China clamps down on crypto services in ongoing war with Bitcoin

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Budrul Chukrut | LightRocket | Getty Images

China’s central bank said on Tuesday it was calling for the shutdown of companies “suspected of providing software services for cryptocurrency trading.”

statement issued by the Beijing office of the People’s Bank of China, also warned institutions not to offer other cryptocurrency-related services, such as office provision and marketing.

Competition with digital currencies is nothing new for authoritarian nations.

Until 2013, the country ordered third-party payment providers to stop using Bitcoin. Chinese authorities stopped selling 2017 tokens Pledged to continue the target crypto exchange in 2019.

But generally, whenever Beijing criticized the crypto industry, the puncture wounds were worn out and the rules were eventually relaxed.

However, this time it looks different.

In May, China banned financial institutions and payment companies from providing crypto-related services. In June, there were mass arrests in China Percentage of people suspected of using cryptocurrencies fraudulently. That same month, the regulator stepped up pressure on Weibo, a Chinese Twitter account, to stop offering cryptocurrency services in its banking and payments business. Suspended account linked to crypto.

In July, half of the world’s Bitcoin miners were dark after Beijing seeking a tough crackdown on Bitcoin mining and trading.

“The Chinese government is doing everything in its power to ensure that Bitcoin and other cryptocurrencies disappear from China’s financial system and economy,” said Bitcoin Mining Council, CEO of Marathon Digital Holdings. Member Fred Thiel said.

Why now?

So why did China essentially declare war on cryptocurrencies in 2021?

Nick Carter, Founding Partner of Castle Island Ventures, said:

One theory is that this is part of promoting broader law and order towards the 100th anniversary of the Chinese Communist Party this year.

“They crack down on all kinds of unwanted behavior,” Carter said.

Cryptography has long been synonymous with continental crime.

“Probably the biggest cryptocurrency of all time Ponzi was the Chinese Plus Token project,” he said.

In this plan, fraudsters deceived investors for $ 5.7 billion and dozens were arrested. “It will be memorable for them. “

Another theory is that China has authorized its own digital yuan, the central bank’s digital currency track. Under development from 2014.

“Part of this is ensuring the adoption of China’s central bank digital currency, and part of it is probably ensuring that financial supervisory activities can see all economic activity,” he said. said Thiel. Mentionned. The digital yuan could, in theory, give governments greater power to track spending in real time.

However, Carter argues that Bitcoin and the RMB differ in that they are not considered direct competitors.

“This is definitely the most often cited reason,” Carter said. “I don’t know if I believe it. They are very different systems from each other.

According to Carter, the most likely motive is Beijing’s attempt to stop the outflow of capital through stablecoins and cryptocurrencies. “It’s a big deal for China to block the flow of RMB into cryptocurrencies,” he said.

Bitcoin price

When it comes to Bitcoin prices, Carter says, by converting all Chinese retailers to cryptocurrencies, they are “completely shifting the needle.”

“I think that really explains a lot of the weaknesses and full sales in the market,” he said. “The good news is that Bitcoin has been fairly stable as the crackdown accelerated, which suggests that the market has digested this information.”

Thiel believes banning Bitcoin and crypto will help Bitcoin in the long run.

“If China’s goal was to shut down 50% of its mining capacity and kill Bitcoin by banning trade, its value to punish Chinese holders (Didi and Ant Financial after the IPO). “Collapsed” did not work.

“Instead, Bitcoin is proving its resilience, trade is just moving overseas and miners elsewhere are taking over.”

Alyse Killeen, founder and managing partner of Bitcoin-focused company Stillmark, said the whole conversation could be a problem as the government’s ability to enforce the Bitcoin ban continues to erode over time. I specify that there is sex.

“We expect this kind of news to have less of an impact on Bitcoin’s exchange rate than ever before,” she said. “It’s also true that the news has had some industry vaccines. Bitcoin has been banned multiple times in many regions, but today’s adoption outshines internet adoption at similar lifecycle stages. I go. “

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