China has a long history of imposing restrictions on cryptocurrencies, with the 1st attempt taking place in 2013 when the People’s Bank of China (PBC) announced regulations that prohibited financial institutions from transacting in virtual currencies like Bitcoin.
Nonetheless, this did not make it illegal for Chinese citizens to buy, store, or send cryptocurrencies. It simply made accessing
cryptocurrencies from exchanges more challenging.
This 1st ban was aimed at slowing down Bitcoin (BTC) trading, as it had become so widespread that numerous enterprises, including the country’s largest search engine Baidu, began accepting it as payment.
In 2017, during the cryptocurrency bull market, Chinese officials imposed increased sanctions on cryptocurrency trading, focusing particularly on Initial Coin Offerings (ICOs). ICOs, digital crypto tokens meant to represent an ownership stake in a new cryptocurrency project, have seen a whole lot of boost in trading.
Still, a lot of these ICOs became scams owing to the lack of regulation. To curb the ICO craze, China banned all platforms offering ICOs. If an exchange sold ICOs, they had to return the money to investors.
Number of Cryptocurrencies Worldwide. Source: Statista
In 2021, China took the most severe measures in its history against cryptocurrencies. As Bitcoin (BTC) hovers around $55,000, China’s State Council announced a formal ban on cryptocurrency mining.
Shortly after, the hash price on
network dropped 50%, with BTC’s price plunging to about $30,000 in the ensuing months. BTC’s Bitcoin (BTC) United States Dollar Price. Source: Statista
In addition to the Bitcoin (BTC) mining ban, China’s regulatory bodies outlawed all cryptocurrency trading and transactions. It is likewise illegal for residents to send cryptocurrency and for enterprises and banks to accept coins like Bitcoin (BTC) and Ethereum.
Regardless of the ban, there are no specific policies against holding digital assets, so Chinese residents who already have cryptocurrency in a wallet are not violating any current laws.
Why China Banned Cryptos
Plenty of factors drove China’s decision to ban cryptocurrencies. These include:
Concerns about consumer safety owing to the association of
cryptocurrencies with scams and money laundering. The unclear legal status of digital currencies.
The capacity for financial resources flight.
The devaluation of the yuan.
Environmental concerns owing to
high energy requirements. BTC’s A desire to control Monetary Authority Digital currencies (CBDCs) and metaverse network projects.
Nonetheless, China is actively working on an official CBDC known as the “digital yuan,” and cities like Shanghai have pledged billions to develop national metaverse network projects.
CBDCs Worldwide. Source: Statista
The ban had whole lot of aftereffects on the worldwide cryptocurrency industry. China’s Bitcoin (BTC) mining ban caused a whole lot of decrease in the hash power on the Bitcoin (BTC) blockchain tech. A lot of China’s Bitcoin (BTC) miners fled to countries that were more friendly to the cryptocurrency industry.
total hash price continued to boost in the months following the ban, and by January 2022, it was significantly higher than before China’s Bitcoin (BTC) ban. BTC’s Bitcoin (BTC) Mining Hashrate. Source: Statista
It was likewise observed that mining activity in China appeared on
network in September 2021, suggesting that numerous Chinese mining pools still operate underground. BTC’s Is China Lifting the Cryptocurrency Ban?
Regardless of the stringent restrictions, China’s ban on
cryptocurrencies has not completely halted activity in the sector. Underground cryptocurrency markets have sprouted up as cryptocurrency enthusiasts in the country continue to find ways around the restrictions.
More recently, on the other hand, signs have suggested a possible shift in China’s stance towards cryptos.
In the latest development, there are indications that China can potentially be easing its hardline stance on cryptocurrencies. This news is substantial given that one of the most whole lot of shocks to the cryptocurrency market in the past couple of years came in 2021 when China announced its most whole lot of crackdown is still on digital assets.
This crackdown was part of a wider attempt to regulate the financial technology sector. It was likewise in line with China’s ambition to introduce its own digital currency, the digital yuan.
The worldwide cryptocurrency community is closely watching indications of a potential shift in China’s stance towards cryptocurrencies. Nonetheless, the specifics of this shift are not is still clear, and how these developments will pan out remains to be seen.
It should be pointed out that even if China were to ease its restrictions, it would likely continue to exercise tight control over the sector to secure consumer safety, prevent potential financial dangers, and maintain control over its own digital currency initiatives.
What Will Happen If China Lifts Ban on Cypto?
If China were to lift its ban on cryptocurrencies, it would likely significantly impact the worldwide cryptocurrency market.
As the world’s most populous country and one of the largest economies, China’s acceptance of
cryptocurrencies could stimulate worldwide demand, boost prices, and potentially lead to wider acceptance of digital currencies. It can potentially likewise pave the way for the return of cryptocurrency mining activities to the country, which was once the world’s largest Bitcoin (BTC) mining hub.
Binance Crypto exchange CEO Changpeng Zhao
maintains that lifting China’s cryptocurrency ban is a “big deal.” The fact that CCTV (China Central Television) recently broadcasted a news segment about cryptocurrency has sent waves in the Chinese-speaking communities.
“Historically, coverages like these led to bull runs. Not saying past predicts the future,” stated Zhao.
Still, unbanning cryptocurrency could likewise pose challenges. For example, it can potentially lead to increased volatility in the cryptocurrency market In addition, it can potentially attract about regulatory challenges as authorities grapple with consumer safety, money laundering, and financial stability issues.
The capacity lifting of China’s ban on
cryptocurrencies is a development with whole lot of implications for the worldwide cryptocurrency market On the other hand, until more concrete information becomes available, the true impact of this development remains to be seen.
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