- China has intensified its cryptocurrency crackdown by declaring all cryptocurrency transactions to be illegal.
- This renewed crackdown has caused bitcoin and several top cryptocurrencies to record a drop in their prices.
- Chinese FUD continues to affect cryptocurrencies but recent metric hints that the markets could ignore the effects on Chinese antics.
The People’s Bank of China has declared all cryptocurrency transactions in the country as illegal and cryptocurrency exchanges outside China providing services are also operating illegally. While this sort of announcement is nothing new in the ecosystem, its effects remain profound for investors.
China’s Reign of Terror on Cryptocurrencies
The earliest instances of China’s anti-crypto sentiments can be traced to 2013 with the government forbidding financial institutions from facilitating cryptocurrency-related transactions. In the years that followed, the crackdown intensified, triggering a massive wave of panic for investors. 2021 rolled by and the regulatory agencies took it up a notch with a nationwide attack on mining activities causing the bitcoin hash rate to fall by over 50%.
According to Chris Bendiksen, head of research at CoinShares, Bitcoin is the “pure antithesis of their regime of top-down centralized currency control” and the country’s stance should not come as a surprise. The development of the digital yuan may be a veritable reason for the crackdown against cryptocurrencies as the CBDC has neared completion.
The recent declaration that all cryptocurrency activities are illegal extends to cryptocurrency exchanges. Already, Huobi has reportedly announced the suspension of new user registration in mainland China while Debank has restricted all services except checking the balance on the chain. It is expected that more exchanges will make similar announcements in the coming days.
Is The Dominance Ending?
Although the crackdown has been amplified in recent months, its effect on the cryptocurrency markets is not as profound as it used to be in the past. At the heights of the powers, Bitcoin lost as much as 30% of its value following Chinese anti-crypto sentiments but the recent ban saw the asset lose around 6% after the recent ban.
Meltem Demirors, the Chief Strategy Officer of CoinShares, noted that the frequent bans are “never really dramatic in the larger scheme of things”. The mass migration of miners and crypto start-ups from China to other jurisdictions has seen the power pendulum swing to other arenas. US Senator Pat Toomey views the Chinese authoritarian crackdown on crypto as a “big opportunity for the U.S” and can be seen as a reminder of the huge structural advantage that it has over China.
Investors are more concerned by the activities of U.S regulators and the potential effect they could have on the markets. SEC’s legal drama with Ripple Labs and the threat of litigation with Coinbase over its lending product are thought to have more impact on the markets than China’s antics.