China ban bitcoin news

Bitcoin, the original cryptocurrency, once fueled illicit transactions on the dark web and now facilitates payoffs for ransomware attacks. Its value is unstable, and the Bitcoin network cannot process a large volume of transactions quickly and cheaply. Bitcoin has, instead, become a purely speculative digital financial asset with no intrinsic worth. Its entire value proposition rests on its scarcity. The computer algorithm that manages Bitcoin issuance has a hard cap on the total number of the digital coins that can be issued, in contrast to fiat currencies that central banks can print at will.

The prospect of households channeling their savings into crypto assets, leaving them vulnerable to a bursting of the speculative bubble, is worrying to governments. Beijing also had concerns about cryptocurrencies affecting its control of domestic payment systems. This concern has been evident in its crackdowns on Ant Financial and other tech giants that had come to dominate domestic retail payments, rendering central bank money increasingly irrelevant.

Beijing also has been wary of new cryptocurrencies called stablecoins, which maintain stable value by being backed by stores of fiat currencies and could serve as alternatives to those same fiat currencies in making payments. Yet another concern was that cryptocurrencies and stablecoins could be used to evade restrictions on cross-border financial flows.

Such controls have been eased in recent years. Beijing now sees cryptocurrencies as conduits for evasion of capital controls. Such mining had proliferated in China because of the easy availability of cheap energy and computer hardware, making it the global center of such activity. The environmental impacts, in terms of energy consumption and computer detritus, have been enormous.

Notwithstanding all of these deep flaws, the blockchain technology that underpins Bitcoin could in fact have widespread benefits. The technology is already finding uses in other areas of finance. We mean it. Werbach: China for a long time has had the highest concentration of cryptocurrency mining activity, but that mining industry is now a multibillion-dollar industry around the world. Many operators, networks, and pools based in China had for a number of years been developing operations overseas.

When it became clear that Chinese authorities were serious about cracking down on mining, they started literally unplugging the mining machines and shipping them to other locations, including to the U. So there was a period of time where the overall level of mining activity dropped sharply. That difficulty level dropped very sharply when all the mining activity went offline in China. It has since come back in significant ways as other mining operations have compensated and many of those mining machines that were in China have moved elsewhere.

WBD: Is the expectation that the volatility and price declines are temporary? WBD: Can you have an overall cryptocurrency market that reaches its peak without having the Chinese economy in the mix? Werbach: Oh, sure. Facebook does not operate in China and still manages to have almost 3 billion users around the world. Again, China cracked down on cryptocurrency trading a number of years ago, and yet surprisingly, a number of exchanges that were founded in China, largely operated by mainland Chinese citizens, nominally offshore, not doing business with China, were still huge participants in the market.

A Growing Momentum WBD: In terms of adoption and use of cryptocurrency, it seems like the momentum continues to grow when you see a country like El Salvador adding it into its mix of currency. How quickly could we see other countries take a similar approach? Werbach: Overall, yes, the momentum continues to build. But I am very skeptical about the El Salvador announcement. Regulatory Trajectory in the U. WBD: In the U. Werbach: Oh, absolutely. If you believe in cryptocurrency and you think this is the future of financial services, then you want to have a good regulatory regime.

We need to address these regulatory issues and address the bad actors to allow the legitimate activity — which is considerable — to grow. Unfortunately, this debate in the U. And that would be unfortunate. Because there are really thoughtful and hardworking people in the U.

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