China’s most powerful regulators on Friday intensified a crackdown on cryptocurrencies with a blanket ban on all crypto transactions and mining. China banned on all crypto transactions and vowed to root out mining of digital assets, delivering the toughest blow yet to the industry.
The Importance of China
China has emerged as the epicentre of global cryptocurrency trading. More than 90% of global bitcoin trading is done in China, a South Korean newspaper estimated in January. However, its position in global crypto markets has been under threat as a growing number of Chinese and Japanese crypto exchanges have been shutting down amid intense scrutiny from authorities.
With the latest ban on bitcoin and cryptocurrency mining, China has stepped up the pressure on crypto trading and mining. More importantly, with this latest move, authorities have made it clear that the days of anonymity are over for Chinese investors. Advertisement Crypto Exodus From China Cryptocurrency exchanges in China have reported heavy investor withdrawals in the past few weeks.
The Chinese Crypto Ban
Chinese officials issued a notice saying the move was aimed at reducing financial risks. It also prohibited financial institutions from handling transactions related to bitcoin and other virtual currencies. The regulators also said they would shut down platforms that allow the trade of cryptocurrencies.
The government banned ICOs last month. The government also banned bitcoin exchanges from offering margin lending and unapproved initial coin offerings. The shutdown of trading platforms will affect bitcoin’s South Korean rivals Bithumb and Coinone.
Local news outlets have reported that these platforms may halt operations within days. Local media has reported that bitcoin and other major cryptocurrencies have begun trading at a fraction of their market values.
What Will Happen to Bitcoin?
China’s total ban on crypto trading will likely not affect bitcoin’s price for long, according to analysts. The yuan, which has tumbled against the dollar in recent weeks, is the primary driver of bitcoin’s value. How to Minimize Risks When Bitcoin Trading in China Crypto experts say bitcoin and similar digital tokens will have difficulty escaping China, the top global market for trading of the digital currencies.
Crypto Mining Is Hurting China Cryptocurrency mining is burning up electricity and damaging the environment in China at a rate not seen in other countries. The country’s crypto-mining craze is rippling through the global power grid, with some experts estimating it could reduce China’s electricity consumption for IT by up to 40 percent.
Given the relative size of the Chinese cryptocurrency market, the ban on crypto trading and mining could potentially cause serious problems for the industry. Moreover, given the centrality of cryptocurrencies in Chinese financial transactions, the ban will also further erode the trust and confidence of Chinese and international investors in digital assets.
Given the enormous economic importance of cryptocurrencies for the Chinese market, the policy change could well prove to be positive for the industry. However, the full impact of the ban will not become clear for some time, as investors will need time to shift their businesses elsewhere, especially those who have just started to operate. AsiaCoin is one of the largest cryptocurrencies in the world.