What China’s Crackdown on Crypto Can Mean for the Market

What China’s Crackdown on Crypto Can Mean for the Market

How would China’s crackdown impact the international crypto market?

The death knell of crypto in China

The People’s Bank of China said in September this year that “all virtual currency-related business activities are illegal financial activities”, including services by overseas cryptocurrency exchanges to Chinese residents through the Internet.

The Bank also warned that the trading of cryptocurrency “seriously endangers the safety of people’s assets”. It asked provincial governments to step up local monitoring and early warning systems to improve the accuracy and efficiency of discovering hyped activities in cryptocurrencies.

Cryptocurrencies immediately tumbled after China laid down its regulations. Bitcoin fell 5% to US$42,496.12 and the price of Ether, the second-largest digital currency, dropped 7% to US$2,921.53. 

In November, China’s National Development and Reform Commission continued to criticize crypto trading, targeting Bitcoin mining this time. The Commission said that the activity “produces a lot of carbon emissions” and “prominent risks.”

The price of Bitcoin fell immediately after the remarks, plunging more than 7% to US$60,889.

Crypto’s journey to extinction in China

Beijing’s latest announcements on crypto regulation did not come out of the blue. It is merely the latest in a series of tech crackdowns led by Beijing targeting cryptocurrencies. 

In May this year, Chinese financial self-regulatory bodies—the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China—warned investors against speculative crypto-trading. They also  banned financial institutions and payment companies from providing crypto-transactions-related services, following government officials’ vows to increase pressure on the industry.

A month later, the government told banks and payment platforms to stop supporting digital currency transactions. According to the People’s Bank of China, they were told to stop providing products or services, such as trading, clearing and settlement for cryptocurrency transactions. The government also issued bans on currency mining, the trade of using computer processors to make new coins.

Reasons for crypto enforcement

Beijing’s primary objective is to curb illegal and criminal activities, such as gambling, illegal fund-raising, pyramid schemes and money laundering. They reckon these acts would endanger the safety of people’s money and property. However, a more significant concern is that privately-operated, highly volatile cryptocurrencies, such as Bitcoin, could disrupt the state’s financial and monetary systems, thus threatening the regime of top-down centralized currency control. Besides, it could also be a move to push China’s digital currency, the electronic Chinese yuan, which is about to be launched at the 2022 Winter Olympics.

Evidently, China’s objective in recent crypto crackdowns is to retain control of the country’s monetary systems, and it’s not alone. China’s position has inadvertently put pressure on other countries to tighten cryptocurrency regulation. There has been increasing worry in the U.S. that regulatory systems would echo China’s strict control. Meltem Demirors, the Chief Strategy Officer at CoinShares, said, “D.C. has been increasingly aggressive with crypto enforcement, and clearly sees crypto as a threat to the government’s ability to manage markets.”

Gary Gensler, Chairman of the Securities and Exchange Commission, said that they have been “working overtime” to create a set of rules to oversee volatile cryptocurrency markets and regulate thousands of new digital assets and coins. 

The way forward

Taking reasonable steps in regulating cryptocurrency is necessary to make investments safer and minimize the possible abuse of crypto, such as for money-laundering and illicit activities. However, it is also important for regulations to be reasonable, or else the spirit of cryptocurrency—freedom of exchange—will be suffocated.

Header Image Courtesy of Unsplash

SHARE THIS STORY

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

RELATED POSTS

Eightfold AI Joins Department of Commerce Initiative for AI Safety

Eightfold AI, an AI-driven talent solution company, has announced its involvement in a Department of Commerce initiative aimed at fostering the development and deployment of trustworthy and secure artificial intelligence (AI). This initiative, under the auspices of the National Institute of Standards and Technology (NIST), introduces the U.S. AI Safety Institute Consortium (AISIC). The consortium aims to unite a diverse group of stakeholders, encompassing AI developers, users, academia, government and industry experts and civil society bodies to advance the mission of safe and reliable AI.

What Are Shadow Boards in the Workplace? Pros and Cons

In today’s rapidly evolving business landscape, companies are constantly seeking innovative ways to maintain a competitive edge. An intriguing development in this arena is the emergence of “shadow boards”—dynamic groups within organizations designed to complement the official board of directors by offering fresh perspectives on critical business strategies. This article explores the role of shadow boards in the modern workplace and highlights their benefits, challenges and how they are shaping future business practices.

Anthropologie and Pinterest Unveiled 2024 Bridal Trends at NYC Pop-Up Event

Anthropologie Weddings, a bridal collection from the global lifestyle brand Anthropologie, in collaboration with AnthroLiving and Terrain, debuted the Anthropologie Weddings x Pinterest Trend Pop-Up. This event, developed in partnership with Pinterest, was designed to bring emerging bridal trends, as identified by Pinterest Predicts, into tangible experiences. Offering inspiration and early access to trends, the pop-up showcased bridal designs, décor and lifestyle options that could be personalized for unique wedding visions.

Hello Group Introduces inSpaze: An Immersive Social App for Apple Vision Pro

Hello Group Inc., a prominent mobile social entertainment provider in China, introduces its immersive social application, inSpaze, an immersive social application exclusively for Apple Vision Pro users in the United States. This application, crafted for visionOS, leverages advanced technologies like 3Ds, Reality Converter and Reality Composer Pro, offering a unique spatial computing experience that connects users worldwide through Spatial Audio and 3D interactive content.

Are There More Layoffs Coming in 2024?

Even as we kick off the new year, the horrors of the year past are not behind us. In 2023, major tech companies undertook big layoffs—in January last year, Google reduced its headcount by 6% (it also recently hinted at a fresh round of layoffs this year); in December 2023, Spotify laid off 17% of its staff and more companies gave out pink slips. This trend has been ongoing for a couple of years since the pandemic shook global markets.