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China’s central bank, The People’s Bank of China, has claimed that the crackdown on China’s has been successful in minimising the amount of Bitcoin transactions occurring in the country. According to a recent note published, China’s global Bitcoin transaction declined rapidly from 90% to just 10% after the crackdown was put in place.
According to the report released by the People’s Bank of China, the financial risk associated with digital currencies and peer-to-peer exchanges in China have been almost wiped out, with a significant drop in transactions in the country. The report discusses the effect of the cryptocurrency industry on financial markets, diving into how the crackdown has impacted the economy in the country. According to the note,
“All P2P online loan platforms have withdrawn from operation, and the balance of unpaid loans has dropped from the original 1.2 trillion yuan to 490 billion yuan. Effectively curbing the hype of virtual currency trading in China, the global share of Bitcoin transactions in China has dropped rapidly from more than 90% to 10%.”
Looking at correlating data from Statista, there has, indeed, been a major drop in the trading volume in the country with digital yuan and Bitcoin trading volumes dropping to just above 0% as a result of cryptocurrency exchanges banned in the region.
China’s ban on cryptocurrency
China’s blanket ban on cryptocurrency has been a topic in the space, as one of the countries that has taken an actively anti-crypto space since the launch of the decentralised token. In 2013, China banned Bitcoin and ensured no institutional banks allow transactions for citizens. There has been no letting up since, with a recent crackdown on peer-to-peer exchanges. In 2021, China slapped a ban on Bitcoin mining, making regulatory notices banning mining in the industry.
While China’s note points that the country has successfully blocked cryptocurrency trading in the region, many Chinese traders have looked abroad to trade cryptocurrencies through a VPN. With the emergence of decentralised finance (DeFi), which is harder to regulate and put know-your-customer (KYC) protocols in place, Chinese investors have looked to new projects to maintain cryptocurrency trading in spite of the country’s blanket ban.
Despite the crackdown in the country, analysts and experts in the cryptocurrency market pointed out that China’s aggressive stance would be a point of attention to investors.
China’s ban on Bitcoin mining
Industry experts also believe that China’s ban on cryptocurrency mining might not be a bad thing for Bitcoin in the long-term. Previously, it was estimated that a massive 65% of all Bitcoin mining took place in China.
Since the country cracked down on Bitcoin mining, Chinese miners have been moving to other countries to continue their mining activity and carry on Bitcoin production. The relocation of Bitcoin miners across the globe might be overall better for the market, as it redistributes mining across the world, and limits a high concentration of Bitcoin production in just one region. The shift from Chinese mining has also had a significant effect on the environment impact related to the energy-intensive activity. With miners moving to the United States, there has been a trend of energy-efficient mining increase in the scene, with regions like Texas boasting low energy for the industry.
Source: CoinShares