Every time Beijing They announce a crackdown on their industry, and the joke going on among crypterati is that China Already banned cryptocurrency 18 times. Chinese government agencies have issued a series of increasingly restrictive but not definitive legal prohibitions on various aspects of cryptocurrency since 2013; All along, the crypto industry has been booming in China. Turns out the nineteenth time might be magic.
On September 24, China’s central bank and its National Development and Reform Commission issued two documents. One Cryptocurrency mining banned After the previous crackdown in May, the other I declare all cryptocurrency transactions illegal And all companies that provide cryptocurrency trading services to Chinese citizens as engaging in illicit financial activity. Some of the usual unsettling thoughts have been posted on crypto Twitter, but the general reaction to the ban is that this time China is getting serious.
“The ban is sweeping, absolute and comprehensive. It doesn’t focus on some micro-aspects,” says Jonathan Padilla, co-founder and deputy director of the Stanford University’s Future of Digital Currency Initiative, who has conducted field research at the Chinese central bank. “And senior government officials seem to be taking this in. Among the documents the authorities signed on are at least one of the two documents, the Ministry of Public Security, the Supreme People’s Court, and the Supreme People’s Procuratorate – indicating the possibility of strict enforcement.
Many exchanges, wallets and other cryptocurrency companies They announced that they would stop providing services For mainland users China A sweeping block of all Chinese IP addresses has been imposed on their services. Looking at the wording of the official document, which explicitly defines foreign exchanges that cater to the Chinese population, the industry appears to have taken a very cautious approach. “The extent to which citizens are threatened by the new level of application remains,” says Louisa Kinzios, director of Sinolytics, a China-focused consultancy. “[But] The announcement also targets any Chinese nationals who work for crypto-related companies abroad, declaring their work illegal and putting them at risk of legal investigation.”
China’s escalation in repression Bitcoin And Other Cryptocurrencies It was always going to happen. The borderless and unregulated nature of cryptocurrency runs counter to the Chinese government’s vision of a state-dominated economy. In addition, Beijing regards cryptocurrencies as an example of mindless guesswork. “The Chinese government has just reaffirmed in its new 14th Five-Year Plan – the blueprint for China’s economic planning for the next five years – that the financial system should primarily serve the real economy, not speculation,” says Kinzios. “China is very reluctant to purely financial speculation due to financial stability concerns – and of course, cryptocurrencies are largely driven by speculation.”
These public concerns have now been exacerbated by recent developments. In September 2020, China announced its plan to end its annual growth in 22ko2 emissions by 2030 and will become carbon neutral by 2060. This necessarily entails cracking down on cryptocurrency mining An energy-intensive and often carbon belching process It is used to maintain the cryptocurrency network, which Chinese authorities consider hardly beneficial to the country’s economy. On the other hand, China is currently experimenting with the Chinese Digital Yuan, a state-backed digital currency designed to provide surface-level convenience to cryptocurrencies with none of their privacy and decentralization benefits—or, arguably, their lack of government oversight. From Beijing’s point of view, it makes no sense to allow the Chinese digital yuan to coexist with any other virtual asset. Keynesius says China was interested in “avoiding competition.” [from] Cryptocurrencies”, especially as it prepares to make the Chinese digital yuan available to foreign users during the 2022 Beijing Winter Olympics.
“To ensure successful adoption of digital currency, China is not interested in other attractive alternative payment options,” she says.