China Tightens the Noose around Crypto

Crypto

Cryptocurrency traders and miners have been backed into a corner with the latest edition of China’s crypto regulations.

A week after crypto mining operations in China’s Sichuan province came to a halt, the country has now declared all crypto transactions illegal. On September 24, ten Chinese government agencies, including the central bank, made a statement saying that they would work closely to ensure a “high-pressure clampdown” on crypto trading.

The Chinese government has vowed to eliminate illegal cryptocurrency activity in the country. Let’s take a closer look at what these new regulations are, the possible reasons behind them and how Bitcoin is faring after being hit with another ban.

Nothing except “fiat” currencies on the market

The People’s Bank of China (PBOC) said that cryptocurrencies must not circulate on the market like traditional fiat currencies (currencies issued by governments). They announced that foreign crypto exchange regulators are barred from providing their services in mainland China. Financial institutions, payment companies and internet firms have also been instructed to not facilitate crypto transactions.

The National Development and Reform Commission (NDRC) in China has said that it will be launching a nationwide cleanup of crypto mining. NDRC states that crypto provides little to the country’s economic growth and rather hampers China’s carbon neutrality goals. NDRC declared that it will ensure that electricity and financial services for miners are restricted, urging local governments to come up with a timeline to achieve these goals.

Reasons behind increased regulation

The environmental risk posed by crypto mining is one of the primary reasons for the strengthened regulation surrounding cryptocurrencies in China. In 2021, the Bitcoin mining industry accounts for approximately 5.41% of China’s carbon emissions due to electricity generation. It is believed that China has intensified the crackdown upon sensing the continuation of illegal crypto mining activities.

Besides environmental concerns, this step follows a power crisis in China which has lowered the energy supply for various industries. Given Bitcoin’s high electricity consumption of  91 terawatts-hours of electricity annually (or 0.5% of all electricity worldwide), making crypto transactions illegal could also be considered a step towards reducing the country’s energy requirements. 

Market response

Bitcoin has been having tough luck recently, with the Securities and Exchange Commission (SEC) in the U.S. calling for tighter regulation in Chairman Gary Gensler’s recent statement.  Following this, China’s latest crypto-regulatory step has also dealt a heavy blow to the price of Bitcoin, with it dropping as much as 5.5% soon after the announcement.

China’s recent step comes in the wake of real estate giant Evergrande’s liquidity crisis in China, which has garnered the attention of global markets. This liquidity crisis had crypto investors rushing to liquidate their assets for fear of disruption in the global financial balance. Such a rush to liquidate crypto had also adversely affected crypto prices.

The effect of China’s announcement does not limit to Bitcoin. Other cryptocurrencies like Ether and Ripple (XRP) have also seen a drop of 8% and 7% respectively.

Header image courtesy of Freepik

SHARE THIS STORY

Share on facebook
Share on twitter
Share on linkedin
Share on email

RELATED POSTS

Top Three Weirdest Mobile Game Advertisements

Top Three Weirdest Mobile Game Advertisements

Whether on YouTube or Instagram, I’m sure you all must have seen at least one mobile game advertisement. One common trope with today’s mobile game advertisements is that they tend to mislead their audience.
You might have come across these weird ads while scrolling through social media: In the ad for the strategy game “Game of Sultans”, a sultan is fat-shaming his daughter; in the match-three puzzle game “Lily’s Garden” ad, women use washing machines as vibrators.

The Maximalist Fashion Trend Where Did It Come From and Where Is It Going

The Maximalist Fashion Trend: Where Did It Come From and Where Is It Going?

If you Google “maximalist fashion”, you will be swamped with dressing guides dedicated to this “the more, the better” trend published by leading fashion magazines in 2022. Rapidly gaining popularity in the last couple of years, maximalist styles are breaking out of the runway of an Haute Couture fashion show, a red carpet event or a K-pop performance to conquer streets in high fashion neighborhoods.

How Is Technology Influencing the Food and Beverage Industry

How Is Technology Influencing the Food and Beverages Industry?

Food waste, sustainability and animal cruelty are some of the biggest challenges facing the food and beverage (F&B) industry nowadays. Like any other sector, the industry is dipping its toe into technology and innovations to seek solutions. While we are already seeing more food tech solutions in our everyday lives, like plant-based meat alternatives and food waste management startups.

3 Innovations for a Cleaner Environment You Never Heard Of

3 Innovations for a Cleaner Environment You Never Heard Of

Innovation in clean energy, sustainable infrastructure and eco-friendly solutions to environmental hazards are the need of the hour. The burden on the world’s natural recourses is immense, and it is high time we focus on renewability and diversification. While we are only scratching the tip of the iceberg, here are three innovations working to create an environment-friendly future.