China intensified its crackdown on cryptocurrency on Friday, declaring all financial transactions involving cryptocurrencies illegal. China intensified the crackdown on cryptocurrency mining, banning the practice outright in some provinces and restricting it heavily.
The cryptocurrency boom began in China. One of the largest cryptocurrency exchanges in the country, BTCC, had to close after losing 70% of its trading volume, the result of a crackdown by Chinese authorities, according to Bloomberg. China is now the world’s largest producer of cryptocurrencies, according to a recent article in the Wall Street Journal.
The Government’s Response While China has recently made efforts to regulate bitcoin exchanges and collect information on bitcoin miners, it continues to promote cryptocurrency and blockchain-based technology.
Why China Wants to Ban Cryptocurrency
While the value of a single bitcoin is currently around $17,000, China is concerned about the potential of the booming cryptocurrency market, which it sees as another tool for money laundering, drug smuggling and tax evasion. “Cryptocurrencies such as bitcoin have no real use outside speculative trading, and the speculative bubble is reminiscent of the housing bubble in the U.S. in 2008,” the People’s Bank of China said in a statement Friday. “There is huge potential in the cryptocurrency market, but to prevent illegal activities, we must further regulate and stamp out illegal behavior.” For years, China has been home to the world’s largest bitcoin market.
How the Regulations Impact You
The cryptocurrency mining ban has very little impact on everyday consumers. By definition, cryptocurrency miners are private citizens who use powerful computers to solve complex math puzzles that let them generate cryptocurrency.
But the cryptocurrency mining ban means companies that buy, sell, and store Bitcoin or Ethereum will be impacted. For example, in a joint statement, China’s three biggest internet giants — Alibaba, Baidu, and Tencent — said that any cryptocurrency exchanges in their companies would have to close. The regulations on ICOs do affect average citizens.
According to some reports, only 15 people in the country were able to sell virtual currency through online exchanges by Thursday. That’s down from around 1,000 in January, according to the South China Morning Post.
China’s cryptocurrency regulations are part of a larger crackdown on cryptocurrency and digital currencies around the world. In 2017, China was the world’s biggest market for Bitcoin mining and has banned Initial Coin Offerings. Chinese authorities have expressed concern about a possible financial bubble caused by increased use of cryptocurrencies.
In addition to the ban on the practice of mining, which is used to create new cryptocurrencies, the Chinese government has instructed all financial institutions in China not to buy or sell any cryptocurrencies. If Bitcoin plunges, people will panic, China’s regulators said. One thing I’m interested in to make the cryptocurrency market less risky, should the Bitcoin bubble burst, is for the Chinese central bank to buy up Bitcoin.