So, did China ban cryptocurrency? That’s a question that’s been circling the web since late last year. Earlier, it was the world’s leading place for Bitcoin mining, but regulators have now made it illegal to mine digital coins. However, this recent ban may not be a complete disaster. We’ve updated this article with new details about China’s new policy. In the meantime, stay tuned for our weekly newsletter.
The latest move is part of a global crackdown on the cryptocurrency industry, spanning Asia and the United States. The People’s Bank of China (PBOC) recently issued a statement declaring cryptocurrency trading and mining illegal and prohibiting foreign websites from offering the services to Chinese citizens. The ban’s impact on the Chinese crypto market is huge. It’s a sign that the Chinese government is serious about putting a stop to the use of cryptocurrencies.
Although China’s government has not officially banned crypto, dozens of other countries have banned it or severely restricted it. Some countries have banned or restricted their use, including Egypt, Iraq, Qatar, Oman, Morocco, Algeria, Tunisia, Bangladesh, and the U.S. Treasury Department. Many individual companies are also facing tighter federal oversight. Some e-commerce companies, including Coinbase, have suspended lending of cryptocurrencies they consider “stable” in value.
The new restrictions on crypto trading and mining have caused prices to tumble in China. The crash of Evergrande, China’s second largest building company, led to a massive sell-off of cryptocurrencies. During turbulence in the stock market, investors generally sell off riskier financial bets. And, unfortunately, cryptocurrency is one of those bets. But, despite this ban, the cryptocurrency market is expected to continue to experience bullish breadth.
There are some speculations regarding the reasons for the government’s new regulations. The ban was enacted in response to a significant increase in capital flight from the country, which occurs through cryptocurrency exchanges. The PBOC knew that allowing cryptocurrency to flourish would only exacerbate the issue. Furthermore, the common prosperity programme aims to curb capital flight and encourage domestic circulation of people’s wealth. If the rich were allowed to circumvent capital controls, it would be much more difficult to redistribute wealth among the poor.
The government’s actions have been largely symbolic, but the reality is far more significant. The ban on crypto trading will have a profound impact on employment and investment opportunities in the country. It will also have a profound impact on the global economy, as it will likely lead to the demise of many Chinese citizens and halt the expansion of the crypto industry. Instead, the ban will allow cryptos to thrive in other markets. In fact, after China’s announcement, the US has become a hub for cryptocurrency mining and trading.
Previously, China has been an attractive location for Bitcoin mining, particularly in Inner Mongolia. Now, this is unlikely to be the case for much longer. China’s energy crisis is a major concern for the country and its aim to become carbon neutral by 2050. In 2019, China accounted for about 75 percent of the global Bitcoin energy consumption, but this number dropped to just 46 percent by the spring of 2021. With the new restrictions, the energy consumption of Bitcoin is likely to drop further.