China’s Latest Anti-Crypto Transaction Stance Raises New Concerns for Chinese Users
China last week declared all cryptocurrency-related business transactions as illegal financial activities. Added to the Evergrande crisis, the new statement – as issued by the Chinese authorities – adversely affected the crypto market causing a sharp drop to be recorded across the board.
The entire market cap dropped below the $2 tln mark and it also brought hashprice down to levels last seen in mid-July, (at below $0.30 for most of the week and dipping to as low as $0.27 at one point).
Coming after the ban on crypto mining activities which saw the migration of miners from China to other parts of the world including the U.S. and parts of Eastern Europe, the latest declaration has become what some market insiders have described as China’s most severe crackdown on the cryptocurrency industry yet.
Now what is the practical impact?
First, whilst this is not a surprise as China has “banned” crypto many times in the past, this time there is no ambiguity. Crypto transactions and crypto services of all kind are banned in China. No room for discussion. No grey areas.
— Henri Arslanian (@HenriArslanian) September 24, 2021
The crackdown has also been and continues to be connected to paving the way for the gradual and successful rollout of China’s state-backed digital yuan. The digital currency’s release is set to play a role in
China’s growing digital economy which grew to CNY39.2 tln (about $6.07 tln) in 2020 or 38.6% of the country’s total GDP according to a report released by the Chinese Academy of Cyberspace Studies at the World Internet Conference Wuzhen Summit over the weekend.
China announced this morning a new crackdown on Crypto. What does that mean? It means China is about to launch its Government crypto coin. If US follows, Fed coin means Bitcoin outlawed, US becomes Centralized Gov, like China, US communism begins, our freedoms end. Take care.
— therealkiyosaki (@theRealKiyosaki) September 24, 2021
A Chinese crypto user’s growing concern
However, with the positive digital economy outlook for China comes a gloomy reality for crypto users in the country. While the recent announcement may not be able to stop all crypto-related transactions within China in its entirety, it has shown that the authorities can hinder the emerging asset class from becoming mainstream in the country as well as in various parts of the world should other countries choose to follow suit.
There have been concerns that the new regulatory policy will continue to cause the entire crypto industry to move out of China including exchanges and other crypto institutions migrating to Singapore. The move also stands to alienate the Chinese crypto community from the rest of the space which will help to avoid coordinated bearish movements while slowing down innovation in the crypto/blockchain space and hurting Chinese ability to compete.
With the latest target at trading and other transactions being deemed illegal and some crypto exchanges in the country already working on how to ease out of the situation, a shutdown of on-ramp services across China is likely as well.
To make the acquisition of crypto assets with fiat currencies even harder, a developing issue that could pose a long term threat for many crypto users in China will have to do with the eventual roll out of the digital yuan as a digital version of the existing national currency. No one will be able to shield where and to whom they send money from the government, including its use for crypto-related transactions or any other purpose, once the digital yuan roll out is complete.