Why China is getting tough on crypto

22 June 2021 | International

AFP

Beijing

Cryptocurrency prices have fluctuated wildly in recent weeks as China intensifies a crackdown on trading and mining operations.

On Monday bitcoin slumped more than 10 percent after Beijing pulled the plug on the massive mines of Sichuan province.

China's regulatory assault on the digital currency has crypto watchers reaching for answers as to why Beijing is clamping down now and what it means for the market.

Beijing craves control, with the financial system now increasingly in its sights.

Bitcoin, the world's largest digital currency, and other cryptos cannot be traced by a country's central bank, making them difficult to regulate.

Chinese authorities outlawed trading this month to "prevent and control financial risks".

Analysts say China fears the proliferation of illicit investments and fundraising -- it also has strict rules around the outflow of capital.

Crypto transactions threaten these controls.

"China does not have an open capital account and cryptocurrencies circumvent this which is an anathema to China's authorities," Jeffrey Halley, Asia Pacific analyst at Foreign Exchange trading firm Oanda, told AFP.

But the crypto crackdown also opens the gates for China to introduce its own digital currency, already in the pipeline, allowing the central government to monitor transactions.

While crypto creation and trading have been illegal in China since 2019, Beijing's latest moves have led to its vast network of bitcoin miners shutting up shop.

China's electricity-guzzling bitcoin data centres power nearly 80 percent of the global cryptocurrency trade.

Access to cheap power and hardware has allowed Chinese companies to process the vast majority of crypto transactions and generate the tedious hexadecimal numbers needed to mint new currency.

China relies on a particularly polluting type of coal, lignite, to power some of its mining and Bloomberg predicts it will not be able to meet its cryptocurrency industry's needs through renewable energy until 2060.

Crypto-mining is expected to use 0.6 percent of the world's total electricity production in 2021 -- more than the annual consumption of Norway -- according to Cambridge University's Bitcoin Electricity Consumption Index.

Chinese restrictions may in part be triggered by the fact that crypto's enormous power demands have led to a surge in illicit coal extraction, posing a serious risk to Beijing's ambitious climate goals.

Several provinces have ordered mines to close as the central government plays whack-a-mole with the shadowy sector.

Authorities in the province of Sichuan ordered the closure of 26 mines last week and told power companies not to supply electricity to the energy-guzzling facilities.

The hit on one of the largest mining provinces tanked the price of bitcoin to $32,309.

China launched tests for a digital yuan in March. Its aim is to allow Beijing to conduct transactions in its own currency around the world, reducing dependency on the dollar which remains dominant internationally.

"It is about making the yuan more internationally available whilst maintaining complete control," analyst Halley said.

But while countries race to get their own digital currencies in a market-leading position, experts say state-sanctioned digital money will not dampen the wider appeal of crypto as a safe place far from the reaches of governments.

"Bitcoin only marginally competes as a payment system," Leonhard Weese, Co-founder at The Bitcoin Association of Hong Kong said.

"At the moment, its main appeal is that it cannot easily be seized, censored and debased."

Similar News

 

Cabinet instructs home affairs to repatriate Burundians

2 days ago - 26 July 2021 | International

NAMPAWINDHOEKCabinet has directed the immigration ministry to enter into an agreement with the Burundian government and the United Nations High Commission for Refugees (UNHCR) which...

Ethiopia's Amhara boss urges residents to fight Tigray rebels

2 days ago - 26 July 2021 | International

AFPADDIS ABABAEthiopia's Amhara region on Sunday called on all armed residents to mobilise for battle against rebels from conflict-hit Tigray, calling it a "survival campaign",...

France: Macron calls for unity after anti-vaccine protests

2 days ago - 26 July 2021 | International

ASSOCIATED PRESSPARISFrench President Emmanuel Macron appealed for national unity and mass vaccination to fight the resurgent virus, and lashed out at those fuelling anti-vaccine sentiment...

SA ramps up vaccine drive

2 weeks ago - 12 July 2021 | International

NAMPA/APJOHANNESBURGSome in wheelchairs, others on canes, hundreds of South Africans waited recently on the ramps of an open-air Johannesburg parking garage to get their Covid-19...

China vows retaliation after US blacklists companies

2 weeks ago - 12 July 2021 | International

NAMPA/APBEIJINGChina on Sunday said it will take “necessary measures' to respond to the UD blacklisting of Chinese companies over their alleged role in abuses of...

New Mexico town eyes economic lift-off from Virgin Galactic...

2 weeks ago - 12 July 2021 | International

NAMPA/REUTERSNEW MEXICOAs the first passenger rocket plane gears up for take-off, a sleepy desert town near Spaceport America in New Mexico is hoping for a...

Germany to donate all remaining AstraZeneca vaccines in Aug

2 weeks ago - 09 July 2021 | International

NAMPA/REUTERSBERLINGermany will give all its remaining doses of the AstraZeneca coronavirus vaccine to less developed countries in August, the government decided on Wednesday.The cabinet decided...

Exiled Turkish journalist attacked in Germany

2 weeks ago - 09 July 2021 | International

NAMPA/APTURKEYA Turkish journalist, who is critical of President Recep Tayyip Erdogan's government and has been living in exile in Germany, was injured after being attacked...

Chinese port city Qingdao launches fight against algae bloom

2 weeks ago - 09 July 2021 | International

NAMPA/APBEIJINGThe northern Chinese port city of Qingdao has deployed thousands of boats and powered scoops to deal with a massive algae bloom that is threatening...

Namibia, Angola set up livestock fence committee

1 month - 28 June 2021 | International

NAMPAWINDHOEKNamibia has set up a technical committee that will work with the Angolan counterparts to construct a livestock fence along the Namibia-Angola border.According to a...

Latest News

Fighting the fire of discontent

18 hours ago | Economics

Jo-Maré Duddy – Although Namibia shares a similar volatile cocktail of high inequality, poverty, unemployment, corruption and waning trust in political powers than South Africa,...

Livestock marketing gaining momentum

18 hours ago | Economics

PHILLEPUS UUSIKUDue to the unavailability of animals in the market for the month of April 2021, there was a massive decline in the number of...

Covid: Come to work even...

18 hours ago | Health

TUYEIMO HAIDULA OSHAKATIThe health ministry has ordered its staff members in the north to...

African central banks to hold...

18 hours ago | Economics

VUYANI NDABAMajor sub-Saharan African central banks are expected to keep interest rates on hold this week as the region's recovery lags the rest of the...

EDITORIAL: ACC reappointments discouraging

18 hours ago | Opinion

First things first: No sitting president should be appointing the anti-corruption boss in any constitutional democracy. It compromises ethics, impartiality and – perhaps most importantly...

Taxing ­rendering ­services outside ­Namibia

18 hours ago | Business

Stefan SwartzHave you and your employer been in a position where the services you perform, as part of your trade, had to be performed to...

Africa demands local production of...

18 hours ago | Economics

Global pharmaceutical firms should license production of Covid-19 vaccines in Africa rather than just do piecemeal contract deals, an African Union special envoy has said.By...

Crash near Henties kills govt...

18 hours ago | Accidents

Staff Reporter Henties Bay A 49-year-old man died in an accident on the C-34 road yesterday.According to the Namibian police’s Erongo commander...

AstraZeneca keeps eluding Namibia

18 hours ago | Health

JEMIMA BEUKES WINDHOEKGovernment has expressed serious concern with the perpetual delays of AstraZeneca Covid-19 vaccine delivery, which has now put the...

Load More