The two Chinese government moves that spooked the bitcoin market
China is continuing its ongoing restriction of cryptocurrency business and two recent announcements have added to global worries about the value of virtual money. But China’s cryptoheads are unlikely to change their plans.
Bitcoin and other cryptocurrencies took a hit as markets responded to Elon Musk and Tesla’s newly negative comments on virtual money last week, and to regulatory rumbles from China this week. Bitcoin is trading at around $39,000 as of the evening of May 19 EST, down from $60,000 plus highs in April, but still way up from May 2020, when it was trading at around $9,000.
Yesterday, three Chinese state-organized industry associations reminded (in Chinese) financial and payments companies of China’s rules against trading in and offering cryptocurrency services.
- China’s central bank first prohibited (in Chinese) financial institutions from cryptocurrency brokerage and trading in 2013, and the government has restricted the crypto business in various ways since then.
- The new notice, according to Reuters, “covers services that were not previously mentioned,” such as specifically banning the use of virtual currencies “as a means of payment and settlement.”
Inner Mongolia yesterday also announced (in Chinese) on Tuesday it had set up a hotline for residents to report illegal crypto mining operations. The provincial government of Inner Mongolia had in March issued (in Chinese) draft measures to “clean up and shut down” all cryptocurrency mining operations by the end of April 2021.
There is growing public and government concern about the environmental costs of crypto mining, and “bitcoin miners are feeling the squeeze,” reports Sixth Tone.
- Worries about bitcoin mining even became the focus of speculation about a skyscraper in Shenzhen that shook mysteriously today.
China’s active crypto community is unlikely to be deterred.
- Bitcoin mining and a huge range of businesses based on the blockchain technologies that underlie crypto continue to thrive.
- Right now, NFTs are the flavor of the month.
- Just this week, Hong Kong–based crypto asset manager Babel Finance said it had secured $40 million of funding from investors including Zoo Capital, Sequoia Capital China, and Dragonfly Capital.
And as Hong Kong’s Bitcoin Association tweeted:
For those new to bitcoin, it is customary for the People’s Bank of China to ban bitcoin at least once in a bull cycle.
