For those who've traversed the cryptocurrency landscape for a while, the ebb and flow of China's stance on cryptocurrencies is a familiar tale. It's almost woven into the very fabric of the space—like a recurring motif. Each China cryptocurrency ban carries a distinct rhythm: a dip in prices, followed by a resurgence that often propels the market to new heights. Thus, it beckons us to explore the intriguing history of China's cryptocurrency bans.
To embark on this exploration, it's prudent to revisit the essence of cryptocurrencies—a brief reminder of their nature and significance.
Disclaimer: We want to emphasize that this is not financial advice. Cryptocurrencies operate in a volatile market, where values can drastically fluctuate in a blink of an eye. It is imperative to conduct thorough research and seek guidance from a qualified financial advisor before investing.
What is a Cryptocurrency?
At the very core of every cryptocurrency lies a blockchain—a revolutionary concept that forms a decentralized digital ledger. Within this intricate web, all transactions within the network are meticulously recorded and preserved, devoid of the need for a centralized intermediary. The crux of blockchain's distinctiveness is its peer-to-peer nature—a hallmark that obviates the necessity for a third-party mediator. Individuals within the network are empowered to engage directly, autonomously transacting without reliance on external facilitators. The currency of these interactions resides in cryptocurrencies, versatile tokens that encapsulate value. Among their myriad applications, cryptocurrencies are most prominently celebrated as a new form of digital currency.
The fusion of blockchain and cryptocurrency stands as a beacon of innovation, heralding a realm of decentralized value transfer and digital data exchange that knows no bounds. This technological wonder is borderless, universally accessible to anyone tethered to the internet. Yet, these advancements—specifically the realm of cryptocurrency—cast a looming shadow over governments across the globe. In the ensuing exploration, we will decipher the reasons behind the apprehensions that governments hold towards these technologies and how they may potentially challenge established norms.
Cryptocurrency Technology: A Threat To Governments
Cryptocurrencies pose a threat to governments across the globe mainly because they are borderless, they make it difficult for governments to monitor the amount of money in their countries, they’re private, and they can’t be taken down.
Being powered by blockchain technology makes cryptocurrencies borderless. This means that anyone transacting with cryptocurrencies can send money to, and receive money from, anywhere in the world with hardly any ties to jurisdiction under governmental control. What’s most important is that they can do so without the need for a bank. So, transaction times and fees are dramatically lowered.
Difficult To Monitor Money In Their Countries
Building on the previous point, the borderless nature of cryptocurrencies poses a very large problem for governments as they cannot monitor how much money is flowing into and out of a country through digital currencies. This is a problem for government tax collectors as they risk losing the amount of money they can collect through tax with people sending money out of their jurisdiction.
It is very difficult, if not impossible, to link a real-world identity with the identity in a transaction on the blockchain network. This is because all information that can be used to identify a person on a blockchain network is encrypted using advanced cryptographic protocols. The identities of people on a blockchain network are encrypted to protect each person on a blockchain network from hackers and cybercriminals. The identity of a person on the network can only be known if they disclose it. This is also a problem for government tax collectors as they cannot tax individuals accordingly based on money that they may have in a blockchain network.
Cannot Be Taken Down
As you may recall, a blockchain network is decentralized. Among other things, this means that it does not run on a single server or a group of servers that belong to a centralized institution or organization. For this reason, it is extremely difficult to take down a blockchain network, and subsequently a cryptocurrency, because governments would have to simultaneously stop every computer across the globe that is running the blockchain’s software in order to do so.
As you can see, blockchain and cryptocurrency technology pose a threat to governments. This is probably why governments, like China’s, are constantly trying to clamp down on them. Let’s now get to the main point of the article; all of China's bans.
A Historical Timeline of China’s Crypto Bans
China has had a complex relationship with cryptocurrency, marked by a series of bans and regulatory actions over the years. The country's stance on cryptocurrency has had a significant impact on the market and the value of Bitcoin.
The first significant move came in 2013 when Chinese regulators issued a notice that prohibited banks from handling Bitcoin transactions. While individuals were not banned from trading Bitcoin, they were warned about the risks involved.
In 2017, China took steps to stabilize its currency and restrict capital outflows. This led to the investigation of cryptocurrency exchanges and the subsequent ban on Initial Coin Offerings (ICOs). ICOs, a fundraising mechanism, were deemed illegal, and the ban extended to ICO platforms. Funds raised through ICOs had to be returned to investors.
The year 2019 saw China labeling Bitcoin mining as an "undesirable" industry, causing concerns as the country held a significant share of Bitcoin mining. Although concrete restrictions were not immediately enforced, this move signaled the government's intentions.
Throughout 2020, China targeted domestic cryptocurrency exchanges to combat money laundering and fraud. The government took measures against both domestic and foreign platforms offering exchange services.
In 2021, China escalated its regulatory efforts. It started by restricting cryptocurrency mining, citing energy consumption and environmental concerns. Several provinces introduced policies to curb mining operations. Later in September 2021, the Chinese central bank and various state bodies issued a comprehensive ban on cryptocurrency trading, leaving no room for ambiguity.
These regulatory actions from China have triggered fluctuations in the cryptocurrency market, impacting Bitcoin's value and investor sentiment. Despite the bans and crackdowns, the cryptocurrency market has shown resilience, adapting and evolving in response to the changing regulatory landscape.
A Current Snapshot
As of the present moment, the value of a single Bitcoin stands at approximately $42,000. This valuation has experienced a slight dip from its pinnacle, yet it continues to surge forth from its initial all-time zenith. In the wake of the initial China cryptocurrency ban, Bitcoin's trajectory has been marked by substantial ascension. If history is a reliable guide, this upward trend may persist, propelling Bitcoin's value to soar to fresh, unprecedented heights in the foreseeable future. This trajectory appears to be charted independent of the legislative maneuvers and regulatory frameworks that various governments may introduce along the way.
China has been at war with Bitcoin and the overall cryptocurrency market for quite some time now. Every announcement made by China regarding their stance on cryptocurrency has had a negative impact on the market. However, the price has always recovered. Following its final and biggest crackdown on cryptocurrency, the price of bitcoin still remains relatively high. With this being the case, it may be fair to say that bitcoin and the wider cryptocurrency market are here to stay!