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- A series of Chinese government restrictions aiming at restricting cryptocurrency commerce and mining have dominated the crypto news cycle since the beginning of the summer
- Larger-scale testing and widespread deployment appear to be on the horizon in the next months
- With big Chinese banks like the Agricultural Bank of China following suit and suffocating crypto-related consumer and commercial activities, the concentrated effort appears to be more of a chokehold than a lack of enthusiasm
Since the beginning of the summer, a slew of Chinese government regulations aimed at limiting cryptocurrency trade and mining have dominated the crypto news cycle. The initiatives coming out of Beijing and their ramifications are widely believed to have contributed significantly to the recent market downturn, ranging from urging financial service providers to throttle cryptocurrency-related transactions to ordering the shutdown of a crypto trading software provider. What is driving this latest round of unfriendly measures, and how will they affect the cryptocurrency market in the country that previously accounted for over two-thirds of the global digital asset supply? Furthermore, whatever occurs in China appears to have a significant impact on the rest of the globe, which does not appear to be bad.
It’s easy to see how the tightening of regulations on decentralized cryptocurrency trading and mining coincides with the expansion of China’s central bank digital currency (CBDC) initiative. Stacks of government-issued electronic money have already arrived in the wallet applications of 200,000 Chinese residents chosen through a lottery as part of the Digital Currency Electronic Payment system testing. Larger-scale testing and widespread deployment appear to be on the horizon in the next few months.
According to Yu Xiong, professor of business analytics and director of the University of Surrey’s Center for Innovation and Commercialization, China will not allow any currency to affect the renminbi, and as a result, Bitcoin (BTC) cannot grow too large. Xiong went on to say that China, like the majority of other countries, wants Bitcoin to expand at a controlled rate. China would suffer financial calamity if Bitcoin was permitted to be used as a currency. There is no need for the government to support a decentralized cryptocurrency because China already has its own CBDC, which can be regulated by the central bank.
With big Chinese banks like the Agricultural Bank of China following suit and suffocating crypto-related consumer and commercial activities, the concentrated effort appears to be more of a chokehold than a lack of enthusiasm. Cryptocurrency firms and regular users are suffering the repercussions of the government’s anti-Bitcoin campaign.
All key players are included in the authorities’ all-out assault on China’s bitcoin sector: Miners in many major provinces are receiving eviction letters as financial service providers wake up to find their bank accounts frozen. The departure of the business that ran the country’s first Bitcoin exchange exemplifies the severity of the situation. The whole crypto business in China is officially gone, Yifan He, CEO of Hong Kong-based blockchain startup Red Date Technology, as mentioned.
While he believes that commerce has always existed in the area and that mining has been substantially supported by certain local governments, he believes that the present restrictive shift in government policy will strike both forms of business a hit from which they are unlikely to recoup very soon as he said that once banks and payment service providers outright ban crypto trade, it will be extremely difficult for ordinary individuals to acquire crypto using RMB. Because all mining has ceased in China, there has already been a huge reduction in crypto trading activity. Regular customers may no longer add money to their accounts, and nearly all major exchanges have barred Chinese citizens from using leverage and margin services.
It’s also likely that the absence of Chinese trading activity may be a drag on the global crypto market for a long time. Building and maintaining a fresh bull run equivalent to that of early 2021 — a process that necessitates a constant infusion of new market players — might become more difficult, given China’s inability to provide the user base expansion it previously provided. To compensate for China’s departure, the rest of the world will have to work extremely hard.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
