Cryptocurrency has had its fair share of ups and downs over the years. It has experienced lots of highs which people have benefited from as well as lows that it seemed to recover from in due time. Not getting full support from governments and central banks is one of the major factors hindering the growth or stability of cryptocurrency and the Chinese government has not been shy of showing their disapproval of crypto with lots of crackdowns over the years and the latest coming in recent weeks.

Why exactly does the country with the most cryptocurrency miners in the world have a negative look towards cryptocurrency? Let’s consider times when crackdowns have come from the Chinese government.

China Cryptocurrency Crackdowns

As mentioned earlier, this isn’t the first time China is coming down hard on cryptocurrency-related operations. The authoritarian state has long disapproved the innovation which is evident with several attacks on crypto over the years.

In 2013, China ordered third-party payment providers to stop using bitcoin. Banks were not exempted from this as they were banned from handling bitcoin, citing concerns that its inherently speculative nature threatens the country's financial stability.

In 2017, China banned initial coin offerings, thereby making it illegal and showing their relentless efforts to regulate cryptocurrency in the state.

Now, the most recent is a mining ban and order of major banks not to do business with crypto companies. In late June, the central bank also required payment firms and banks to shut down the accounts of individuals involved in crypto transactions. All these have made lots of miners seek refuge for their hardware overseas. It’s estimated that 90% of the country’s mining capacity will be shut down as a result of the recent bans. The news is significant because Chinese mines power 80% of global cryptocurrency trades. 

There are two major reasons the Chinese governemnt as cited as to why they are cracking down on cryptocurrency. They are: Financial stability and Energy security.

Financial Stability

Being financially stable is a major concern for any country, especially China, as it prides itself in being able to keep the economy standing firm. A lot of factors have contributed to the crackdowns on cryptocurrency at large but one thing that has been made very clear by the Chinese government is that bitcoin’s wild price moves are a threat to the nation’s economic and financial stability. The government said cryptocurrencies disrupt economic order and that it will "resolutely prevent the transmission of individual risks to the wider society”.

China has good control over fluctuations in markets for important goods and assets to protect their economy so not being able to control cryptocurrency to protect its citizens and economy wouldn’t sit well with them as things could go awry as they have done with bitcoin in the past.

Energy Security

Another major factor contributing to the crackdown is energy security as China’s carbon neutrality policy comes into place. China’s carbon neutrality policy has two goals - It aims to make the nation’s carbon emissions peak before 2030 and realize carbon neutrality by 2060, which means reaching net-zero carbon dioxide emissions at some point before that deadline.

What this means is that China needs to halve its carbon dioxide emissions from coal-based power plants by 2030. Over 57% of the country’s energy use is coal-based and so having bitcoin mining organizations drawing energy that comes indirectly from coal would be a big problem for them, hence the ban.   

Those are the two major factors leading to the recent crackdowns on cryptocurrency in China but is it all gloom and doom? Certainly not. Here are two positives to take from all this.

• Cryptocurrency isn’t banned in China

Contrary to the belief of some people, cryptocurrency isn’t banned in China. Citizens aren’t being forced to surrender their assets. China’s central bank is primarily concerned by the increased popularity of cryptocurrency because it directly challenges the nation’s economic and financial stability and seeks to insulate itself from the volatility.

• Improved mining decentralization

65% of bitcoin mining takes place in China - That’s a whole lot for a currency that claims to be decentralized. With this ban and migration of crypto mining companies from China to other countries, cryptocurrency wouldn’t be much affected by the laws of a single country as seen in the past.

There you have it! Educate someone else today just as you’ve been educated by sharing this article.

Why exactly does the country with the most cryptocurrency miners in the world have a negative look towards cryptocurrency?