SAN FRANCISCO –
Since China’s government ruled all cryptocurrency transactions illegal last week and banned citizens from working for crypto-related companies, the price of Bitcoin has risen despite being banned from one of its largest markets.
Experts say that major Chinese cryptocurrency miners – like Bitcoin and Ethereum – will be bringing their powerful, power-hungry servers overseas. The digital money exchange and the numerous Chinese startups associated with trading are also expected to rebuild overseas after domestic customers were removed from their rosters.
The shift shows how virtual currencies can bypass government regulations.
“The stock exchanges have pushed abroad anyway, and with the stock exchange business you need a cloud infrastructure, you need developers, you need management to move things in the right direction, whether in Taipei, San Francisco, Singapore or Shanghai, It doesn’t matter – these companies are very virtual, ”said Zennon Kapron, founder of Singapore-based financial advisory firm Kapronasia.
“However, the real impact that we have probably seen lies with the miners, and most of those miners” [are in] the process of relocating overseas or [have] already completed the move abroad, ”he said.
Strongest anti-crypto campaign to date
On September 24, the People’s Bank of China, Beijing’s monetary authority, issued a statement stating that cryptocurrencies do not have the status of other monetary instruments. The notice, issued along with nine other government agencies including the Public Security Bureau, declared all related business illegal and warned that cryptocurrency transactions originating outside of China will also be treated as crimes.
To explain the ban, China’s official Xinhua news agency reported on Friday that cryptocurrencies had disrupted the financial systems of the controlled economy and contributed to crimes such as money laundering.
Cryptocurrencies – digital trading tools not tied to a centralized banking authority – first appeared in China around 2008. Chinese banks started banning the use of digital currencies in 2013 and tightened regulations after 2016.
According to the news website CryptoVantage, China was the world’s largest bitcoin miner and supported the largest exchanges in terms of volume. It is said that many of those who suddenly made millions when bitcoin prices skyrocketed four years ago were in China.
Chinese miners and traders travel to Singapore
The Chinese ban brings penalties to international exchanges doing business with people within China, and news reports suggest that international crypto exchanges have been trying to sever ties with Chinese customers in the past few days. But the companies themselves remain largely calm.
A spokesman for the digital currency exchange Coinbase said on Wednesday that he “currently has nothing to share” about what is going on in China. US-based Worldcoin Global, a new breed of cryptocurrency, didn’t respond to a request for comment.
China’s growing pressure on crypto in recent years has led stakeholders to leave the country, Kapron said, adding that less than a quarter of the country’s original cryptocurrency peer-to-peer credit startups – small businesses, that link individual lenders and borrowers – remain in China.
Digital currency mining – the process of using computers to circulate bitcoins and validating cryptocurrency transactions in exchange for a withdrawal – should become easier overseas as Chinese people exit the market, Kapron said.
Smaller operators, he added, may find it easier to mine without competition from huge Chinese companies.
Singapore is emerging as the first port of call for operations that don’t need to be physically on land. The country had accepted around 300 cryptocurrency license applications by July. The e-commerce giant Alibaba and the digital finance companies Yillion Group and Hande Group have applied from China, according to Asia.
Other Asian countries are missing the legal welcome mat that Singapore has extended, said Jason Hsu, vice president of the Taiwan Fintech Association industry group.
“Where should the money go? I think it’s a question that needs to be answered, ”said Hsu. “I think Singapore would be a destination for them in Asia. Singapore obviously has the clearest regulations and wants to attract more digital fintechs too [financial-technology] Companies.”
Outside of Asia, Amsterdam and Frankfurt are “building their presence as international centers” for financial technology, said Rajiv Biswas, chief economist for the Asia-Pacific region at research firm IHS Markit. Financial technology covers cryptocurrency.
Western Europe was ranked the world’s largest crypto economy that year, with inflows of more than $ 1 trillion, or 25% of total global trade, activity, news and data service Chainalysis. Europe’s upswing follows a similarly rapid growth in 2020.
Possible resurgence of crypto in China?
Authorities in China are now targeting crypto as part of a broader “crackdown on overnight wealth” and to “clean up the wild, wild west,” Hsu said, referring to largely unregulated sectors of the market. Trade will go underground for now, he predicts, and China will eventually release an official digital currency issued by major banks.
Several countries are considering the introduction of new digital currencies that would allow people to exchange money without a middleman like a bank. Proponents argue that these currencies could take advantage of cryptocurrencies that make it easier to exchange money, but without the price volatility of decentralized digital assets like bitcoin.
The Chinese authorities could eventually switch to a more tolerant view of unsanctioned digital currencies, albeit with strict criteria of what is legal or not, said Song Seng Wun, an economist in the private banking division of Malaysian bank CIMB. Blockchain, the core technology behind the public transaction book that makes crypto trading transparent, could evolve for other uses in China, he added.
source https://www.bisayanews.com/2021/10/02/how-chinas-ban-on-cryptocurrency-will-ripple-overseas/
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