29 November 2023
The People's Bank of China's confirmation of its ongoing crackdown on the Cryptocurrency market last year was a blow to the sector as a whole. The People's Bank of China has made clear in a frequently asked questions (FAQ) section on its website that all Crypto-related activities are prohibited inside the country of China. Furthermore, it is forbidden for foreign Cryptocurrency exchanges to provide their services inside mainland China. This is however standard practice in China. That makes China's latest ban on Bitcoin the twentieth such restriction in its history.
Cryptocurrencies are not recognized as legitimate cash in China, and the banking system does not adopt them or offer related services. Bitcoin was officially recognized by the government as a virtual commodity in 2013, as its internet transaction was legalized for all citizens. Later that same year, meanwhile, monetary authorities such as the People's Bank of China (PBOC) prohibited financial institutions from offering Bitcoin-related services. To safeguard investors and reduce financial risks, China prohibited ICOs in September 2017. Exchanges that facilitate the purchase and sale of Cryptocurrencies were also prohibited from acting as intermediaries in the conversion of fiat cash into Cryptocurrencies and vice versa under the ICO regulations. As a result of the regulations, several of these exchanges were forced to close, while others relocated to overseas jurisdictions.
Also Read: How To Purchase Bitcoin In China?
China’s Crypto Crackdown isn’t New
The Chinese government has been cracking down on the Cryptocurrency business since 2013, when it first banned banking institutions from processing Bitcoin transactions. The fact that the country dislikes Bitcoin is not surprising. That system runs counter to their edicts in every way except one: they manage the money and you don't. Later in 2018, China maintained its prohibition on Chinese financial institutions offering Cryptocurrency-related services and announced further efforts to shut down Crypto mining rigs, which process and authenticate Cryptocurrency transactions. The PBOC has pledged to increase its surveillance of Cryptocurrency transactions and has intensified its efforts to drive miners out of the country.
Why Does China Keep Tightening the Rules?
Trading in Bitcoin and other Cryptocurrencies has been revitalized in China as a result of the massive price increase over the previous couple of years, with speculators discovering methods to circumvent the country's strict rules. The move comes as the government seeks to create its own official digital currency, making it the first large economy to do so. Chinese authorities cracked down on Cryptocurrency services early the previous year, effectively excluding banks and payment processors from the industry. The regular financial and economic order is being disrupted by financial speculation in Bitcoins, according to an industry guideline, which noted that the practice has recently seen a resurgence. Numerous Chinese traders are now using the platforms of Chinese exchanges like Huobi as well as OKEx, which have set up business outside of China. Moreover, social media trading chart rooms that had been idle have reopened, and the over-the-counter market for Cryptocurrencies in China has picked up activity.
Impact on U.S. Investors
China's Cryptocurrency restrictions have had significant ramifications for investors in other nations; for illustration purposes, we'll use speculators in the United States. Potentially affecting market turbulence, Bitcoin dropped 4% in 24 hours after the PBOC Q&A and is now trading at roughly $19,097.49 (as of the time of writing, as per CoinMarketCap). The price of ether has dropped 6% and now stands at $1280.95. Professionals recommend only putting money into Cryptocurrencies that you can manage to lose due to its high degree of instability. Cryptocurrency markets have been criticized for being volatile as well as hazardous, with some warning that increased Chinese regulations might lead to even greater price volatility. When it comes to Cryptocurrency, professionals are more concerned about US legislation than Chinese.
The greater danger is that the United States will adopt Chinese->
Disclaimer: The author’s thoughts and comments are solely for educational reasons and informative purposes only. They do not represent financial, investment, or other advice.