Chinese Restrictions on The Operation of Cryptocurrencies and Mining
In 2021, China's mining process and Bitcoin's price were not threatened. Everything was quiet until mid-May when Chinese authorities dealt a few blows to the crypto market.
As the CEO of cryptocurrency exchange Kyrrex, based in Malta, I would like to tell about the state of the Chinese mining market and the challenges that mining companies will face in the near future.
China's Vice Premier Liu He's announcement tightened up the cryptocurrency and mining market pushed Bitcoin into another slump on May 21, 2021. It began to bring many companies back to the reality in which Bitcoin will not be worth $200K by the end of next year.
In just two hours, the first digital currency plummeted to $36K. Moreover, Chinese companies that provide data center, cloud, and telecommunications services can lose their licenses if authorities find out about their involvement in cryptocurrency mining.
On May 19, Chinese authorities imposed a total ban on financial institutions to provide services in the cryptocurrency market. So they lost the right to issue products based on cryptocurrencies, conduct transactions, and provide services for their management.
Four years ago, the Chinese authorities already made a similar attempt to regulate the cryptocurrency market. At that time, it was forbidden for exchanges to operate in the country. Nevertheless, there are good reasons for Bitcoin's decline, and they include physical mining.
These changes could be related to the Chinese Central Bank's lobbying for its electronic currency, in which the electronic yuan remains part of the banking system. To receive it, a citizen needs to have an account at one of the specified banks.
Nevertheless, the events of June greatly overrode the shock therapy of May. Here are some of them, which on my mind were the most important:
At the beginning of June, Weibo users experienced administrative restrictions on access to several major cryptocurrency accounts with the note: "It violates laws and regulations.” In addition, the accounts of opinion leaders and bloggers related to cryptocurrencies were also restricted. Thus, gradually, mining and circulation of cryptocurrencies and even news on the topic are banned.
The Chinese government has banned the mining of digital assets in Sichuan, Yunnan, Qinghai, and Xinjiang provinces. It led to a huge drop in the price of not only Bitcoin to $30K-$32K and many other cryptocurrencies.
Many companies operating in the Chinese market are rushing to sell their mining assemblies, offering a 30% discount. Others are preparing to move to other countries, such as the U.S., Canada, Latin America.