Jamie Dimon adds to cryptocurrencies’ recent woes

Cryptocurrencies took another hit on Tuesday and Wednesday, after a Chinese over-the-counter cryptocurrency trading service announced that it would suspend over-the-counter bitcoin and bitcoin cash trading services from tomorrow, and JP Morgan chief executive Jamie Dimon revealed concerns about bitcoin in remarks that were widely reported.

In Dubai, meanwhile, the Dubai Financial Services Authority on Wednesday issued a warning to investors of “certain new and evolving online offerings…often referred to as cryptocurrencies”.

“The DFSA would like to make it clear that it does not currently regulate these types of product offerings or license firms in the Dubai International Financial Centre (DIFC) to undertake such activities,” it said.

“Accordingly, before engaging with any persons promoting such offerings in the DIFC, or making any financial contribution toward such offerings, the DFSA urges potential investors to exercise caution and undertake due diligence to understand the risks involved.”

The latest news, on top of other recent negative developments for crypto-currency fanciers over the last few days, sent the price of bitcoin below US$4,000 on Tuesday, and by Wednesday it was trading at around $3,844, which bitcoin experts said was a 25% drop from the record high of US$5,000 it hit on 2 September.

As reported here yesterday,  the cryptocurrency world first began to wobble after the Chinese regulator, the People’s Bank of China, announced on 4 September that it would ban ICOs, which are newly-created cryptocurrencies offered by fledgling companies instead of shares in the business.

That news immediately sent the value of bitcoin tumbling by as much as 11.4%, according to Bloomberg, as well as hitting other cryptocurrency prices.

Then over the weekend and earlier this week, China’s authorities announced they were  considering shutting down the country’s bitcoin and digital currency exchanges, at the same time reports emerged that the European Union and the UK were planning to tighten up their oversight of the cryptocurrency industry,  with a particular focus on ICOs.

The OTC cryptocurrency trading entity that suspended some of its OTC bitcoin trading services was Bitkan. However, it said its bitcoin “wallet”, as well as the deposit and withdrawal functions of digital assets held for clients would not be affected by the suspension.

Perhaps ominously for cryptocurrency holders in China, though, its website is currently featuring a statement issued just before midnight Wednesdasy by China’s National Internet Finance Association, in which the NIFA, a self-regulatory digital finance industry association in China, states that “cryptocurrencies like bitcoin have become a tool for speculation among investors, while also serving as a payment conduit for illegal fundraising and money laundering”.

‘Worse than tulips’

Of all the recent negative crypto-currency news, it was Dimon’s comments about bitcoin that seemed to receive the most media coverage, which included a comparison to the modern bitcoin craze to a famously disastrous speculative bubble for tulip bulbs that occurred in 17th century Holland.

If a JPMorgan trader were to be caught trading bitcoin, he told an investor conference in New York on Tuesday, “I’d fire them in a second. For two reasons: It’s against our rules, and they’re stupid. And both are dangerous.”

In remarks that were carried by the Bloomberg news agency as well as the Financial Times and other media outlets, Dimon said the currency was a “fraud” and suggested that while drug dealers,  murders and people living in places like North Korea, Ecuador and Venezuela might represent a potential market for the coin’s use, it would be a “limited” one.

“You can’t have a business where people are going to invent a currency out of thin air,” the FT quoted him as saying.

“It won’t end well… someone is going to get killed and then the government is going to come down on it.”

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