China is at loggerheads with cryptocurrencies.
It is a well-known fact that, although China possesses a great affinity for advancements in technology, it does not bear the same fondness towards cryptocurrencies. Indeed, arguably, China is one of the most tech-savvy nations in the world. But, on the table of cryptocurrencies, it has consistently refused a piece of the pie. Here we shall take a look at China’s recent ban against Crypto-mining and what caused it.
The trading and creation of cryptocurrencies have been illegal in China since 2019. However, its recent wide-sweeping crackdown on crypto-mining is having major consequences on the market, with prices of cryptocurrencies plummeting within mere days of the ban.
Before the ban fell into place, China accounted for approximately 65% of all Bitcoin mining globally, due to its easy access to cheap power and hardware. Regions like Inner Mongolia alone could generate around 8% of all Bitcoin mined globally. By comparison, the entirety of the United States of America accounts for about 7.2%. This remarkable feat is only achievable via high-powered computers that perform the complex computation required to generate cryptocurrency coins.
China’s carbon footprint
These power-guzzling computers can consume as much energy in terawatts as nations like Ukraine and Argentina, making them a significant environmental hazard. This has had a significant impact on China’s carbon footprint. President Xi Jinping, in a remote address to the United Nations on 22nd September 2020, announced that China aims to be carbon neutral by 2060. The statement has widely been cited as the reasoning behind the crypto-mining ban.
Concerns with decentralization
Bitcoin and other cryptocurrencies are decentralized by their very nature, relying on a blockchain system that verifies each transaction through each computer. This means they cannot be traced by a country’s central bank or be manipulated externally. This makes cryptocurrency difficult to regulate. Cryptocurrency would allow Chinese citizens to use money while being absolutely free of any supervision from the government. China’s reasoning behind outlawing Cryptocurrencies has thus been to prevent and control financial risks.