The team at BitOoda, a global digital asset financial technology and services platform offering risk management solutions, “best-execution” brokerage and market analysis, notes that in China, Vice Premier Liu He, in a meeting of the Financial Stability and Development Committee, had stated on Friday (May 22, 2021) that the country will be “fiercely” cracking down on Bitcoin mining and cryptocurrency trading activities.
The crackdown, which some sources are saying is on dirty energy like coal-mining-based power plants for crypto mining, has again been launched to “maintain the stability of the yuan exchange rate and fend off financial risks,” the BitOoda team notes.
They also mentioned that Liu is “one of the most powerful leaders in Beijing and arguably is President Xi Jinping’s top economic advisor.” BitOoda also mentioned that Liu has “served as Beijing’s lead in the long-running U.S.-China trade negotiations.”
“We assess this announcement will almost certainly have an immediate impact on the crypto market writ large, and could significantly alter the global bitcoin mining landscape. For those in the mining ecosystem who are pushing for the global diversification of hash and the buildup of North American mining, this development could be extremely bullish. One critical question we will be monitoring is whether Beijing will allow existing miners to export their equipment (and associated hashpower) out of the country to new jurisdictions — this could be a key determinant of how the fallout from this crackdown will manifest in other global markets.”
BitOoda also noted:
“Further, we assess that any relocation of Chinese mining assets would likely be a net positive for renewables consumption, and would serve to reduce the overall carbon footprint of the mining industry.”
It’s worth noting that this is not the first time that Chinese regulators have attempted to launch a crackdown on crypto-related operations in the country.
During the past few years, China’s authorities have been trying to prevent consumers from engaging in digital currency trading. In late 2017, the nation’s regulators had tried to ban crypto transactions via exchanges, but peer-to-peer trading was still taking place, local sources had confirmed at that time.
Chinese lawmakers have also said previously that Bitcoin and other similar assets might not be legal tender, but they may be considered personal property that could be given protection under existing laws.
China is also quite focused on its digital yuan or central bank digital currency project (CBDC) – which has been successfully piloted in major cities across mainland China. The country’s authorities might be trying to discourage or make it difficult for residents to conduct transactions with permissionless, decentralized currencies like Bitcoin, because that might give locals more financial freedom.
Instead, Chinese regulators may want to restrict financial activity, like they have been for many years. They may also want to keep a close watch on monetary transactions to ensure that residents are not engaging in illicit activities. However, it’s not really practical to ban cryptocurrencies due to their decentralized nature.
Other countries and jurisdictions like India and even Nigeria have attempted to prevent crypto transactions, but have not been too successful because it’s not really practical or even possible on a large scale.