China Bans All Cryptocurrency Transactions

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Source: Reuters

By Seth Gellman

On Friday, September 24, China’s central bank, one of its most powerful institutions, continued its crackdown on crypto-currency as it released a ban on all transactions and mining. China is one of the biggest markets for cryptocurrencies, and the price of Bitcoin fell by more than $2000 after the announcement.

However, this isn’t a major departure from recent Chinese policies regarding crypto-currency. In 2019, China banned crypto-currency, but it continued through foreign transactions. In May of this year, China warned buyers that they wouldn’t be supported. A month later, it told banks to stop facilitating the use of crypto-currency and banned mining. These moves appear to be a crackdown on any potential loopholes involving the currencies or blockchain-supported technology.

According to Winston Ma, a law school adjunct professor at NYU, “In the history of crypto market regulation in China, this is the most direct, most comprehensive regulatory framework involving the largest number of ministries.”

Mining is very popular in China, particularly because of low electricity costs and cheaper computer software. In September 2019, China made up 75% of Bitcoin’s energy use. Less than two years later, that number dropped to 46%. China is concerned that mining could harm the environment. It is also speculated that China’s crackdown on crypto-currency could be linked to its sovereign digital-yuan, which may be threatened by Bitcoin and other crypto-currencies.

Despite the immediate shock of the policy, analysts believe that they believe crypto-asset prices will not be severely affected in the long term. They argue that as more companies adopt crypto-currency, it will gain more traction and prices may increase.

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