can-now-buy-a-tesla-with-bitcoin.html">accepting it as a method of payment</a>. But he subsequently roiled crypto markets after deciding&nbsp;<a href="https://www.cnbc.com/2021/05/12/elon-musk-says-tesla-will-stop-accepting-bitcoin-for-car-purchases.html">to halt bitcoin payments</a>&nbsp;due to the currency’s “insane” energy usage and a reliance on fossil fuels.



It raises some questions for asset managers who are under heightened pressure to limit their investments to ethically-conscious assets.



“At the very least it may deter some investors from holding Bitcoin,” analysts at&nbsp;<a href="https://www.cnbc.com/quotes/C" target="_blank" rel="noreferrer noopener">Citi</a>&nbsp;wrote in a research note earlier this year, adding it could also “spur government intervention to ban mining, as seen in parts of China.”



<h2 class="wp-block-heading">Stablecoin scrutiny</h2>



So-called stablecoins, whose prices are meant to be pegged to real-world assets like the U.S. dollar, are also facing&nbsp;<a href="https://protos.com/tether-commercial-paper-jim-cramer-mad-money-crypto-financial-times/" target="_blank" rel="noreferrer noopener">growing scrutiny</a>.



Last week, Federal Reserve Bank of Boston President Eric Rosengren&nbsp;<a href="https://www.bostonfed.org/news-and-events/speeches/2021/official-monetary-and-financial-institutions-forum-fed-week-financial-stability-session.aspx" target="_blank" rel="noreferrer noopener">said&nbsp;</a>tether, a stablecoin that ranks among the world’s largest digital currencies, was a risk to the stability of the financial system.



Tether maintains that each of its tokens are backed 1:1 by U.S. dollars held in a reserve, the idea being that this keeps the price stable. Crypto investors often use tether to buy cryptocurrencies, as an alternative to the greenback But some investors worry tether’s issuer <a href="https://www.ft.com/content/529eb4e6-796a-4e81-8064-5967bbe3b4d9" target="_blank" rel="noreferrer noopener">doesn’t have enough dollar reserves</a> to justify its dollar peg.



In May, the company behind tether&nbsp;<a href="https://tether.to/wp-content/uploads/2021/05/tether-march-31-2021-reserves-breakdown.pdf" target="_blank" rel="noreferrer noopener">broke down the reserves for the stablecoin</a>, revealing that around 76% was backed by cash and cash equivalents — but just under 4% of that was actual cash, while about 65% was commercial paper, a form of short-term debt.



Tether has been compared to traditional money-market funds — but&nbsp;<a href="https://www.bloomberg.com/opinion/articles/2021-05-31/stablecoins-like-tether-should-face-regulators-scrutiny" target="_blank" rel="noreferrer noopener">without the regulation</a>&nbsp;— and, with almost $60 billion worth of the tokens in circulation, has more deposits than that of&nbsp;<a href="https://www.bloomberg.com/news/articles/2021-05-01/crypto-s-shadow-currency-surges-past-deposits-of-most-u-s-banks" target="_blank" rel="noreferrer noopener">many U.S. banks</a>.



There have&nbsp;<a href="https://www.cnbc.com/2018/02/02/tether-what-you-need-to-know-about-the-cryptocurrency-worrying-markets.html">long been concerns</a>&nbsp;about whether tether is being used to&nbsp;<a href="https://www.cnbc.com/2018/11/20/regulators-investigate-whether-bitcoin-price-was-propped-up-illegally.html">manipulate bitcoin prices</a>, with&nbsp;<a href="https://www.cnbc.com/2018/06/13/much-of-bitcoins-2017-boom-was-market-manipulation-researcher-says.html">one study</a>&nbsp;claiming the token was used to prop up bitcoin during key price declines in its monster 2017 rally.



“Tether is a massive problem,” Carol Alexander, professor of finance at the University of Sussex, told CNBC.&nbsp;″Regulators seem unable to stop them so far.”



“Traders need tether to open accounts and trade. Or other crypto. But since most large traders are U.S.-based, tether is the obvious choice.”



<h2 class="wp-block-heading">‘Meme coins’ and scams</h2>



Rising speculation in crypto markets could prove another risk for bitcoin.&nbsp;



<a href="https://www.cnbc.com/quotes/DOGE.CM=">Dogecoin</a>, a cryptocurrency that started out as a joke, surged wildly earlier this year to record highs as growing numbers of retail investors piled into digital assets in search of outsized gains.



At one point, dogecoin was&nbsp;<a href="https://www.bloomberg.com/news/articles/2021-04-20/dogecoin-at-50-billion-makes-it-bigger-than-ford-and-kraft" target="_blank" rel="noreferrer noopener">worth more than Ford</a>&nbsp;and other major U.S. firms, thanks in no small part to&nbsp;<a href="https://www.cnbc.com/2021/05/20/dogecoin-jumps-on-elon-musk-tweet-as-wild-cryptocurrency-trading-continues.html">support from celebrities like Musk</a>. Its value has depreciated significantly since then.



Elsewhere in the crypto market, a decentralized finance, or DeFi, token called titan&nbsp;<a href="https://www.cnbc.com/2021/06/24/why-titan-crypto-crash-that-burned-mark-cuban-may-not-signal-similar-bitcoin-plunge.html">crashed to zero</a>. Self-made billionaire investor Mark Cuban was a holder.



“Another concern is the number of scams that have appeared throughout the year,” StormX’s Yu said. “With certain meme coins, we’ve seen many pump and dump activities and have seen retail investors getting burned.”



“Whenever retail gets burned, the government steps in. And if things are over-regulated to a point, as we have seen with&nbsp;<a href="https://www.cnbc.com/2018/07/13/initial-coin-offering-ico-what-are-they-how-do-they-work.html">2018 and ICOs</a>&nbsp;(initial coin offerings), the industry as a whole could be negatively affected.”

Bitcoin had a wildly volatile first half. Here are 5 of the biggest risks ahead

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/JEAP3R6MHJMMXJOZII2DGPDI5E-820x547.jpg" alt="" class="wp-image-408000" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/JEAP3R6MHJMMXJOZII2DGPDI5E-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/JEAP3R6MHJMMXJOZII2DGPDI5E-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/JEAP3R6MHJMMXJOZII2DGPDI5E-120x80.jpg 120w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/JEAP3R6MHJMMXJOZII2DGPDI5E-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/JEAP3R6MHJMMXJOZII2DGPDI5E.jpg 960w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>The logo of Binance is seen on their exhibition stand at the Delta Summit, Malta&#8217;s official Blockchain and Digital Innovation event promoting cryptocurrency, in St Julian&#8217;s, Malta October 4, 2018. REUTERS/Darrin Zammit Lupi</figcaption></figure>



June 27 (Reuters) &#8211; Britain&#8217;s financial regulator has said Binance, one of the world&#8217;s largest cryptocurrency exchanges, cannot conduct any regulated activity and issued a warning to consumers about the platform, which is coming under growing scrutiny globally.



In a notice dated June 25, the Financial Conduct Authority (FCA) said Binance Markets Ltd, Binance&#8217;s only regulated UK entity, &#8220;must not, without the prior written consent of the FCA, carry out any regulated activities&#8230; with immediate effect&#8221;.



It also issued a warning to consumers about Binance Markets and the wider Binance group.



Binance said in a statement that Binance Markets, which it acquired in 2020, was not yet using its regulatory permissions, and that the FCA&#8217;s move would not impact services offered on its Binance.com website.



&#8220;We take a collaborative approach in working with regulators and we take our compliance obligations very seriously. We are actively keeping abreast of changing policies, rules and laws in this new space,&#8221; a spokesperson said.



Binance announced in June last year that it had bought an FCA-regulated entity and would use it to offer cryptocurrency trading services using pounds and euros.



AUTHORISATION



While trading of cryptocurrencies is not directly regulated in Britain, offering services such as trading in cryptocurrency derivatives does require authorisation.



The FCA has told Binance that by June 30 it must display a notice stating &#8220;BINANCE MARKETS LIMITED IS NOT PERMITTED TO UNDERTAKE ANY REGULATED ACTIVITY IN THE UK&#8221; on its website and social media channels.



It must also secure and preserve all records relating to UK consumers and inform the FCA this has been done by July 2.



The regulator did not explain why it had taken these measures.



British citizens will still be able to access Binance&#8217;s services in other jurisdictions.



The FCA is stepping up its oversight of cryptocurrency trading, which has soared in popularity in Britain along with other countries around the globe.



Since January, the FCA has required all firms offering cryptocurrency-related services to register and show they comply with anti-money laundering rules. However earlier this month it said that just five firms had registered, and that the majority were not yet compliant.&nbsp;<a href="https://www.reuters.com/world/uk/uk-regulator-says-cryptoasset-firms-not-meeting-anti-money-laundering-rules-2021-06-03/">read more</a>



Japan&#8217;s regulator said on June 25 that Binance was operating in the country illegally, a notice posted on Japan&#8217;s Financial Services Agency website showed.



Last month, Bloomberg reported that officials from the U.S. Justice Department and Internal Revenue Service who probe money laundering and tax offences had sought information from individuals with insight into Binance&#8217;s business.&nbsp;<a href="https://www.reuters.com/technology/binance-under-investigation-by-justice-department-irs-bloomberg-news-2021-05-13/">read more</a>



In April, Germany&#8217;s financial regulator BaFin said the exchange risked being fined for offering digital tokens without an investor prospectus. <a href="https://www.reuters.com/technology/germanys-financial-watchdog-warns-crypto-exchange-binance-over-stock-tokens-2021-04-29/">read more</a>



Reporting by Derek Francis in Bengaluru; Editing by Toby Chopra

The logo of Binance is seen on their exhibition stand at the Delta Summit, Malta’s official Blockchain and Digital Innovation event promoting cryptocurrency, in St Julian’s, Malta October 4, 2018. REUTERS/Darrin Zammit Lupi

Britain bans Binance’s UK ops in latest cryptocurrency crackdown

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/106889865-16222044362021-05-27t195502z_1427218795_rc2jon9mbvz0_rtrmadp_0_usa-funds-ark.jpeg" alt="" class="wp-image-407721" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/106889865-16222044362021-05-27t195502z_1427218795_rc2jon9mbvz0_rtrmadp_0_usa-funds-ark.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/106889865-16222044362021-05-27t195502z_1427218795_rc2jon9mbvz0_rtrmadp_0_usa-funds-ark-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/106889865-16222044362021-05-27t195502z_1427218795_rc2jon9mbvz0_rtrmadp_0_usa-funds-ark-140x80.jpeg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>LAN network cables plugged into a Bitcoin mining computer server are pictured in Bitminer Factory in Florence, Italy, April 6, 2018. Alessandro Bianchi | Reuters</figcaption></figure>



With China cracking down on cryptocurrencies, it may soon become much easier — and more profitable — to mine&nbsp;<a href="https://www.cnbc.com/bitcoin/">bitcoin</a>.



Last month, Beijing called for measures to stamp out bitcoin mining amid concerns over its environmental impact. This has already resulted in crypto miners&nbsp;<a href="https://www.cnbc.com/2021/06/15/chinas-bitcoin-miner-exodus-.html">fleeing China for other regions</a>, like North America.



China’s crackdown intensified over the weekend, with authorities in the hydropower-rich Chinese province of Sichuan ordering crypto miners to shut down operations.



According to reports, more than 90% of China’s bitcoin mining capacity is estimated to be closed. It is thought that between 65% to 75% of all global bitcoin mining takes place in China.



Though it may not be good news for bitcoin miners in China, others could stand to benefit.



<h2 class="wp-block-heading" id="h-what-is-bitcoin-mining">What is bitcoin mining?</h2>



When you think of mining, the image of a gold mine with picks and shovels is probably the first thing that comes to mind. But bitcoin mining is nothing like hunting for gold or other precious metals.



Digital currencies are underpinned by a vast network of computers around the world. In the case of bitcoin, these computers are racing to solve complex math puzzles in order to make transactions go through. This process also generates new bitcoins, rewarding miners in the cryptocurrency if they’re successful.



Currently, rewards to miners are capped at 6.25 BTC. It used to be 12.5 BTC, but since bitcoin’s total supply is limited to 21 million, the amount of bitcoin rewarded to miners gets halved roughly every four years.



Being the first miner to mine a new block — essentially a list of bitcoin transactions — is “a game of random chance,” explains Alyse Killeen, founder and managing partner of bitcoin-focused venture firm Stillmark.



<h2 class="wp-block-heading">It’s about to get easier</h2>



The total hashrate, or processing power, of the bitcoin network appears to have gone down sharply in the wake of Beijing’s crackdown.



In the last month or so, bitcoin’s hashrate has gone down from a record 180.7 million terahashes per second — a measure of the speed of crypto mining hardware — in mid-May to around 116.2 million as of Wednesday, according to <a href="https://www.blockchain.com/charts/hash-rate" target="_blank" rel="noreferrer noopener">Blockchain.com</a> data.



Crypto experts say that, with more bitcoin miners going offline due to China’s restrictions, other miners’ share of the network will increase, potentially making mining much more lucrative.



“As more hashrate falls off the network, difficulty will adjust downwards, and the hashrate that remains active on the network will receive more for their proportional share of the mining rewards,” Kevin Zhang, vice president of crypto mining firm Foundry, told CNBC.



Meanwhile, the <a href="https://www.blockchain.com/charts/difficulty" target="_blank" rel="noreferrer noopener">network difficulty</a> of bitcoin — a measure of how hard it is to mine bitcoin — went from a record above 25 trillion in May to 19.9 trillion last week. Mining difficulty is adjusted roughly every two weeks, so there is a time lag in the data.



“Network difficulty goes down the less mining equipment is online,” Killeen said. This effectively leads to less competition for other bitcoin miners.



However, another big factor that determines profits to bitcoin miners is the price of bitcoin, which has plummeted from record highs in recent months on the back of&nbsp;<a href="https://www.cnbc.com/2021/05/13/why-elon-musk-is-worried-about-bitcoin-environmental-impact.html">negative comments</a>&nbsp;from&nbsp;<a href="https://www.cnbc.com/quotes/TSLA" target="_blank" rel="noreferrer noopener">Tesla</a>&nbsp;CEO&nbsp;<a href="https://www.cnbc.com/elon-musk/">Elon Musk</a>&nbsp;and China’s crackdown on the industry.



<a href="https://www.cnbc.com/quotes/BTC.CM=">Bitcoin</a>&nbsp;has nearly halved in value since reaching a record high of almost $65,000 in April. The cryptocurrency fell below $30,000 on Tuesday, briefly wiping out its 2021 gains, but has since recovered to trade above $34,000.

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Mining bitcoin could be about to get a whole lot easier after China’s crypto crackdown

The slump for bitcoin continued on Tuesday morning as the leading cryptocurrency fell below a key level and is trading at its lowest price since January.



<a href="https://www.cnbc.com/quotes/BTC.CM=">Bitcoin</a>&nbsp;was down 8% to $29,674.25, according to Coin Metrics. Traders had warned a break below $30,000 could lead to more losses.



<a href="https://www.cnbc.com/2021/06/08/whats-really-behind-the-bitcoin-decline-and-why-it-could-take-the-cryptocurrency-as-low-as-20000.html">Technical analysts had been watching the $30,000 level</a>&nbsp;as a key support level on the charts after the cryptocurrency had fallen to near that low during its May crash. The analysts, who study charts to make buying and selling decisions, believe the next level to watch for support could now be as low as $20,000.



Now that it is approaching $29,000, the price of bitcoin is threatening to turn negative for the year.



Galaxy Digital CEO Mike Novogratz said on CNBC’s “<a href="https://www.cnbc.com/squawk-box-us/">Squawk Box</a>” that bitcoin could still rebound after Tuesday’s move but there was significant downside to the next support level.



″$30,000, we’ll see if it holds on the day. We might plunge below it for a while and close above it. If it’s really breached, $25,000 is the next big level of support,” Novogratz said. “Listen, I’m less happy than I was at $60,000 but I’m not nervous.”



Bitcoin has been struggling to reclaim its highs from earlier in the quarter. It fell dramatically in May following some market-moving tweets by Elon Musk about&nbsp;<a href="https://www.cnbc.com/2021/06/13/musk-tesla-will-accept-bitcoin-when-miners-use-clean-energy.html">bitcoin-related environmental concerns</a>, and then even further in early June around fears of the cryptocurrency’s use in the Colonial Pipeline ransomware attack.



It’s been on a rollercoaster ride since then, battered by a&nbsp;<a href="https://www.cnbc.com/2021/06/22/china-crypto-crackdown-wipes-nearly-300-billion-off-market-btc-slides.html">stream of headlines out of China</a>, where regulators have imposed new restrictions on energy-intensive mining and ordered financial institutions like Alipay to stop doing business with crypto companies. The price briefly touched $40,000 last week and fell again Monday.



With Tuesday’s losses, bitcoin has slid about 54% from its&nbsp;<a href="https://www.cnbc.com/2021/04/14/bitcoin-btc-and-ether-eth-prices-rally-ahead-of-coinbase-listing.html">all-time high of more than $64,000</a>&nbsp;in mid-April, taking other cryptocurrencies along with it.&nbsp;<a href="https://www.cnbc.com/quotes/ETH=">Ether</a>&nbsp;fell 8% and&nbsp;<a href="https://www.cnbc.com/quotes/DOGE.CM=">dogecoin</a>&nbsp;is dropping more than 16%.



Significant pullbacks have happened before in the cryptocurrency market, with bitcoin falling about 80% from its late 2017 highs at one point. Professional crypto investors have warned that the space should continue to be volatile in the years ahead.



“The only guarantee with the cryptocurrency space is volatility and obviously, that’s what we have right now,” Fairlead Strategies founder Katie Stockton told CNBC. “It’s not new, we’ve had days like this before, it’s just a matter of navigating through this noise.”



Novogratz also noted that despite previous pullbacks, crypto market infrastructure is only becoming more mature, which has helped usher in more institutional support over the past year, with major hedge fund managers, pension funds and banks jumping into crypto, while registered investment advisors seek ways to get clients exposure to cryptocurrencies in a way that’s compatible with their current workflow.



The price of bitcoin rose nearly 500% between mid-September of last year and its April peak. Even with the recent decline, the cryptocurrency is still up about 150% over the past 12 months.

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