The People’s Bank of China made a clear announcement on its website that transacting crypto-assets is an illicit financial activity and even off-shore exchanges cannot extend their services in and around China.
China’s ban on cryptocurrencies gave a terrible blow to the crypto market, resulting in the drop in the price of leading assets like Bitcoin, and Tether. China also vowed to ban the mining of digital assets which is again the toughest blow to the industry. The People’s Bank of China made a clear announcement on its website that transacting crypto-assets is an illicit financial activity and even off-shore exchanges cannot extend their services in and around China. The bank added that Bitcoin and Tether are not conventional currencies and they cannot be brought into circulation. This unexpected announcement shook the crypto market and the price of bitcoin went insanely low falling up to 8% immediately. China being the home for a huge number of crypto users and holders, the market experienced downtime for almost a week.
Impact of China’s crypto ban
China has always been a trendsetter whose regulations are unique and aggressive compared to the other major countries. A decision made in a developed country like China is more likely to create a significant impact on the developing countries as well. In countries like India, the use and store of crypto assets is made legal very recently. China’s ban on cryptocurrency will definitely create an adverse effect on the crypto players based in India, giving a sudden blow in the early stages of their crypto journey.
Just have a look at the blow!
The main reason for China getting rid of cryptocurrency activities is its ties with money laundering and excessive energy consumption. Before the ban, China has barred banks from offering crypto-related services, as an indication of the end of an era. People in China who are still serious about their crypto business have moved to offshore exchanges based on U.S and U.K and the over-the-counter platforms.
Though China’s termination of use of crypto assets within the country has a short-term impact on the crypto industry’s valuation, there might not be any long-term implications as crypto is stepping towards its mass adoption in other regions of the world.
Is it to meet carbon goals?
“Hey, carbon goals! Here I’m coming to meet you.”, says China. The major reason for the crypto industry coming under scrutiny is the massive energy consumption associated with mining. Mining involves solving complex mathematical equations to validate the transactions occurring on blockchains, which requires a huge computational power and hardware equipment that eats up a lot of electricity. China’s economic planning agency is strong in its stance that rooting out all crypto-related activities is essential to meet carbon goals. This might help China overcome the power crisis that already roiled commodities like steel and aluminum.
According to the Cambridge Bitcoin Electricity Consumption Index, 46% of the total global hash rate is contributed by Chinese miners, this April. For a country with a large concentration of the world’s crypto miners, a sudden ban on crypto will be the right choice to override their contribution.
An alternate move to crypto ban
The People’s Bank of China (PBOC) is working on an alternative to taking China’s economic status to a whole new level with its own digital currency. Chian will be the pioneer and the leading contender in central-bank-issued digital currencies, while it has already tried circulating digital versions of yuan in hotspot cities of China.