Chinese regulators delivered another shock to the cryptoversum by banning all cryptocurrency transactions on September 24th. That move came just as the market began to recover from the government’s June ban on cryptocurrency mining activities.
The Fear, Uncertainty, and Doubt (FUD) that arose from the ban caused Bitcoin (BTC) to crash nearly 9% in five hours, from switching hands in the $ 45,000 range to bottoming out at $ 41,142. Shortly afterwards, Alibaba announced that it would ban the sale of cryptocurrency rigs and related accessories from October 8th.
However, the flagship cryptocurrency has since rallied to trade above the pre-ban level of around $ 45,000. At the time of writing, BTC is exchanging hands in the $ 47,300 range. This recovery could be due to two positive developments: Federal Reserve Chairman Jerome Powell mentioned that there is no intention of banning Bitcoin or cryptocurrencies in the United States and the lifting of the temporary Bitcoin mining ban Iran.
This isn’t the first time BTC, or the market as a whole, has rebounded from the FUD caused by China. According to an analysis by Cointelegraph, the cryptoversum has bounced back from China’s crypto bashing over a dozen times. This fall marks another one of those inevitable recoveries.
In addition to the falling price of tokens as a direct consequence of the ban, the long-term effects on crypto companies and investors in China are enormous. Huobi Global, the most widely used cryptocurrency exchange in China by trading volume, immediately suspended crypto transactions for its Chinese investors in accordance with the guidelines of the regulator.
In addition, the exchange outlined a plan for its users in China to ensure users can protect their assets before their accounts are permanently closed on December 3rd. Du Jun, a co-founder of the Huobi Global cryptocurrency exchange, told Cointelegraph:
“In the coming months, customers will be able to transfer their assets to other exchanges or wallets. If customers cannot or cannot see our latest announcements, we will offer other ways to protect customer assets and wait for them to be withdrawn. “
Unlike the previous instances where China dwarfed cryptocurrencies or announced “bans”, this time around, there doesn’t seem to be any gray area or loopholes that would allow crypto companies to continue offering their services in the country.
China’s motive
As with many countries, China’s hostility to crypto appears to be contrasted with the promotion of its own central bank digital currency (CBDC), the digital yuan.
Ariel Zetlin-Jones, associate professor of economics at Carnegie Mellon University’s Tepper School of Business, told Cointelegraph:
“China clearly wants to promote the digital yuan. Removing one’s competitors by banning crypto activity is one way to do this, so it seems reasonable to view this motivation as a rationale for their policy. “
Kristin Boggiano, co-founder and president of the CrossTower cryptocurrency exchange, told Cointelegraph, “China appears to be choosing control over innovation and its actions suggest that crypto could pose a threat to the digital yuan as much of crypto is without permission . “
The government has pushed its CBDC initiative in various provinces to the point that the Xiaong’an New Area enabled the country’s first blockchain-based salary transaction in June of this year.
This shows an immense trust and commitment to the digital currency initiative compared to other major economies where the security and reliability of digital currencies is still debated. Therefore, this move could definitely be an attempt to curb the proliferation of “private” cryptocurrencies and push users in China towards the digital yuan.
China’s Loss, America’s Gain?
Huobi’s Jun further mentioned that business outside of China already accounts for nearly 70% of the company’s total portfolio, as the exchange has expanded its presence to various countries in recent years.
In July, after a series of raids on bitcoin mining in China, the bitcoin mining difficulty was immediately affected and decreased by 30%. Zetlin-Jones said similar results are now emerging on the Ethereum blockchain, where large Ether (ETH) mining pools in China are now going offline. Zetlin-Jones continued:
“Reducing the mining difficulty reduces the entry costs for mining and creates opportunities for new entrants. While I believe this could be beneficial in promoting decentralization in the mining industry, it is unclear that this is an opportunity for the US in particular. “
Charles Allen, CEO of BTCS Inc. – a publicly traded company that offers blockchain infrastructure – remains optimistic. He told Cointelegraph, “Blockchain technologies have the power to change the world just like the internet. Simply put, they are the future of finance and beyond. “
Allen said that if China doesn’t want a hand in development and innovation, it is a 100% chance for the United States in the long run.
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US Senator Pat Toomey agrees, writing on Twitter: “China’s authoritarian crackdown on crypto, including #Bitcoin, is a great opportunity for the US. It is also a reminder of our enormous structural advantage over China.”
The opportunity for the United States and other major economies here is huge as various sectors of crypto businesses such as exchanges and mining need to relocate to China, thus adding to the surrounding economy with job opportunities and a consistent flow of capital.
Even though there is absolute clarity about the law for crypto transactions and services, individual investors and holders of cryptocurrencies are still unsure whether the possession of cryptocurrencies is illegal. Boggiano claimed that over-the-counter access to the crypto market remains relatively untouched, even though China-based investors cannot trade cryptocurrencies through exchanges.
source https://www.bisayanews.com/2021/10/03/chinas-crypto-ban-may-reveal-digital-yuan-cbdc-goals/
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