The global cryptocurrency market is showing no sign of stabilisation as it’s getting stuck in problems one after another. The latest move by China could prove fatal for cryptocurrencies, especially Bitcoin.
China has instructed a company to seize all its operations and shut it down completely. The Chinese authorities suspected that the company was providing software services for virtual currency transactions. The action has come with a stern warning to all businesses and individuals to stay away from companies dealing in cryptocurrencies.
This could be the biggest ever crackdown on cryptocurrencies by China as the move virtually shut doors for all cryptocurrencies traders and software companies that are in the business of providing software or services related to cryptocurrencies.
China Crackdown on Cryptocurrencies: Big Picture
- China instructed a company, engaged into into the business of providing software services to virtual cryptocurrencies companies, to shut down its operations.
- The People’s Bank of China, the largest bank in the country, has also instructed its people and businesses to refrain from dealing with any companies that have got anything to do with cryptocurrencies.
- Any kind of dealing, including renting office premises or marketing services, with companies involved in virtual currency would subject to legal actions.
- China has been cracking down on cryptocurrency, especially bitcoin, since 2013 when Beijing ordered third-party payment processors to refrain from using bitcoin.
- In 2017, once again China came down heavily on cryptocurrency and suspended token sales.
- In 2019, Chinese authorities beefed up their exercise of targeting crypto exchanges.
- In May 2021, China took a major decision by banning financial institutions and payment companies from dealing with companies that were in the business of crypto-related services.
- In June 2021, the mass arrest of people suspected of using cryptocurremcies in nefarious way, shook the whole world. The impact on the cryptocurrency market was quite visible. Over $1 billion, in terms of market cap, was wiped off from the global cryptocurrency market.
- Beijing, which is the home for half of world’s bitcoin miners, is leaving no options for crypto enthusiasts to look for alternate venue to setup their operatioons.
- A sizeable number of insitutaional investors have labelled crptocurreny as “Rat Poison”.
Food For Thought
For many years, China has been exercise every possible option to wash off cryptocurrencies from the country’s financial system. Interestingly, experts believe that the ongoing crackdowns are part of a well-thought strategy to make China one of the first and largest countries to leverage cryptocurrency.
Beijing is making a runway to give a flying start to the homegrown digital currency that the central bank of China has been working on since 2014. China is always known to be a walled garden and the country has a long history of not welcoming international products or services, be it social media platforms or operating systems or devices. The country has always pushed and supported local players, products and services over outsiders, and crypto is no exception. Complete surveillance over the financial system is another purpose China wants to have by pushing digital yuan over any other digital currency.
For now, Bitcoin seems to be surviving the China crackdown as the value of bitcoin remains flat for now. In long term, this may not be the case given all developed and developing nations are engaged in the process of creating their own digital currency. The reciprocal impact would affect bitcoin and other cryptocurrencies but to a certain extent only. The value correction will be there but cryptocurrency is here to survive.
Should you buy it or not now, I think you must read what Andrew Bailey, Governor – Bank of England, has to say!
