Crypto is a blessing or curse for China?

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Crypto is a blessing or curse for China?

There is a running joke that china has banned crypto 18 times. Chinese regulators have never exactly been crypto advocates. Since 2009, China and Hong Kong have banned or otherwise caused fear, uncertainty, and doubt in the crypto space. China's solution was to create its own cryptocurrency. Now, What is the real reason behind China's ban on crypto? 

   

    Crypto is a borderless and unregulated nature that runs against the Chinese government's vision for a state-dominated economy. However, China isn't the only country to ban cryptocurrencies.50 other countries have placed bans on crypto, (Countries Where Crypto is Legal (and Illegal) | Money.com)according to an article by Julio Vargas Pérez. Currently, 9 Countries have an absolute ban that makes crypto illegal. This means that people in these countries cannot buy or sell or possess crypto. The other fortitude has an implicit ban that prohibits financial institutions. This means banks are not allowed to transact payments related to crypto, including NFTS. China joins Algeria, Bangladesh, Egypt, Iraq, Morocco, Nepal, Qatar, in Tunisia as countries that have outlawed crypto. China banned virtual currencies for the first time in 2009, specifically for trading real-world goods. This meant You could not use crypto to buy anything tangible. This was just the beginning of a decade of anti-crypto regulation. Four years later, in 2013, the People's Bank of China prevented Chinese financial institutions from handling Bitcoin. Beijing sees cryptocurrencies as the epitome of mindless guesswork. It sees it as Macau-style gambling and nothing more. On September 24th, 2021, China's Central Bank declared all crypto-related transactions illegal, citing concerns about gambling fraud and money laundering. This seems like the last nail in the coffin.     

    Most of the world's crypto mining has taken place in China, with the US in a distant second place. However, this has not changed the government's skepticism about crypto. China

began by taking aim at crypto mining operations within its borders back in 2019, a China state planner expressed interest in banning Bitcoin mining. This became effective when the government banned mining in the province of situations, which is the epicenter of Bitcoin. Just to get a glimpse of how significant Sichuan is in the world of crypto, you just need to compare the crypto industry in China and the US. In April 2021 47%  of all crypto mining happened in China. In contrast, the US accounted for 16% of the world's crypto mining during that same month. The majority of China's 47% is mined in Sichuan. China Central Bank cited concerns about gambling, fraud and money laundering as the reason behind cracking down on cryptocurrencies. 

    But there is also another reason in disguise and that is China is undergoing an energy crisis. China has the world's most energy-intensive economy. This has led to the worst electricity crisis it has faced in a decade. The main reason is that China is still highly dependent on coal, which provides 70% of the country's power generation. The problem is that the electricity prices paid to generators are regulated by the central government, while the prices of the coal used to generate electricity are not regulated by the government, but instead, they are set on the market. This means the price of coal fluctuates a lot more than the price of electricity. And if coal prices rise, it doesn't make economic sense for coal power plants to keep supplying electricity unless regulators increase electricity prices.The current energy crisis has spiraled because plants have been avoiding generating at a loss by claiming they have a technical malfunction or by failing to purchase the coal they needed to run. Some provinces have experienced outright blackouts. On top of that, greenhouse gas emissions by China are the largest. Both in production and consumption terms, and stem mainly from coal burning in China, including coal-fired power stations and coal mining in general. It is also the leading emitter of greenhouse gases, nearly 30% of global emissions.

    China's plan to end U.S. dollar dominance. China is in an ongoing trade war with the US, and one thing that Beijing hates about the world is the dominance of the US dollar. China has been working for over a decade to undermine its role in global trade and investment. It's no secret that it wants its currency, the yuan, to replace the US dollar as the world's global currency, which would give it more control over its economy. So what's a better way to move ahead of time than creating its own digital currency? And here comes the digital Chinese “Yuan” a state-backed digital currency designed to offer the surface-level convenience of cryptocurrency with none of the privacy and decentralization benefits of it. China does not want any other cryptocurrency competing with the digital Yuan. China is planning to expand the viability of its crypto by making the digital Chinese Yuan available to foreign users during the 2022 Beijing Winter Olympics. We can see China's cryptocurrency sector is over for now. 

    Some miners have chosen to move to other countries, while others choosing to offload their mining rigs on the market at bargain basement rates. The prices for machines used in mining are getting much lower by the day. However, Across the world smaller operators may be able to mine more easily without the competition of giant Chinese operations, which are exiting the market.