By Larry Wright
It will come as no surprise to those who are acquainted with the cryptocurrency business that China has imposed another cryptocurrency prohibition. Beginning in 2013, when it enacted first-ever set of crypto-related limitations, the nation has had an adversarial relationship with its domestic cryptocurrency sector.
Although the current prohibition on cryptocurrencies may seem to be the last nail in the coffin, it is in fact, an update to the cryptocurrency guidelines published by the nation’s central bank eight years ago. The following is a chronological history of China’s crypto-related crackdowns to date.
China and Bitcoin: Rivalry In a Nutshell
China has some of the biggest virtual currency marketplaces around the globe. It should likewise be noted that the worldwide value of crypto-currencies is frequently affected by movements here. It’s the newest trend in China, which regards it as a risky, hypothetical asset and a vehicle intended to evade taxes at the worst.
China’s officials restated on Friday (September 24) that digital currencies and production are prohibited, signaling the nation’s most strident position towards non-government-issued supplies too far. The People’s Bank of China (PBOC) stated in an announcement that the measures are needed to “safeguard the security and social economy.” Since then, the Country has made a series of verdicts that have disturbed the exchanges and, to some extent, the general impression of Bitcoin.
China has had a long history of Bitcoin restrictions, dating back to the year 2013. Over the last several years, numerous cautions, limitations, and prohibitions have been likewise declared. Ever since the year 2013, the country has made attempts to limit the growth of cryptocurrencies. However, with crypto marketplaces flourishing in 2021 and the steady implementation of China’s government electronic currency, the administration is becoming more concerned about imposing further restrictions on crypto.
Let’s throw some light on the Crypto Ban History of China.
2013
China prohibited banking institutions from processing financial transactions on Cryptocurrency, referring to bitcoin as a “digital commodity” rather than lawful cash.
Amid criticism from payment services providers as well as the authorities, Bitcoin China, the nation’s leading trading platform, stopped accepting yuan transactions. This warning was released just as cryptocurrency dealing was picking up momentum, with the value of bitcoin hitting the $1,000 milestone only ten days before the restriction was imposed. After the revelation, bitcoin’s price jumped by more than 30 percent on the now-defunct Mt. Gox Platform, the world’s most excellent payment processor of Cryptocurrency at that moment.
The People’s Bank of China allegedly spoke with prominent private financial firms on December 16. It forced them to cease conducting trade with cryptocurrency exchanges, thereby firmly obeying its ban on BTC transactions. BTC China (BTCC), the nation’s central trading platform at that moment, stated shortly afterward that it would no longer take yuan payments, which obviously, significantly devalued bitcoin.
2017
In January 2017, the People’s Bank of China started investigating the operations of cryptocurrency trading in an effort to support the currency and prevent funds from getting out from the country illegally. The study looked at how marketplaces handle F.X. as well as anti-money trafficking. The results appeared to be subjective to prohibiting initial coin offerings (ICOs) on September 4, 2017.
ICOs, which let people in business and innovators obtain cash for their ideas by releasing and purchasing tickets, was a critical part of the cryptocurrency business at that time. The People’s Bank of China ruled that initial coin offerings (ICOs) were a prohibited method of soliciting funds. Following this declaration. China began prohibiting ICO companies from releasing ICO funds and directed that any funds received through the use of an ICO be refunded to stakeholders. The authority said that ICOs represent a danger of “enterprise collapse” and that they significantly endanger the nation’s financial prosperity. According to the ruling, banking firms and non-bank transaction businesses were likewise banned from delivering support for token-based charitable activities.
Although China’s bitcoin network was also still coming up with a new and better framework simultaneously, officials announced a new guideline requiring cryptocurrencies platforms to close down by September 15. The leaked memo showed that the exchange was anticipated to cease operations and develop procedures that would enable customers to retrieve their monies without any frauds or loss of investments. Because of this declaration, several exchanges in China had to relocate their activities to other nations, while some had to shut their doors. BTCC and BTC were two of the cryptocurrency marketplaces that were badly impacted by it.
2019
China considered prohibiting the manufacture of cryptocurrencies but finally opted against doing so. The Chinese government’s National Economic and Development Authority (NEDA) classified cryptocurrency production as an “unacceptable” industry in April 2019, when it published its inaugural list of businesses that should be monitored, regulated, or phased out via city councils. On the company’s list of significantly polluting industries is cryptocurrency processing, which is defined as the automated process of verifying bitcoin payments and exchanging them for newly printed money.
Given that China manufactured a large majority of cryptocurrency mining equipment, this news created considerable havoc in the nation. Furthermore, due to the low cost of energy, China was home to far more than 50% of the globe’s cryptocurrency mining capacity. Due to the fact that the National Development and Reform Commission removed the mining process from their operations, a wide-scaled economic downtown was soon to follow.
2020
The Chinese government increased its hold on cryptocurrency exchange activity inside its boundaries for the greater part of 2020 as part of a broader push to combat financial crimes and deception. In August, the People’s Bank of China (PBoC) announced its intention to blacklist more than 100 international websites that provide cryptocurrency trading services.
2021
In response to the growing threat that bitcoin and other cryptocurrencies pose to China’s environmental goals, the country is tightening its grip over the sector. Banking institutions and transaction companies are forbidden from providing crypto-related services by the authorities in their jurisdictions.
The obstacles that the country’s bitcoin corporation faced in 2021 began in May when the country’s governing council reaffirmed prior cryptocurrency restrictions by requesting that cryptocurrency creation and exchange be prohibited. Prior to all of this, the regional governments of Inner Mongolia, Xinjiang, and Sichuan, which are all well-known cryptocurrency mining hotspots, had begun to advocate for limitations on cryptocurrency extraction that were detrimental to the industry.
Following the declaration by the State Authority, regional governments began taking significant efforts to combat cryptocurrency creation. According to government authorities, the new restriction was justified by the currency’s resource characteristics and its harm to environmental goals. Producers of cryptocurrencies were obliged to cease operations permanently or migrate to other bitcoin-friendly countries, similar to that of the cryptocurrency trading halt in 2017. Because the country had generated more than half of the world’s cryptocurrency mining capacity before the closure, it was expected that the worldwide crypto economy would suffer more severely from this act.
Even though the limit on cryptocurrency manufacturing did not have a significant negative impact, the country’s officials opted in September to outright prohibit cryptocurrency exchanges. The nation’s top bank, together with nine other agencies, including the police and the Judicial Branch, removed any confusion about the country’s attitude on cryptocurrencies and left no room for misunderstanding, notwithstanding previous bitcoin trading suppressions.
The Latest Crypto Ban
On September 24, Bitcoin financiers got a sad news: the government has slapped a ban on all cryptocurrency cash transactions as well as the manufacturing of new Cryptocurrency. Bitcoin, the most well-known digital currency, had an estimated 8% reduction in value as a result of the publication. This was not the first occasion Government has attempted to regulate a currency that was meant to be immune to state regulation.
Authorities instructed Chinese financial institutions not to handle or trade-in Cryptocurrency at the end of 2013, and the directive was effective immediately. China’s central bank, the People’s Bank of China, said in the year 2019 that they would pursue illegal cryptocurrency activities. As a consequence of the announcement, bitcoin plummeted by 9 percent versus the U.S. dollar. Moreover, China has long been a leading contender in cashless transactions, and it is now developing its own electronic money, even though it has banned all forms of Cryptocurrency. It is not the intention to let people conduct their monetary activities in secret, but rather to improve the ability of authorities to monitor the economic system as a whole.
Nine other government entities backed up the monetary system in making the declaration. Despite previous bans, the government has declared a countrywide ban on all crypto-related activities and commercial operations, regardless of where they take place. This includes Bitcoin, Ethereum, and the Stablecoin tether, all of which were expressly mentioned by the PBOC as being “illegally spendable” and hence not permitted to be used. While stablecoins are often tied to the value of fiat money, the Chinese government has made it clear that they do not meet the conditions set out by their respective regulatory bodies.
According to the judgment, not only are national banks prohibited from supporting crypto-related organizations but so are advertising and information technology companies. Rather than saying this, all bitcoin owners and processors in China are already completely barred from engaging in authorized business activity. In order to expedite the suspension of mining operations, China’s primary economic development organization urged government agencies to investigate irregular resource usage, call in debts, and revoke tax breaks in order to expedite the suspension of mining activities.
As per the Cambridge shire Cryptocurrency Energy Usage Index, several producers already have immigrated, that had a 46 percent of the international hash rate, a measurement of a computational of resources utilized in mining and processing, as of the month of April. According to the official website of the blockchain statistics, the computational power has fallen by even more than 50% as the suppressions started from a high pitch in mid-May to July. Its recovery suggests that workers have returned to the country and other parts of the world. The hash rate remained relatively stable in the period following the Friday statement.
Because cryptocurrency ownership has not yet been proven criminal in the same way that drug possession has, Bobby Lee, owner of cryptocurrency services company Ballet, said that it is unclear if the new restrictions will be more successful than that of the previous ones. “This time, the People’s Bank of China was quite specific in saying that private dealings might no longer be given legal protective position,” Lee added. “This means that in the event of a disagreement or theft, sufferers of transactions involving will no soon be allowed to file a lawsuit.”
Despite the fact that Chinese courts have typically recognized cryptocurrency ownership, Arslanian of PwC was concerned about whether this would be followed in practice. In the same way, Huobi customers will be forced to register bank accounts elsewhere before the end of the year. This will be made much more difficult if other cryptocurrency exchanges follow Huobi and Binance in prohibiting users from accessing accounts using the Chinese contact information.
“This is the most explicit, universal set of regulations in the existence of cryptocurrency market legislation in the country, surrounding the highest percentage of authorities,” said Winston Ma, associate professor at NYU School Of law. Due to the fact that private companies run them, authorities from Asia to the United States are concerned that the increasingly dangerous cryptocurrency transactions will weaken their management of the economic and financial networks, create vulnerabilities, encourage tax fraud, and harm shareholders.
Critics are also concerned that “extraction,” which is the computational power procedure uses to produce BTC and other currencies, is compromising worldwide ecological objectives. Chinese federal agencies have also often expressed worry that bitcoin trading may endanger the nation’s business and market stability, which is a primary priority for the capital of China. According to experts, China regards virtual currencies as a danger to its independent electronic yuan, which is currently being tested. “Beijing is so opposed to free enterprise that they can’t even allow its citizens to participate as to what is perhaps the fascinating invention in banking in generations,” said senior Republican Representative Pat Toomey in a statement.
While American authorities are carefully studying the hazards of virtual currencies, they have also stated that they provide benefits, such as enhancing economic inclusiveness.
A Word of Caution from the Very Top
Many people are unsure what to anticipate from the events in China, given the country’s long and rich history of Bitcoin scandal and sometimes ambiguous attitude on the digital commodity. The potential of a total ban on mining in China is not a source of concern for everyone, though.
Nic Carter, a major shareholder of Castle Island Ventures, retweeted a tweet earlier on the subject, in which he said that a mining prohibition would be beneficial to Bitcoin in a variety of ways. Carter mentioned quicker hash rate decentralization, larger margins for miners operating in the United States, and decarburization of mining Bitcoin as some of the benefits of Bitcoin mining. This is because this ban would transfer hash rate determination by renewable and more sustainable energy sources.
As per the Cambridge Center for Alternative Finance’s Bitcoin mining map, China will host the vast majority of Bitcoin hash rate — around 65 percent by the end of 2020, based on current estimates. While this in and of itself is not a centralizing element for the networking, further dispersing the hash rate can’t be a bad thing for the channel. Unless the markets move to a ban on mining in China, the price of Bitcoin will not be immediately impacted if the hash rate drops as miners look for a new domicile. “While [a prohibition] would be unpleasant for mine workers in China, it [would be] negligible for Bitcoin and miners in other parts of the world,” quotes Adam Back
Migration of Miners
In order to legalize and authenticate Bitcoin transactions, which is a sizeable standard log, some cryptocurrencies, such as Bitcoin, are dependent on a network of distributed workstations.
Because of its relatively cheap power rates and less costly digital technology, China has long been regarded as one of the world’s most important mining hotspots. When it comes to cryptocurrency mining, video game fans have periodically criticized the industry for a global shortage of powerful graphics processors used by miners to create Cryptocurrency. China’s latest interference has had a negative influence on the mining industry.
Until May, cryptocurrency mining was a big business in China, accounting for more than half of worldwide output; however, miners have been migrating to other countries in response to this trend. Like Christopher Bendiksen, head of research at crypto startup CoinShares, several Bitcoin experts have remarked that “the Chinese are definitely the victims of all this.” “China will now forfeit around six billion dollars in annual mining profits,” he further added, citing Kazakhstan, Russia, and the United States as examples of other countries affected.