Is China’s encryption industry gone?Beijing’s repression keeps sending shock waves

Since the beginning of the summer, a series of measures taken by the Chinese authorities to curb cryptocurrency trading and mining have dominated the cryptocurrency news cycle.

From urging financial service providers to Restrict transactions related to cryptocurrencies Order one Crypto trading software provider closed, It’s widely believed that Beijing’s initiative and its impact Made a great contribution To the recent market downturn.

What are the motives for the new round of hostilities, and how will they affect the cryptocurrency space of this country that once accounted for about two-thirds of the global digital asset supply? In addition, everything that happens in China seems to have a huge impact on the rest of the world. Does not seem to be negative.

Support digital element

It is not difficult to notice how the severe crackdowns on decentralized cryptocurrency trading and mining have gone hand in hand with the advancement of the digital currency (CBDC) project of the Central Bank of China.As part of the digital currency electronic payment system test, the government-issued electronic currency stack Has landed In the wallet application of about 200,000 Chinese citizens selected by lottery. It seems that larger-scale trials and widespread implementation can be carried out within a few months.

In terms of political or economic power distribution, the Chinese leadership has no habit of advocating diversity and competition. To some extent, the country’s huge cryptocurrency industry may avoid censorship because it does not directly conflict with the government’s strategic plan, but this does not seem to be the case anymore.

Yu Xiong, professor of business analytics and director of the Center for Innovation and Commercialization at the University of Surrey, told Cointelegraph that China will not allow any currency to affect the renminbi, so it cannot allow Bitcoin (Bitcoin) Becomes too big. Xiong added:

“Like most other governments, China wants the value of Bitcoin to grow at a controlled rate. If Bitcoin is allowed to be used as currency, China, [as many other countries], Will face financial disaster. China now has its own CBDC, which can be controlled by the central bank, so there is no need for the government to encourage decentralized cryptocurrency. “

As major Chinese banks such as the Agricultural Bank of China line up and squeeze crypto-related consumer and corporate operations, this concerted effort looks more like a stifle than a lack of encouragement. On the receiving end of the government’s anti-bitcoin push, cryptocurrency companies and daily users are dealing with the dire consequences of strengthening policies.

Bear the brunt

The authorities’ full crusade against China’s cryptocurrency industry covers all major stakeholder groups: as the bank accounts of financial service providers are suspended, miners in several key provinces are working Receipt of eviction notice. The company operating the oldest bitcoin exchange in the United States exits Vividly illustrates the depth of the crisis.

Yifan He, CEO of Hong Kong blockchain company Red Date Technology, told Cointelegraph that “China’s entire crypto industry has officially disappeared.” He believes that although transactions have been conducted in the region, the mining industry has largely benefited from some local governments. Support, but the current prohibitive changes in government policy will hit these two activities, and they are unlikely to resume anytime soon:

“Once banks and payment service companies completely ban crypto transactions, it will be difficult for ordinary people to buy cryptocurrencies with RMB. Crypto trading activities in China have fallen sharply because all mining has disappeared. Ordinary users can no longer inject new funds into transactions. , Almost all major exchanges prohibit the provision of leverage and margin services for Chinese citizens.”

In his view, a small portion of encrypted transactions can still exist, but it must be moved underground. This will fundamentally end China’s dominance in BTC mining, as miners must either be completely shut down or relocated and subject to supervision in other jurisdictions.

Global impact

What is witnessing now seems to be the collapse of the entire cryptocurrency industry in the country, which until recently was a major mining and trading powerhouse.

Most daily Chinese traders may find the new rules prohibitive and stop trading activities. Mining companies will face the choice between disappearing and opening stores in different jurisdictions. Those who appreciate the convenience of digital asset transactions will soon have a centralized alternative in the government-backed CBDC.

Squeezing the encryption industry on such a large scale will inevitably resonate globally.With the disappearance of most of China’s mining power, the world’s hash power map will have to undergo a dramatic rearrangement. The emergence of a new mining rights center Fill in the gap elsewhere.In this way, in the long run, not only the company but also ordinary users will be affected, because certain parts of the world will begin to witness Inflow of encryption-related businesses, Regulators will begin to respond to this.

The reduction in trading activities in China may also become a factor affecting the global crypto market for a long time. Considering that China is no longer able to provide the user base growth that it previously contributed to, establishing and maintaining a new bull market comparable to the beginning of 2021—a process that requires a continuous influx of new market participants—may become more challenging. The rest of the world will have to work very hard to make up for China’s departure.