Monday, August 15, 2022

Why Did China Ban Cryptocurrency

Forbidding Bitcoin Mining Won’t Help

Crypto Unfiltered: Here’s Why China Has Banned Cryptocurrency

Bitcoin was built to resist regulation and censorship but, according to de Vries, even if every country banned Proof of Work mining, it would not make much difference.

“As a country, you can’t really hide mining on the grid but as soon as that type of operation is completely forbidden then the next issue is that people can still buy these machines and put them in their own houses,” he said.

However, finding a solution is difficult as even switching to renewable energies, which are more expensive than fossil fuels, comes with its problems.

“You would have to bring down the price of renewables by law to make sure that these mines only use renewables, and then the question is, do you want them using your renewables because you’d have to subsidise it for them? But what are you getting back for?” de Vries said.

World leaders and companies have tried to regulate the environmental damage caused by cryptocurrencies.

More than 200 companies and individuals launched the Crypto Climate Accord last year, committing to net-zero operations by 2030 which would involve mainly switching to renewable power sources.

Given the findings in the latest report, the accord is not a solution as it is a voluntary agreement, de Vries said.

“It clearly is not working because the network actually got less green during the year.

Income Tax Calculator: Estimate Your Taxes

One example of the SECs battle with crypto, of course, is Ripple . Last month, XRP said no deals to settling its dispute with the SEC. Thats because they believe SEC chairman Gary Gensler will drop the case altogether.

On the other hand, Genslers SEC is not opening the floodgates to cryptocurrency becoming the new financial market of the U.S.

Coinbase couldnt get through the SEC on its plans to expand and create a crypto lending arm, known as Lend. Theyve abandoned it.

The SEC has told us it wants to sue us over Lend. We dont know why, Coinbase said on September 7. The SEC told us they consider Lend to involve a security, but wouldnt say why or how theyd reached that conclusion.

The SEC is right. Lending can be packaged into a security. Wall Street sells loans all the time. People have them in their 401ks.

Things are moving fast in crypto.

Coinbase just went public this year. The $44 billion Grayscale is releasing new crypto funds. They created a DeFi exchange traded fund this summer.

A cryptocurrency Wall Street is being built up every day, only outside of the confines of the usual brand name firms in the asset management space. These things are not being wheeled out by BlackRock and Vanguard.

The SEC can do a China-style smackdown on these companies.

Everyone knows a regulatory crackdown is coming. But is it bad?

Every time Beijing cracks down on Bitcoin, the running joke is that China has already banned cryptocurrency 18 times.

Yeah, take that China!

China Ban Theory #: Cleaner Energy Sources

Our report on small hydropower stations source was government-regulated media, so take it with a grain of salt. It starts with a claim that clashes heavily with theory #2:

According to the article, the heyday of private power plants in China was the beginning of the century. Investors built thousands of hydropower stations because they saw them as a constant cash cow. For their part, the regions nearby saw them as a sign of progress and a solution to their energy problems.

However, with the gradual surplus of electricity in China in recent years, the electricity generated by hydropower stations is often destined to being abandoned

Nevertheless, the main reason for the decommissioning seemed to be repairing the original flow of the rivers. Hydropower stations have always been one of the important factors restricting the ecology of Sichuans rivers, said Wang Hua, deputy director of the Sichuan Provincial Water Resources Department. We went a step further:

Its possible that the government is trying to get rid of those plants. That would explain the articles tone, it seems like it was trying to get investors to stay away from those hydropower stations. In light of this, Chinas ban on Bitcoin mining could just be part of an even bigger play. Theyre serious and methodically shaking things up over there.

What could be their end-game? Is China just trying to go carbon neutral and repair the original flow of the rivers? Or is there something else at play here?

Read Also: How To Track Bitcoin Transactions

China Declares All Crypto

China’s central bank has announced that all transactions of crypto-currencies are illegal, effectively banning digital tokens such as Bitcoin.

“Virtual currency-related business activities are illegal financial activities,” the People’s Bank of China said, warning it “seriously endangers the safety of people’s assets”.

China is one of the world’s largest crypto-currency markets.

Fluctuations there often impact the global price of crypto-currencies.

The price of Bitcoin fell by more than $2,000 in the wake of the Chinese announcement.

It is the latest in China’s national crackdown on what it sees as a volatile, speculative investment at best – and a way to launder money at worst.

Trading crypto-currency has officially been banned in China since 2019, but has continued online through foreign exchanges.

However, there has been a significant crackdown this year.

In May, Chinese state intuitions warned buyers they would have no protection for continuing to trade Bitcoin and other currencies online, as government officials vowed to increase pressure on the industry.

In June, it told banks and payment platforms to stop facilitating transactions and issued bans on “mining” the currencies – the trade of using powerful computers to make new coins.

But Friday’s announcement is the clearest indication yet that China wants to shut down crypto-currency trading in all its forms.

Background: Introduction Of Cryptocurrency Restrictions In China

Why Did China Ban Cryptocurrency?

Cryptocurrency restrictions in China are not new.

In 2017, China shut down local cryptocurrency exchanges at a time when their speculative market accounted for 90 percent of the worlds trade of bitcoin.

In June 2019, trading cryptocurrency was officially banned in China, when the PBOC stated they would be blocking access to all forms of cryptocurrency exchanges, domestic and foreign, and Initial Coin Offering websites although cryptocurrency transactions continued through foreign online exchanges.

2021, however, saw the government double down on its crackdown on cryptocurrencies:

  • In May, China banned institutions and companies from providing cryptocurrency related services, warning investors against speculative crypto-currency trading.
  • Three industry bodies released a statement categorically informing that offering services such as registration, clearing, settlement, and trading is not permissible.
  • Government officials attempted to increase pressure on the industry by warning buyers they will not receive protection for trading in bitcoin and other online currencies.
  • In June, the government told payment platforms and banks to stop aiding transactions and issued bans on mining cryptocurrencies.
  • Finally, two documents were released in September.

Also Check: How To Make Your Own Cryptocurrency

What Was China’s Official Position Leading Up To The Ban

China has long been crypto-skeptical. In 2013, the nation banned Chinese banks from handling Bitcoin. In 2017, China banned initial coin offerings — the crypto version of an initial public offering — wherein a cryptocurrency startup sells coins or tokens to raise funds for the venture. The People’s Bank of China, which is the country’s central bank, designated them an illegal form of fundraising.

Read more: Initial coin offerings, explained

More recently, China has taken aim at crypto-mining operations within its borders. In 2019, China’s state planner expressed interest in banning Bitcoin mining. And earlier this year, the Chinese government outlawed crypto mining in various provinces — including the Bitcoin mining epicenter of Sichuan. It’s still unclear how the ban will affect e-CNY, China’s own state-backed digital currency.

China Crypto Bans: A Complete History

The 2021 crypto crackdown in China was the most severe yet and reiterates a number of the nations previous bans. Heres everything you need to know.

China flag blowing in the wind.

Those familiar with the crypto industry will understand that Chinas crypto ban is not entirely a surprise. The country has maintained a hostile relationship with its crypto industry since 2013, when it rolled out its first set of crypto restrictions.

And while the recent ban may feel like the final nail in the coffin, it is to an extent a reiteration of the crypto directives issued by the countrys central bank eight years ago. Below is a complete timeline of Chinas crypto bans to date.

Also Check: Where Is Blockchain Ledger Stored

How Central Is China To Cryptocurrency Mining

Until now, most of the world’s crypto mining has taken place in China, with the US in a distant second place. In April 2021, 47% of all crypto mining happened in China, according to the University of Cambridge. In contrast, the US accounted for 16.8% of the world’s crypto mining during that same month.

In the near term, that will likely change. Even before the official announcement, a crypto-mining migration of sorts was already underway. And days after the announcement, authorities in the Chinese province of Inner Mongolia seized over 10,000 computers that were specially customized for crypto mining, as reported by Coindesk.

Why Did China Ban Cryptocurrencies Know The Reasons

Crypto Unfiltered Episode 10: Here’s Why China Has Banned Cryptocurrency

China is known for strict measures and state-controlled activities. Recently, The People’s Bank

of China banned cryptocurrencies releasing a notice. The news of the crackdown sent crypto markets into a slump. China was also the center of crypto mining. The latest developments have rocked the financial markets worldwide. Why did China ban cryptocurrencies?

Why the ban?

As per PBOC, the use and transactions in the crypto space have seen an exponential rise.

PBOC assumes these transactions assist illegal activities like money laundering, frauds,

pyramid schemes, and related criminal activities.

Chinese authorities have taken a strict view on the rise of cryptocurrencies and their imminent

danger to their growing economy. The Chinese authorities view that transactions are risky for

people and national security alike.

Moreover, many countries are working on issuing central bank digital currencies using the same technologies pioneered by private virtual currencies like Bitcoin

and Ethereum.

China has been testing its pilot e-currency or the digital yuan for over a year now. Historically,

China is a state-run and controlled country where the power vests with the premiere. The step is

a control measure to ensure the success of its digital currency.

Also, the latest financial crisis of Evergrande may be a possible reason for the crackdown. Experts believe that the government is using various tactics to deflect attention from core issues.

What next for virtual currencies?

You May Like: How To Make Money Off Of Cryptocurrency

Bans Come And Go But Crypto Stays

This list isnt exhaustive, and bans on cryptocurrencies often change. As mainstream acceptance of bitcoin grows, its possible the legal landscape globally will change even more.

While it appears some countries are moving towards more restrictive policies, other governments are considering ways they can participate in the future of digital money. In most cases, this is through a central bank digital currency.

How each country will engage with the future of money is uncertain, but digital currencies in all forms are likely not going anywhere anytime soon.

How Has The Us Government Responded

Though the US government has not yet taken an official position on the Chinese law, a handful of lawmakers were quick to weigh in following the ban:

Chinas authoritarian crackdown on crypto, including #Bitcoin, is a big opportunity for the U.S. Its also a reminder of our huge structural advantage over China.

You May Like: How To Get Robinhood Crypto

China Ban Theory #: Fud To Get More Bitcoin

According to John Carvalhos wild and full of assumptions theory, China bans something related to Bitcoin every cycle to manipulate the price and get more BTC. The country has no incentive to ban the industry. They make too much money mining, plus they control the ASICs manufacturers, plus mining machines inflate the value of chips, and they control that business too. So, Carvalhos theory is:

The main ASIC manufacturer, the Chinese company Bitmain, had a new generation of miners ready. So, the CCP decided to create a demand for the aftermaket and combine it with the FUD. As they usually do, they sold their Bitcoin and made their shorts. Then, China banned Bitcoin mining and the whole country turned off the ASICs. The world perceived the ban as real, just look at the hashrate. This is the first time this happens. Then, China sold a small portion of its ASICs to the USA.

According to him, Bitcoin mining in China didnt stop, theyre just not signing the blocks. Of course, he doesnt have any proof, and neither do we. This is just a theory, like all the others.

Whats really going on in China? Whats the reason behind the great China ban of 2021? We wouldnt know for sure, but we have many suspicions. Lets hope 2022 gives us solid evidence, new insights, or, at least, a plausible explanation.

Featured Image by PublicDomainPictures on Pixabay | Charts by TradingView

Ban Of Cyrpto Currency In Various Countries:

Why Did China Ban Cryptocurrency

Since Cryptocurrency has been gaining popularity, thanks to tweets made by CEOs of renowned institutions, Cryptocurrency is the trending news all over the globe. News such as ban of cryptocurrency in some countries, crime related to cryptocurrency, news talking about cryptocurrency exchanges and their functions in various countries has been all over the place. One such trend that we will be focusing here is Ban of Crypto Currencies in various Countries.

Why did China ban Cryptocurrency and how did they implement the ban?

Picture Credits: Investing.com

China is one among the most powerful countries with strong factors of productions such as economy, labour, capital and market. When Cryptocurrency came into trend, an economically strong country announced ban on the use of cryptocurrency. The major reason for the ban was to protect the investors from fraud and money laundering. The ban was followed in phases. First the country prohibited the financial institutions from engaging in any kind of transactions that were based out of crypto. Then it banned all the domestic mining. Finally, they abolished the concept of cryptocurrency outrightly.

Shanghais Peoples High Courts intervention.

The Shanghais Peoples High Court verdict:

Picture Credits: Cryptoknowmics

How did the court contradict the Chinese Law?

Read Also: How To Buy Bat Cryptocurrency

China Ban Theory #: Blackouts

Is China having energy issues? In that same article, we posed another theory:

In retrospect, we shouldve seen it coming. Only two months ago, following a suspicious blackout, NewsBTC reported:

According to the Beijing Economic and Information Bureau, there were concerns about the energy consumption related to these activities. PengPai quotes Yu Jianing, rotating Chairman of the Blockchain Special Committee of China, to claim that the countrys environmental requirements could lead to crypto mining being more strictly regulated. Jianing said this will be inevitable.

However, would they be decommissioning small hydropower stations if this was the case?

Chinese Government Concerned About Fraud

The recent announcement effectively puts a ban on the use of cryptocurrencies in China, and comes as the People’s Bank of China is seeing increasing turnover in overseas transactions leading to regulatory compliance evasion.

This leaves room for a lot of risk for the monetary system due to the unlawful issuance of cryptocurrencies, which may also involve multi-level marketing and Ponzi schemes to scam less crypto-savvy citizens out of their hard-earned money.

The PBOC views virtual currencies as illegal, since they are not issued by any recognized monetary institution, dont hold any legal status that can make them equivalent to money, and hence advises against their circulation as a currency.

However, realistic implications of the ban still remain uncertain, and it’s unlikely they will effectively eliminate cryptocurrency trading completely. China is home to a large number of bitcoin mining farms as a lot of regions offer cheap subsidized electricity, making mining a profitable venture.

Many agree that the ban by Chinese authorities will have a negative impact on the overall digital currency market. Stricter regulations by the PBOC will “definitely weigh on the cryptocurrency universe,” said Wayne Cao, who runs a company that recently offered 10 billion tokens in an ICO.

Questions remain on the effectiveness of the regulations because taming the decentralized, regulation-free blockchain-based virtual currency market will remain a big challenge for any real-world regulator.

You May Like: Where To Buy Zap Crypto

Whats The Cryptocurrency Clampdown In China About

    For a long time, China has been one of the worlds major centres for cryptocurrency mining operations because of its relatively low electricity costs and cheaper computer hardware. The activity is so popular there that gamers have been known to blame the industry for a global shortage of graphics cardswhich miners use to process crypto-currencies.

    While China banned domestic cryptocurrency exchanges a while ago, trading continued clandestinely by other means. It was only in 2021 that China made efforts to take down cryptocurrency with greater official scrutiny.

    THE BELAMY

    Sign up for your weekly dose of what’s up in emerging technology.

    Now, it is likely that 90% of Bitcoin mining capacity in China will shut down.

    Chinas crackdown on crypto in 2021

    In Mayof this year, Chinese financial regulators issued a statement that reminded consumers of the dangers of virtual currencywarning them they would have no protection for continuing to trade Bitcoin and other currencies online.

    In June, Chinese state institutions further banned banks and payment companies from working with crypto-related businessessimilar to bans that they had earlier introduced in 2013 and 2017. The governments main administrative cabinet vowed to clamp down on Bitcoin trading and mining, leading local authorities to shut down crypto-mining operations across the country.

    Popular news
    Related news