China banned cryptocurrencies. How does this affect YOU?
Postscript disclaimer: This is not an attempt to show any nation, industry or community in a bad light. This article is an honest attempt at reporting factual observations and matching them to the situation at hand. Any offence is unintended, and we apologise in advance for misrepresentation of any party involved.
On the 24th of September 2021, China effectively banned cryptocurrencies in the country. For the longest time, China has been pretty sceptical of digital currencies as a whole, but this is the straw that just might break the camel’s back.
Let us first take a look at the timeline of how this ban came into existence:
Due to the abundance of natural resources in China, generating power has been relatively easy and cheap. The presence of rivers and dams to accompany them laid the foundation for the industrial surge in modern China.
The factories and industries of China consume a lot of this power and make goods, but there is still a good chunk left for people to experiment with.
The presence of usable energy led to the creation of massive cryptocurrency farming projects sprawling across the landscape of China. And hence, it was only a matter of time until cryptocurrency enthusiasts set up huge crypto mining farms in the country. Bitcoin mining, in this case, is equivalent to claiming ownership of resources that never belonged to the miners, to begin with.
Cryptocurrency farms also consume a lot of energy. And while this may not seem like a huge problem if energy is abundant, it sets up a bad precedent for the unauthorised use of public resources. These crypto farms are also poorly reputed for being very carbon consuming. While the world is fighting tooth and nail against the climate crisis, a whole industry dedicated to releasing a load of carbon and using public resources unapproved is bad news.
Also, keep in mind that a good portion of the Chinese population consists of the elderly and non-tech people. China also happens to be an ‘iron fist’ country with a knack for disliking new-age and western concepts. Cryptocurrency as a concept happens to be in the newer camp, unfortunately.
To sum up, in China, both the people and the authorities aren’t very fond of the unauthorised use of public properties. Also, it is human nature to oppose anything new, as seen in the rollout of Bitcoin as the official tender of El Salvador.
There is also public opposition to the carbon-intensive nature of crypto farming and the lack of measures to keep the harm in check. Then, there is the problem with China not taking kindly to any unwarranted opposition defying the already rigid status quo.
So, what has China been doing to limit the influence of cryptocurrencies in its domestic market?
China tried to limit the production of crypto in the homeland by banning mining in April of 2021. The ban proved successful in limiting the production of cryptocurrencies in China. It cut the creation by up to 90% in the next few months.
China also plans to launch its digital currency by the name of Digital Yuan. It is speculated that the ban was put in place to give more prominence to the digital Yuan as it prepares to take on the currency market of the nation.
There is also another school of thought which believes that it’s an attempt for thwarting the high energy-consuming industries and slowly phasing them out. China has said that it plans to go carbon neutral by 2060, and this move might be one part of the massive endeavour.
What does this mean for your cryptocurrency wallets?
For cryptocurrency aficionados outside China, your crypto is safe and sound! The transfer of cryptocurrency is banned in China. It means that someone holding any amount of cryptocurrency is stuck with the assets. Cryptocurrencies do have value but the transfer of funds using crypto is not feasible anymore.
The ban may subvert once a low carbon solution to the problem of cryptocurrencies is solved. Till then, there is only the wait and watch policy at work for most of us.
Since China is an important country, any decision they take is going to have an impact on the market associated. The ramifications were clear the day the ban came to fruition. Prices of several currencies went down by up to 10%, but the market was relatively stable. Experts believe this was just a hiccup and the market will stabilise in no time.
What are your opinions on this whole fiasco?
