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- China accounts for 65% of Bitcoin mining but its ruling elite frowns upon cryptocurrency
- Ban affected after rumors and unregulated flows of capital
- Crackdown ordered by highest echelons of the communist party
China, in an attempt to curb the growing digital trading market, had last week banned financial institutions and payment companies from providing services related to cryptocurrency transactions.
As per Reuters, the latest ban directs institutions, including banks and online payments channels, not to offer clients any service involving cryptocurrency, such as registration, trading, clearing and settlement.
In a statement, it said that the prices of cryptocurrency prices skyrocketing off lately have led to speculative trading of crypto and infringing on the safety of people’s property, and disrupting the normal economic and financial order.
Even in 2017, China had shut down its local cryptocurrency exchanges, smothering a speculative market that had accounted for 90 percent of global bitcoin trading. In June 2019, the People’s Bank of China said it would block access to all domestic and foreign cryptocurrency exchanges and Initial Coin Offering websites. The statement also highlighted the risks of cryptocurrency trading, saying virtual currencies “are not supported by real value”, their prices are easily manipulated, and trading contracts are not protected by Chinese law.
Chinese Government wary of Crypto trade
Control and regulation are the epitome of the Chinese Government and Cryptocurrency has always been looked at suspiciously by the Government. Therefore the Xi Jinping regime effectively throttled the cryptocurrency trade in 2017 but readily accepted the blockchain technology which runs the digital currency.
Three top financial bodies of the People’s Republic of China National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China in a joint statement highlighted the risks involved with financial transactions related to cryptocurrency trading. The joint statement cited the recent events when crypto token pieces had surged, tanked, and again started rising on pure speculation. It seriously threatens the safety of people’s property and disrupting the normal economic and financial order
Bitcoin loses 30% of its value
The Chinese crackdown coupled with Tesla’s announcement of not accepting Bitcoin (BTC) as payment led to mayhem in the market. BTC tanked by 30% in value and other crypto coins fared even worse and lost 50% of their value. In 24 hours investors liquidated their cryptocurrency worth $5.92 billion in value.
The Financial Stability and Development Committee of the State Council was chaired by the second most powerful man in the Chinese hierarchy and when he ordered a crackdown on cryptocurrency, the writing was on the wall. In March 2021, China also banned the Weibo accounts of cryptocurrency trading platforms Binance, Huobi, and OKEx.
However, these steps did not stop the growth of the cryptocurrency market in China completely. What must be understood is China wants alternatives to cryptocurrency. The ban is actually based on speculation and rumors. The ever-expanding peer-to-peer lending (P2P) industry has also invited the ire of the Chinese government. The industry has been hit by a series of scams and China has closed most of the P2P lending businesses and brought others under the regulation of the central bank
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
