Why Is China Cracking Down on Bitcoin
With bitcoin once again climbing above $40 000, the naysayers seem to be in retreat. And a little over a month ago, predictions that bitcoin will collapse if China continues its harsh policies against it were widespread. However, many pointed out that the crackdown will only temporarily affect the price (dropping it) and that bitcoin will quickly recover. So while it is hard to say what rose the price recently, it seems more and more confident that Chinese pressure alone isn’t enough to destroy the cryptocurrency.
China’s Tough Policy on Bitcoin
Why does China hate bitcoin so much? It is simple. They can’t control it. Bitcoin is a worldwide project with many different actors having stake and control over it. It is not something that you can centrally manage and censor. The whole ethos and way of functioning of bitcoin contradict the way the Chinese government handles problems. Not to mention they have their digital currency soon coming out and bitcoin is in some way a competitor to it.
Most financial institutions want to control paying processes. It is how they ensure that what they don’t like doesn’t happen. For example, what happens if you go onto an online slots Canada real money website and provide them with your credit card? The institutions could quickly access that information and potentially block you if they see that you’re not a rational spender. But when payments get processed in cryptocurrency, the government suddenly finds it a lot harder to follow the money or stop it in any way. That is what the Chinese government is afraid of and wants to restrict.
What Exactly Happened
The first thing you should keep in mind is that this all happened at the end of June. So this isn’t recent news, and there haven’t been any significant developments since then. The second thing is that China didn’t (and most likely won’t) ban bitcoin or banned cryptocurrencies. However, it is more and more enforcing measures that negatively affect the bitcoin ecosystem.
The Chinese government started issuing warnings about trading and mining cryptocurrencies way back in May. Also, financial giants in China mustn’t have any connection with crypto. After that, local governments in the top three mining regions started making moves against miners, which are the lifeblood of the bitcoin blockchain. Reports then came out that government officials once again met with significant banks and reminded them that they couldn’t allow cryptocurrency transactions.
Why does it matter if just one country (although) big is pursuing restrictive policies regarding cryptocurrencies? The answer is again straightforward – mining. Mining in China makes most of the bitcoin hash rate. Chinese miners provide about 65% of Bitcoin’s hash rate. Since electricity is so cheap in China, it was very profitable to mine bitcoins in China. However, with the government making such strong moves against bitcoin, more and more mining giants are trying to find alternative countries to house their operations.