Major cryptocurrencies took another nosedive Thursday after China imposed a ban on the usage of digital currencies.
China announced Wednesday that it will be banning all financial institutions and digital payment companies operating in the country from offering services related to cryptocurrency transactions
China's latest move to clamp down on the burgeoning digital market came after regulators warned investors to stay away from speculative cryptocurrency trading.
Under the new order, financial institutions such as banks and online payment companies will not be allowed to offer any service that involved cryptocurrencies. This includes services such as clearing and settlement, trading, and wallet registration, the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China said.
"Recently, cryptocurrency 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 three Chinese agencies said in a joint statement.
Initial Coin Offerings and cryptocurrency exchanges will also not be allowed under the new rule. Chinese officials clarified that individuals are not banned from holding cryptocurrencies.
The three agencies said virtual currencies are not "supported by real value." They said prices can easily be manipulated and transactions are not protected by Chinese law, putting traders at risk.
This isn't the first time China has implemented a major rule against digital currencies. In 2017, the Chinese government imposed a nationwide ban on cryptocurrency exchanges. The move caused crypto prices to plummet to new lows given that trading in China accounted for about 90% of the global total.
Following the announcement the prices of Bitcoin, the largest cryptocurrency in terms of value, fell by as much as 30%. Meanwhile, Ethereum fell by more than 45%.
According to data from CoinGecko.com, at one point in early Thursday, nearly $1 trillion in market capitalization was wiped out from the entire cryptocurrency sector. The price of the two main digital currencies bounced back after Tesla's Elon Musk and Ark Invest's Cathie Wood reiterated their support for digital currencies.