History of Hostilities Between China and Cryptocurrency

Those familiar with cryptocurrency will know how much hostile China has shown towards cryptocurrency. This country has maintained a hostile relationship with its crypto industry since 2013, when it rolled out its first set of crypto restrictions and till 2021, with a ban of trading and mining crypto, China has been notorious as the country that has issued the most cryptocurrency bans in the world. 

Banks are banned on cryptocurrency transactions in 2013

The hostilities of China toward cryptocurrency began in 2013 when People’s Banks of China (PBoC) with all the Chinese ministries issued a notice prohibiting banks from handling transactions that related to Bitcoin. At that time, bitcoin was deemed a “special virtual commodity” and so, it lacked the legal backing to function as a currency. More specifically, the ban was imposed because the digital asset was not backed by any nation or central authority. Also, the PBoC noted that Bitcoin was a potential outlet for laundering cash.

China banned crypto initial coin offerings (ICO) in 2017 

In an attempt to save the weakening Yuan, also blocking money from flowing out of China, this country began to investigate the activities of crypto exchanges in 2017. After that, China informed the decision to ban initial coin offerings (ICO); at this point, ICO was known as the best solution to raise funds for the developer to continue the projects by selling and issuing tokens.

However, the PBoC deemed ICOs an illegal fundraising mechanism and banned ICO platforms from issuing tokens and ordered monies raised via ICO to be returned to investors. The regulator noted that ICOs threaten the stability of the country’s economy and pose a lot of risks and at that time, there are almost no regulations that can protect the investors or any individual joining the ICO process. To get around this restriction, Chinese crypto traders started to use offshore exchanges or peer-to-peer platforms for all of their trading activities.

The attention to Bitcoin mining raising in 2019

In 2019,  China’s National Development and Reform Commission (NDRC) labeled Bitcoin mining as an “undesirable” industry in its preliminary list of sectors that should be encouraged, restricted or phased out by local governments, and fell under the catalog of industries this agency considered to be highly polluting. As expected, this development sparked some level of panic, considering that a significant percentage of bitcoin mining rigs are manufactured in China. Also, more than half of the world’s bitcoin mining power was domiciled in China because operators had access to cheap electricity. 

The officially ban of crypto trading and mining in 2021

In May 2021, the State Council doubled down on past crypto policies by calling for the restriction of crypto mining and trading. Following the statement of the State Council, provincial governments began to take proactive measures to eradicate crypto mining. Regulators cited bitcoin’s energy-intensive nature and how it poses a threat to the country’s environmental goals as its core reasons for justifying the new crackdown. As a result, bitcoin miners were either forced to shut down permanently or move to other crypto-friendly countries because around 50% of the world’s bitcoin mining power was generated in China before the crackdown. 

And as if the mining ban was not enough, China continued to opt to ban crypto trading altogether in September. The details can be listed as: all crypto transactions (both crypto-to-fiat and crypto-to-crypto), trading and investments as illegal, Chinese citizens who worked in marketing or tech support roles for foreign exchanges would face legal prosecution, the RNDC would  increasing electricity costs and blocking new companies from entering the crypto mining industry.

It is not difficult to understand why China is so hostile to cryptocurrency, possibly due to the risks that cryptocurrency could bring, and also maybe due to the negative impacts on the environment from cryptocurrency mining activities. But at that time, with the lacks of regulation frameworks, we could easily conclude that as the most reasonable reason for China hostilities for cryptocurrency

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