Yet again China has taken a leap ahead of the U.S and this time in digital currencies. The snazzy digital currency of the Central Bank of China can be a threat to the domination of the dollar and if the Federal Reserve cannot match it, then the U.S will drastically fall behind the new era of superpower. Such is Chinese crypto policy. You may be wondering about the Chinese cryptocurrency name, it is Yuan.
How Is China Going Into Isolationism With Crypto?
There are some who argue. In fact, technically the opposite of this is true. Chinese crypto policy is not making it a leader, in fact, it is making it an outlier. This competitive attitude of China towards digital currency is cutting off the economy from crucial big trends that are occurring in the international financial market. Without an alteration in approach, China could better be the one who is left behind.
The same can be asserted with many dimensions in the present economic policy. Distrust on crypto by Beijing is a portrayal of the government’s increasing and bigger wariness of private equity, more widely as the investors learned everything too painfully in the latest crackdown on big tech and various other sectors that kept Chinese stocks around the globe.
The crushing of cryptos by China is another side of that same story. China bans cryptocurrency 2021. Authorities banned finance firms and banks from offering Bitcoin and other digital currency services and closed most of the mining functions. While some governments have taken actions to stop crypto transactions, no big economy has gone as far as China. The Central Bank of India also tried to stop the use of private digital currencies in India, but that attempt was shot down by the top court of the country.
Perhaps China is being simply prudent with uncertain and new financial instruments, and so they prefer to consume energy manufacturing automobiles, not Bitcoins.
By taking such strict action, China is isolating the economy from an evolving financial sector and the future entrepreneurship, innovation, and wealth it can formulate. It implies that there won’t be local competitors to firms like Coinbase Global Inc., which is presently worth over $50 billion, nor will Chinese investors and consumers have the ability to participate in the profits and some of the services that have been developed by the crypto craze.
Instead of that, they will be left with the Chinese cryptocurrency coins, the Yuan, which is practically the opposite of a digital currency. Rather than being decentralized which is the most important idea behind cryptocurrency, Yuan is firmly controlled by the People’s Bank of China and it can be availed by the state to exert more control on their economy by tracking all the transactions easily.
Perhaps new firms and ideas may emerge around Yuan once it gets more acceptance from the Chinese masses. The digital version of Yuan may encounter the same issues as the traditional one in order to gain an international audience. According to a report, the so called CNY,
“Will do nothing to relax the constraints that have prevented the renminbi from being widely adopted in international trade or as a reserve currency.”
Chinese Crypto Policy: Latest Updates
Soon after the latest, Chinese crypto policy was laid out by the Chinese government, several miners of digital currency including BTC.TOP and HashCow paused all operations related to cryptocurrency in the month of May. This had massive consequences for the crypto industry since the Chinese miners constitute as much as 70% of the total crypto market.
In the first week of June, China’s version of Twitter, Weibo blocked several renowned accounts that were associated with crypto, asserting that each of these accounts “violates laws and rules.”
This crackdown of crypto and the latest Chinese crypto policy has forced many miners to sell or shut down their machines in anguish and exit from this business. According to a Reuters report, some miners are relocating to Kazakhstan.
Why Did China Ban Cryptocurrency?
The reason for this China crypto ban is very simple. Chinese had no direct control over Bitcoin or any other private digital currency as all of them are decentralized and gives the currency bearer anonymity. This has created a widespread tension amongst the communist party as it implies, Bitcoin trade can easily hide the laundering of money and provide aid to criminal activity against the state.
So they have formulated their own cryptocurrency called the digital Yuan. It was not formed to just counter Bitcoin, it also brings many advantages to the Chinese government in place of offering it fiat currency as it is difficult to track hard cash and can be counterfeited. The digital nature of this currency allows the authority to follow the trails of money, and prevent the counterfeiting efforts of the criminals.
It is too early to predict how the value of Bitcoin will be affected in the long run with this new Chinese crypto policy. It completely depends on the adoption and success of the digital Yuan. If this currency gains success then many other nations may initiate their digital coins. But till then while the whole world deals with Bitcoin and Ethereum, China will have to deal with only the digital Yuan.
Frequently Asked Questions On Chinese Crypto Policy
1. Is China going to ban Cryptocurrency?
China has already banned the use of private digital currency since May 2021. It has formulated its own digital Yuan and the citizens are expected to use that.
2. What is China doing with Cryptocurrency?
This year, China has launched a new campaign against digital currencies taking action against miners and commanding curbs on trading and crypto banking services. The actions have fueled Bitcoin’s decrease to about half its mid-April record near $65,000.
3. Is it legal to own Bitcoin in China?
The terms “bitcoin” and “ban” have been thrown around a lot with regards to the China crackdown, but it’s crucial to note that there has been no outright ban on holding any digital currency including Bitcoin.