Jim Cramer says crypto bulls are fooling themselves about the China ban

Published Fri, Sep 24 202111:23 AM EDTUpdated Fri, Sep 24 202111:39 AM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

CNBC's Jim Cramer said Friday he believes it's impossible to view China's latest crackdown on cryptocurrencies as positive for the nascent digital assets. "This is a tyrannical, totalitarian regime that has just taken one of the biggest groups of buyers of crypto out of the market. How that can possibly be bullish is beyond me," Cramer said on "Squawk on the Street." In a new Q & A posted to its website, the People's Bank of China said services offering trading, order matching, token issuance and derivatives for virtual currencies are strictly prohibited . Overseas crypto exchanges providing services in mainland China are also illegal, China's central bank said. It ratchets up the country's crypto crackdown , which in May included a ban on financial firms and payment companies from offering services connected to digital currency transactions. Bitcoin fell more than 5% to just above $42,000 on Friday. It hit an all-time high over $64,000 in April, but sold off in June and July, even briefly dipping below $30,000. Since mid-July, bitcoin had been gaining ground, making a recent top around $52,000 earlier this month. The world's second-largest digital coin, ether, sank 8% to roughly $2,900 apiece. Ether, which hit its all-time high over $4,000 in May , followed a similar trading pattern over the summer and into the fall. "There's no crypto bull who is ever not a crypto bull. I mean literally, all countries could ban crypto and people would say, 'That's even better because we can do crypto on Mars,'" Cramer said. "I own Ethereum. I made a lot of money in bitcoin, candidly. But I think recognize that not everything is positive." The Chinese central bank's new stance come as authorities in the country have in recent months adopted a tougher regulatory posture toward a range of sectors, not just crypto. It also has hit the after-school education industry and technology firms such as hide-hailing company Didi Global. The popular KraneShares CSI China Internet ETF , which trades under the ticker KWEB, is down 39% year to date, as investors have dumped shares to avoid the regulatory uncertainty. The prospect of tougher government regulation has been a cloud hanging over the digital asset industry as it boomed in popularity and attracted major investment, both in the cryptocurrencies themselves and companies involved in the underlying blockchain technology. However, Cramer said he believes China's motivations for restricting cryptocurrencies are quite different than U.S. regulators. "The Chinese want to find out who's rich," Cramer said on "Squawk Box." "They don't want rich people hiding money" and "these are ways to hide money," he added. "The Americans just want to make it so that if something bad happens ... at least we have some handle on it." Earlier this month, Securities and Exchange Commission Chairman Gary Gensler assured lawmakers that the agency is working overtime to create a set of rules to oversee cryptocurrency markets while balancing the interests of American innovators. "I think that everybody who would really love any of these wants it to be a security and regulated. But there's just a lot of people who just say, 'You know I want to do this and not have any government regulation.' You know what, that's anarchy," Cramer said. "I don't think China or United States wants anarchy."

Bitcoin fell sharply after a sell-off of major U.S. stock indices. Bitcoin has been correlated closely to the price movement of the Nasdaq index.

Luke MacGregor | Bloomberg | Getty Images

CNBC's Jim Cramer said Friday he believes it's impossible to view China's latest crackdown on cryptocurrencies as positive for the nascent digital assets.