Has China’s Cryptocurrency Industry Disappeared? Beijing crackdown continues

Since the beginning of the summer, a spate of measures by the Chinese authorities aimed at restricting the trading and mining of cryptocurrencies has dominated the crypto messaging cycle.

From asking financial services providers to restrict crypto-related transactions to asking them to shut down crypto trading software providers, there are initiatives from Beijing and the aftermarket, the results of which are believed to have contributed significantly to the recent market downturn.

What is driving this new round of hostile action, and how will it affect the country’s crypto space, which once comprised two-thirds of the world’s digital asset supply? Furthermore, it seems that everything that happens in China has a big impact on other parts of the world, which doesn’t seem negative.

Support the digital yuan

It’s not hard to see the mounting reluctance to decentralized cryptocurrency trading and mining that has come with the rise of China’s Central Bank Digital Currency (CBDC) project. As part of a test of the electronic payment system for digital currencies, stacks of government-issued cryptocurrencies were added to the wallet application of approximately 200,000 Chinese citizens who were selected through a lottery. It looks like larger tests and a broad rollout can be expected within a few months.

When it comes to the distribution of political or economic power, China’s leadership is not in the habit of promoting pluralism and competition. Up to a point, the country’s vast crypto sector may have escaped scrutiny as it does not directly conflict with the government’s strategic plans, but it no longer appears to be the case.

Yu Xiong, professor of economic analysis and director of the Center for Innovation and Commercialization at the University of Surrey, told Cointelegraph that China will not allow any currency to affect the renminbi and because it will not allow Bitcoin (BTC) to grow as a result. could allow too big. Xiong added:

“China, like most other governments, wants the value of Bitcoin to grow at a manageable rate. If Bitcoin is allowed to be used as currency, China, [as many other countries], a financial catastrophe looms. China now has its own CBDC, which can be controlled by the central bank, so that the government does not have to provide incentives for a decentralized cryptocurrency. “

With large Chinese banks like the Agricultural Bank of China being hit hard in crypto-related business and consumption, the concerted effort looks more like a stalemate. After receiving the government’s anti-bitcoin push, crypto companies and everyday users have to grapple with the dire consequences of tough policies.

Bear the burden

The full-fledged crusade of the authorities against China’s crypto sector includes all major interest groups: When financial service providers wake up to their bank accounts, they are banned, miners in several important provinces receive eviction notices. The departure of the company that operates the country’s oldest Bitcoin exchange clearly shows the depth of the crisis.

Yifan He, CEO of Hong Kong-based blockchain company Red Date Technology, told Cointelegraph that “the entire crypto industry in China has officially disappeared”. He argues that while there has always been trade in the region and mining has been largely backed by some local governments, the current government ban will deal a severe blow to both countries:

“Once banks and payment service companies completely ban cryptocurrency transactions, it will be very difficult for ordinary people to use RMB to purchase cryptocurrencies. Crypto trading activity in China has declined significantly as all mining has gone. Ordinary users can no longer bring new funds into trading and almost all major exchanges have banned leverage and margin services for Chinese citizens. “

In his opinion, a small part of the cryptocurrency trade could still exist, but it would have to move underground. This will essentially end China’s dominance in BTC mining as miners will have to shut down or relocate entirely and be regulated in other jurisdictions.

Global consequences

What’s being watched right now doesn’t seem to be as short as tearing down the entire cryptocurrency industry in the country that until recently was a major mining and trading powerhouse.

Most Chinese day traders will likely see the new regulations banned and stop trading. Mining companies are faced with a choice between disappearing or opening business in another jurisdiction. Those who appreciate the ease of trading digital assets will soon have a centralized alternative in a government-sponsored CBDC.

The disruption to the crypto sector on such a large scale is sure to find resonance on a global scale. With much of China’s mining capacity depleted, the hash-power map of the world needs a major realignment, with new centers of mining power emerging elsewhere to fill the void. As a result, in the long run, not only businesses but ordinary users will be affected as some parts of the world will see the flow of crypto-related businesses but regulators will start to respond.

It is also possible that the loss of Chinese trading activity will become a factor affecting the global crypto market for an extended period of time. Building and maintaining a new bull run similar to early 2021 – a process that will require a constant stream of new entrants – could become more difficult as China no longer exists. The rest of the world will have to work very hard to make up for China’s departure.