What China’s crackdown on bitcoin mining means for crypto

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Emily Parker, CoinDesk Global Macro Editor and CoinDesk TV Presenter, joins Yahoo Finance Live to discuss China’s crackdown on crypto.

Video transcript

– Welcome to Yahoo Finance Live. It’s time for our crypto corner. Bitcoin has had a good year, almost half of what it was just three months ago. And one of the main reasons for Bitcoin’s dramatic fall could be China’s general crackdown on crypto. Let’s talk more with Emily Parker. She is CoinDesk’s global macro editor. And Emily, I guess maybe start by concluding the story of what the Chinese authorities did there.

We know they are cracking down on Bitcoin mining. They have discouraged banks and fintech players from entering this space. But I guess, first of all, what are they doing specifically? And I guess why now?

EMILY PARKER: Great questions. So it’s part of a much longer story. China has cracked down on cryptocurrency in various forms for many years. China is bullish on blockchain technology but wary of cryptocurrency. And one thing that is important to note is that China is not banning Bitcoin. And China is not banning cryptocurrency. You can still hold Bitcoin in China. But they just make it more difficult for the average investor to enter the market.

So first of all, they made it difficult – they shut down trade on the continent. And they banned initial coin offerings, ICOs. But more recently, they cracked down on mining in China. China is a real center of Bitcoin mining. And they also asked banks to stay away from cryptocurrency transactions. So these are the last movements. It’s all part of the continuing story. But there is certainly a feeling that they are serious this time around.

AKIKO FUJITA: And Emily, a lot of this discussion of China’s Bitcoin crackdown has been conducted alongside the story we’ve been following about China really trying to accelerate the adoption of the digital Yuan, which is, you know, as we anticipate, is set to cause a stir at the Olympics next year. Now, how much of this really relates to each other? Does China see Bitcoin’s growth coming at the expense of its own digital currency, or do you see them in separate lanes?

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EMILY PARKER: Personally, I see them on very different tracks. They are so different animals. So, you know, the whole basic philosophy behind Bitcoin is that it is not issued by any government. It cannot be controlled by the government. It is not issued by a bank. And the digital currency of the Chinese central bank is exactly that, it is issued by a central bank. They are therefore completely different. So I don’t think their crackdown on Bitcoin is necessarily tied to their DCEP.

But it’s certainly part of their larger mission, to embrace those aspects of digital currency that they love, while somehow trying to exclude the aspects that they don’t like, which are the out-of-control nature of cryptocurrency.

– And Emily, another question is that the dynamics in China as a market are different than they are here in the United States. And they have very strict capital controls on the inflow and outflow of capital into the country. So how much of that could it be to play for Bitcoin? It seems that this asset class may be one of the main reasons it was gaining so much popularity in China, hence also why it is moving so negatively, prices rather, due to the crackdown. .

EMILY PARKER: Capital controls are definitely part of the story. Thus, China limits the amount of money an individual can take out of the country per year to $ 50,000. Now, we don’t really have any data indicating that people are using cryptocurrency to take all that money out of the country. We don’t know for a fact. But it is certainly a fear. And it is certainly a possibility.

So, not only has China expressed its distrust of Bitcoin, but it has also recently expressed its distrust of stablecoins, which is another way to potentially take money out of the country. So, yeah, I think capital controls are definitely part of that narrative.

AKIKO FUJITA: Emily Parker, it’s a pleasure to have you with us today, CoinDesk Global Macro Editor and CoinDesk TV Presenter.

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