Getty Images
Bitcoin mining epicenter has ended it. September 24th China’s central bank made all crypto-related transitions illegal, citing concerns about gambling fraud and money laundering. The move triggered a sharp decline in the markets; some investors tried to run down their holdings and the price of Bitcoin fell nearly 10% after the announcement before quickly regaining some lost ground.
China’s Crypto Penetration Comes As Governments Around The World – including the USA – begin to merge their official positions on digital assets and virtual currencies. The Chinese government has long had doubts about the cryptocurrency, so the move to ban it entirely isn’t entirely surprising. Below, we break down the impact of China’s announcement, its impact on exchanges in the US and elsewhere – and what it could mean for digital currencies in 2022 and beyond.
What was China’s official position ahead of the ban?
China has long been cryptoskeptical. In 2013, the nation banned Chinese banks from handling Bitcoin. In 2017, China banned Initial Coin Offerings – the crypto version of an IPO – in which a cryptocurrency startup sells coins or tokens to raise funds for the company. The People’s Bank of China, the country’s central bank, called it an illegal form of fundraising.
Continue reading: Initial Coin Offerings, explained
More recently, China has targeted crypto mining operations within its borders. In 2019, China’s state planners expressed an interest in banning Bitcoin mining. And earlier this year, the Chinese government banned crypto mining in various provinces – including the bitcoin mining epicenter of Sichuan. It is still unclear how the ban will affect e-CNY, China’s own state-backed digital currency.
How central is China for mining cryptocurrencies?
So far, most of the world’s crypto mining has taken place in China, with the US in second place. In April 2021, according to the University of Cambridge, 47% of all crypto mining took place in China. In contrast, the US accounted for 16.8% of global crypto mining in the same month.
That is likely to change in the short term. Even before the official announcement, a kind of crypto mining migration was underway. And days after the announcement, authorities in China’s Inner Mongolia Province seized over 10,000 computers that were specially adapted for crypto mining, Coindesk reports.
Will the China ban affect the price of Bitcoin?
After China’s official announcement to ban digital currency, “China FUD” began to be trending on Twitter. Many users were quick to point out that previous Chinese statements about crypto generated “fear, uncertainty, and doubt” – but were followed by short-lived downturns and should not be taken too seriously. In fact, the price of Bitcoin on the following Monday was roughly the same as it was before the announcement.
Continue reading: Here’s how much electricity it takes to mine Bitcoin and why people are concerned
How does the ban affect the exchange of cryptocurrencies?
China’s ban extends to crypto exchanges doing business with Chinese citizens – even if they are located outside of China. Crypto exchanges are now struggling to figure out how to deal with Chinese customers. Coinbase, one of the most famous US cryptocurrency exchanges, did not publicly comment on the ban. However, according to Bloomberg, investors shied away from the first bond sale after the announcement.
How did the US government react?
Although the U.S. government has not yet officially commented on Chinese law, a handful of lawmakers have been quick to take a stand following the ban:
China’s authoritarian crackdown on crypto, including #Bitcoin, is a great opportunity for the US. It is also a reminder of our enormous structural advantage over China.
– Senator Pat Toomey (@SenToomey) September 24, 2021
China’s ban on Bitcoin is a massive mistake with ramifications that will be felt for generations. Your loss is our gain and America can and will lead the future by providing a clean home for Bitcoin miners and everyone who builds on / with / for #Bitcoin. https://t.co/W4Gcq2e92w
– Mayor Francis Suarez (@FrancisSuarez) September 24, 2021
Comments are closed.