The rules have long defined Chinese relations with bitcoin. As the news of the country’s latest restrictions dominates the headlines, the new regulations must be viewed in the context of previous regulations.
The Chinese government passed the first major crypto statute in 2013, when bitcoin was recognized as virtual property but prohibited as a medium of exchange. The Central Bank of China declared initial coin offerings (ICOs) illegal in 2017, causing bitcoin’s value to temporarily plummet. The latest source of concern is news of mining bans in several Chinese provinces, despite the fact that currency trade restrictions are repeated year after year.
The announcement of a mining ban in China’s Sichuan province last week prompted a mass exodus of miners looking for safe haven for their equipment. As a result of the recent prohibitions, it is estimated that 90 percent of the country’s mining capacity will be shut down. The announcement is significant because Chinese mines account for roughly 80% of total global cryptocurrency trade.
While the FUD (fear, uncertainty, and doubt) mining rules have resulted in a dramatic drop in Bitcoin prices in global crypto markets, many experts remain optimistic that Chinese regulation will strengthen Bitcoin’s long-term health. Listed below are some reasons:
China has not yet banned Bitcoin
In the current situation, Chinese citizens are not compelled to hand over their assets to the government. The terms “bitcoin” and “ban” were bandied about in connection with China’s crackdown, but it is important to note that holding bitcoin and other cryptocurrencies was not entirely prohibited.
The Chinese Council hopes that by tightening restrictions on speculative cryptography trading and mining, the nation’s economy will be better protected from the wild volatility of the crypto market.
More energy efficient crypto mining
With many Chinese miners expected to relocate to the United States, the exodus could actually be a positive step forward in reducing bitcoin’s carbon footprint.
Texas could be a safe haven for Chinese miners. The state has a growing share of renewable energy and a deregulated power grid, as well as some of the lowest energy prices in the world.
Improved Privatization/decentralisation
Although mineral exodus may cause a short-term breakdown in the crypto market, increased decentralisation promises to make the Bitcoin network less vulnerable to the rules and regulations of each country in the long run. China is responsible for 65 percent of Bitcoin mining. It is an estimate. As miners are forced to relocate, the redistributing should help alleviate previous concerns about China’s mining dominance.
It is also worth noting that the conflict between Bitcoin mining and domestic policy is novel, with rumors of a Chinese mining ban circulating since 2018. Due to power shortages throughout the country, Iran declared a temporary mining ban in May.
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