The Crypto market doesn’t have an easy time recently with its bear market. On the one hand, regulators from the USA are trying to tax cryptocurrency transfers, Elon Musk’s tweets as always moves the market, this time not in the way everyone would have hope. An announcement from China was just a nail to a coffin in a current bloodbath of red candles 🕯️.
I won’t go into the details of the first two. I left the links to the appropriate articles above. Either I won’t focus on the price as I firmly believe the price is secondary to the innovation and development of the Blockchain products. I will focus on the China ban and if it’s that serious or not.
Not Classic China FUD
China FUD (Fear, uncertainty, and doubt) is more severe this time than standard news we used to hear from China in the past few years. We heard about “China crackdowns on Bitcoin” a few times already, but this time is slightly different.
On May 21st, 2021, the Chinese Government announced it will “crackdown on bitcoin mining and trading behavior and resolutely prevent the transfer of individual risks to the society,” as we can read in this statement from Financial Stability and Development Committee of the State Council. The announcement was emphasized by Vice Premier Liu He, who acts as President Xi Jinping’s top representative on economic and financial matters.
“The wording of the statement did not leave much leeway for cryptocurrency mining,” said Li Yi, a chief research fellow at the Shanghai Academy of Social Sciences have told in an interview for SCMP. “We should expect the relevant departments, including law enforcement, to come up with detailed measures to ban bitcoin mining in the near future,” Li said.
As we can learn from DoveyWan Twitter thread on this matter
“CCP push policy update on Friday night(same for tradfi market). As this can catch people off the guard and no agency will be working on weekend, leaving people no choice (and even hard to get clarifications) only prepare upcoming impact on coming week”
This alone shows it was a planned action against cryptocurrency mining. DoveyWan points out accurately. We could expect a hash-rate drop in Bitcoin and possibly mining equipment being sold from China to the rest of the world.
Not as serious as it sounds?
JiangZhuoer on Twitter disagrees with this and thinks it’s not as serious as it sounds. He lays down the arguments in this thread.
To summarise his thread, it’s not that China bans all the bitcoin mining, but the mining that is being operated by financial capital might be forbidden. Individual mining is and has always been allowed as long as the users are responsible for their risks and profits.
I recommend reading his thread as he provides really good arguments and another perspective on the matter. Arstechnica also did a good piece about bitcoin mining. Check it out.
I think the timing of this ban could be better for China. It follows into the more increasing talks regarding the environmental impact of Bitcoin mining as China has always had a vast amount of mining pools, draining a lot of energy. China plans to achieve carbon neutrality by 2060 and reducing carbon intensity, or the amount of carbon emitted per unit of GDP, by more than 65% by 2030.
Having a ban on bitcoin mining will help for sure with achievement. Chinese plans for reducing carbon neutrality are not as straightforward as one would think, so I recommend you reading this good piece from cfr.org on that exact topic in detail.
China's decision can also be connected with another project that China is working on since 2014. Its own CBDC issued digital yuan. Bitcoin represents a different approach to what China wants to offer with its CDEP. Bitcoin is open, borderless, and anyone can use it, and nobody can track you. Bitcoin/Ether is not an approach China wants to use.
They want to have a currency they can control and use to track its usage. It will play nicely with China’s social credit system, and they have much bigger plans for CDEP than only being a national currency. They want to replace the Dollar on the international stage as a currency you trade on the stock market.
Above is my view on this topic, but I will lay out more information regarding this in my piece about CDEP and the current state of affairs.
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