Ever since cryptocurrencies have existed, they have been a controversial topic mostly because of their volatility, the electricity needed to mine them, and the legality of the transactions behind them. After several (unsuccessful) attempts to stop cryptocurrency activity in China, the government has passed a bill this Friday, the 24th of September, to make all crypto financial transactions illegal (BBC News, 2021).
China’s first attempt to ban cryptocurrencies dates back to 2013. Eight years later they have decided to take more extreme measures and the results are still to be seen. It’s easy to understand why it is not an easy task, the technology behind crypto is untraceable, and China is responsible for 46% of the world’s current computing processing power used for mining (Al Jazeera, 2021). Nonetheless, the measures seem to be working, as in 2019 this value was up to 75%.
Why is this happening?
Cryptocurrencies’ worth is translated in individual empowerment and in a form of freedom. These are 2 concepts that are not well aligned with CCP’s usual policies. The government would rather hold the population and, most importantly, their information solely under their control, and anything that provides an alternative to that is considered a threat. However, the government justifies these measures with environmental issues and population protection from a dangerous volatile market (Al Jazeera, 2021). The People’s Bank of China claims that “[virtual currency-related business activities] seriously endangers the safety of people’s assets” (BBC News, 2021).
Effects
Despite the drops this news caused in the market the following days, the rest of the world doesn’t seem to care too much about this ban. Ulrik K.Lykke, an executive director at crypto hedge fund ARK36 wrote in an email: “While each time this [China’s crackdown] happens, the markets react with a price drop, each time the effect is smaller and more short-lived. The ‘China bans Bitcoin’ story has gained almost a meme-like status in the Bitcoin community because of this.” (Yue, 2021). The truth is the market has survived every ban news since 2013, and since then, Bitcoin’s value has skyrocketed from just 196 US$ in Oct 2013 to 44,755 US$ in Sep 2021 (Statista, 2021). Cryptocurrencies seem to have come to stay, and China’s efforts to ban their power, just give its supporters more reason to believe it is fulfilling its job of empowering individual freedom for the world.
References
BBC News. (2021, September 24). China declares all crypto-currency transactions illegal. https://www.bbc.com/news/technology-58678907
Al Jazeera. (2021, September 24). Bitcoin slumps as China bans all cryptocurrency transactions. Business and Economy News | Al Jazeera. https://www.aljazeera.com/economy/2021/9/24/bbbitcoin-slumps-as-china-bans-all-cryptocurrency-transactions
Yue, F. (2021, September 25). China’s crypto ban has almost achieved a “meme-like status,” but here are the lingering impacts. MarketWatch. https://www.marketwatch.com/story/chinas-crypto-ban-has-almost-achieved-a-meme-like-status-but-here-are-the-lingering-impacts-11632512981
Statista. (2021, September 24). Bitcoin (BTC) price history up until September 24, 2021. https://www.statista.com/statistics/326707/bitcoin-price-index/
