China signals major crackdown on Bitcoin mining
The war on Bitcoin continues, with roughly 65% of the world's cryptocurrency mining based in China
24 May 2021 | 0
China has signalled a deeper push against cryptocurrencies after its crackdown last week, this time targeting the process of cryptocurrency mining as well as exchange platforms.
The country’s State Council Financial Stability and Development Committee, which is charged with overseeing financial stability, issued a statement on Friday declaring the time is right to crack down on mining and trading behaviour.
Moves to restrict cryptocurrency mining within China is hugely significant, given that roughly 65% of all mining globally is based in China, according to CNBC.
Cryptocurrency miners and exchange platforms have, as a result, been forced to suspend operations, with Huobi Mall, a mining service, suggesting it’s seeking overseas support in order to export mining operations in the future, Al Jazeera reported.
The crackdown follows measures proposed last week that would ban banks and financial institutions from providing cryptocurrency-related services. The ban, which was issued alongside warnings against speculative investments, sent the price of Bitcoin tumbling by roughly 30% last week.
Bitcoin’s value continued to fall over the course of last week and in recent days following China’s doubling down against cryptocurrencies.
The motivation behind the actions isn’t fully clear, although the committee’s statement suggested the crackdown is part of a wider package of financial measures aimed at fighting instability, and illegal activity. More broadly, the committee is intent on guarding against external risk shocks, responding effectively to inflation, and bolstering market supervision.
China’s policy coincides with the US Treasury’s decision to clamp down on the anonymity that cryptocurrencies provide. Under broad tax and spend proposals, businesses dealing with cryptocurrency transactions valued at more than $10,000 will need to report these to the Internal Revenue Service (IRS), as they do with cash payments.
Treating digital tokens like Bitcoin as cash would likely reduce the appeal of using them for large business transactions, given these regulatory barriers. One of the major appeals of exchanging cryptocurrencies; that transactions are anonymous, would also be negated.
Both countries join a growing list of nations to consider regulatory action against cryptocurrencies. Turkey, for example, has banned all cryptocurrencies, where the UK has only prohibited crypto derivative products from being sold to consumers.
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