Last week, China decided to ban privately mined cryptocurrency. What with all the uncertainty from the pandemic amidst international issues and the chaotic volatility that can come with crypto trading, the People’s Bank of China is fixated on stability.
Regulatory Pressures Surface as Warnings Online
Repercussions from China’s recent restrictions have been evident in the plummeting of cryptocurrency prices such as Bitcoin.
Last Tuesday, May 18, the China Banking Association, the Payment and Clearing Association of China, and the National Internet Finance Association of China, posted a warning on social media for crypto consumers- namely financial institutions- stating there would be no protections for those who lose money from crypto transactions. They also see crypto as a threat to the normal economic order and civilian asset safety.
Bitcoin value is partly determined by the 21 million coins that can be produced. Many of these coins are in reserve. Miners make use of computers to solve very sophisticated puzzles, enabling coin circulation on new blockchains.
Last Wednesday, on May 19, Bitcoin price was projected to be under $34,000. Bitcoin prices haven’t been this low for three months. On Sunday, Bitcoin prices dropped still, as much as 13%.
China’s Core Motivators
Cryptocurrency trade was illegal in China since 2019 because of its perceived role in money laundering, smuggling, and drug trafficking. And yet, over 75% of the world’s Bitcoin mining happens in China. Thus, China is continuing to put pressure on cryptocurrency investors within its borders.
As the pressures mount against cryptocurrency and now, its mining power, larger Chinese mining companies targeted by the recent announcements- such as BIT.TOP and HashCow- are halting services for clients in mainland China. Their focus turns to operations overseas.
Major crypto exchanges like Huobi and OKEx are no longer selling mining machines and even retracting their tokens from being traded with the Chinese yuan.
China’s efforts to develop a digital yuan must be another motivator. This currency would be backed by the state and allow for easy access to digital tender from banks.
Private cryptocurrencies are untraceable. The country’s digital renminbi (RMB) allows the state to easily track transactions.
And that’s not all. President Xi Jinping swore to make China carbon neutral by the year 2060. And per the Nature Communications Study, Bitcoin, in China, will generate 130 million+ metric tons of carbon emissions by 2024.
Being a coal-rich province known for cheap energy, Inner Mongolia is a major bitcoin mining hub. Back in February, they vowed to terminate crypto mining projects in their entirety by the end of the month in April to curb emissions.
Today, Bitcoin sits at $38,218.32 and appears to have bounced back some. Other cryptocurrencies are also showing signs of life.
A changing financial paradigm could bring about a major move in #crypto, says @elerianm. "Then I suspect we will find that all sorts of things are correlated." https://t.co/8xLU8G0aRA pic.twitter.com/o2caxtRLkn
— CNBC (@CNBC) May 24, 2021
If cryptocurrencies make a rebound, will you cash in or are you a bubble-nonbeliever?