China bans crypto mining again, causing Bitcoin to drop
The Chinese authorities are stepping up their crackdown on crypto mining. They call crypto mining extremely harmful practices that may jeopardize the country’s efforts to reduce carbon emissions.
National Development and Reform Commission (NDRC) spokesperson Meng Wei said at a press conference that, as China’s top economic planner, the NDRC intends to regulate industrial-scale Bitcoin mining and any state-owned enterprises’ participation in this activity.
The National Development and Reform Commission, responsible for mining policy formulation, recently organized a special meeting on this topic. It has also increased the pressure on provinces and cities to investigate and clean up mining state-owned enterprises.
The Chinese government took a stern stance against Bitcoin miners in 2021. The government blamed miners for energy waste and fatal coal mine accidents while striving to achieve its carbon neutrality goal.
In September, the intensified crackdown on miners was due to concerns about the country’s winter power supply.
Why does China keep cracking down on crypto mining?
This is not the first time Beijing has promised to crack down on cryptocurrency mining this year.
Since May, China has stepped up its crackdown on cryptocurrencies. Back in May, China banned cryptocurrency transactions and said it would review the country’s mining operations.
There are several reasons why China is targeting cryptocurrencies.
The authorities believe that cryptocurrency is a huge financial risk. It is a way for people to evade the strict control of capital by the state.
Restrictions on decentralized currencies such as Bitcoin also appeared when the government launched a digital version of the yuen. It would allow the Central Bank of China to exercise more control over currency movement and exchange.
Beijing is also struggling to achieve its climate goal of achieving carbon neutrality by 2060, and crypto mining may threaten this.
This approach is energy-intensive and consumes a lot of computer power. It requires machines to solve complex algorithms to verify transactions. China is also struggling with a severe power shortage, which affects the power rationing of millions of homes and factories.
Bitcoin and Ether fall sharply: what caused the drop?
After these remarks, the price of Bitcoin fell by more than 7% to $60,889. This was the lowest value in more than a week. Although the reason for the plunge is not yet evident, it coincides with a press conference of the National Development and Reform Commission.
Ether is the second-largest digital token after Bitcoin. It fell by more than 8% to 4,297 US dollars on Tuesday, the worst level in two weeks.
Despite the decline this week, Bitcoin is still a landmark year. The cryptocurrency surged by about 110% in 2021. The previous week, it reached a record high of $69,000.
According to research published in April by the peer-reviewed journal Nature Communications, China accounts for more than 75% of global Bitcoin mining.
In addition to China’s extensive crackdown on crypto mining due to its energy consumption and potential environmental impact, the new tax reporting requirements for digital currencies part of the $550 billion President Joe Biden’s infrastructure bill also led to the rapid decline of Bitcoin.
Bitcoin has more than doubled this year, while Ethereum has risen about six times. As speculative demand and controversial arguments (they can hedge against inflation risks) fueled the enthusiasm for digital assets, both set records last week.
Some technical indicators indicate that the strong operation of cryptocurrencies should be suspended. In any case, digital tokens are very unstable.
India might ban BTC trading
At a recent meeting hosted by Prime Minister Narendra Modi, the coalition government and the Reserve Bank of India (RBI) differed opinions on cryptocurrencies.
Since Bitcoin became popular in India after its sudden surge in prices, the Reserve Bank of India has repeatedly reiterated its strong views on cryptocurrencies. The central bank argues that cryptocurrencies pose a serious threat to the country’s macroeconomic and financial stability. The Reserve Bank of India also doubts the number of investors trading them and their claimed market value.
What is RBI’s biggest concern to ban Bitcoin?
The Reserve Bank of India is mainly concerned about the potential threat of cryptocurrency to the Indian rupee. Suppose many investors invest in digital currencies instead of rupee-based savings like provident funds. In that case, demand for the latter will decline.
This will hinder the ability of banks to lend to customers. In addition, since the governments don’t regulate cryptocurrencies, they are difficult to track in the country. The government will not be able to tax them, posing a threat to the rupee.
Most importantly, cryptocurrency can be used for money laundering and illegal activities. For all these reasons, cryptocurrency investors are vulnerable to hacker attacks, scams, and losses, because cryptocurrencies are inherently unstable.
Despite all the restrictions and potential risks, more and more Indians are investing in cryptocurrencies. A newspaper advertisement in October stated that Indians had invested 6 trillion rupees in cryptocurrencies.
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