As one of the world’s largest and most advanced markets, China has always held sway in terms of the global economy. That same factor is what makes many confused when they consider the fact that cryptocurrencies aren’t allowed in the country.
The Chinese government’s stance on cryptocurrencies isn’t anything new. Digital assets have basically been banned in the country for almost five years now. However, even with the ban, exchanges and trading platforms were still able to operate covertly.
All of this changed in 2019 after the government announced plans to build a Central Bank Digital Currency (CBDC). In a bid to cut out the competition for its assets, the Chinese government went on to close exchanges and trading platforms across the country - especially in major markets like Beijing and Shenzhen.
With all of these crackdowns, one area remained untouched - mining. China holds a firm lead in Bitcoin mining, with the Bitcoin Mining Map showing that it is responsible for 65 percent of the global mining hashrate. The government had refrained from cracking down on miners, and the status quo remained.
Making It Harder to Do Business
Then, the government upped the ante this year as it seems that even miners aren’t welcome in China anymore. The first rumblings came in May as Hong Kong authorities moved to ban retail cryptocurrency trading in the region. Per reports, exchanges will need to be licensed to operate in Hong Kong. Also, only individuals with portfolios worth 8 million Hong Kong dollars (about $1 million) will qualify to trade cryptocurrencies.
Three of China’s top trade associations also released warnings against cryptocurrency investments. The China Internet Finance Association, the China Banking Association, and the China Payment and Clearing Association explained in their release that cryptocurrencies don’t qualify as “real currency,” and that they don’t have any functionality for investors.
In Inner Mongolia, telephone hotlines were also set up for citizens to report any crypto mining activities that they might have witnessed. Inner Mongolia has been a major mining hub, with many miners enjoying access to cheap hydroelectricity. Miners in the region collectively accounted for 7.71 percent of the global Bitcoin hashrate from September 2019 to April 2020. Now, the region is driving miners out.
Things are especially worse in Inner Mongolia. According to a report from the South China Morning Post (SCMP), government officials unveiled a draft policy that will blacklist anyone caught mining in the region. The new rules include placing offenders on a social credit blacklist, preventing them from accessing loans and even using the public transportation system.
Along with individuals, the new rules also mention facilities like industrial parks, data centers, telecom companies, and more. Any company found running mining equipment will have their business license revoked. They could also be taken off the local electricity grid and see their business shut down entirely.
Time to Leave China
With all of these new policies going into effect, miners have come to understand that they are no longer wanted in China. Reuters reported that several of the biggest miners in the country had opted to close down their shops following reports of a planned crackdown.
BTC.TOP - a mining pool that accounted for as much as 2.5 percent of the global Bitcoin hashrate, claimed that it would cease its operations on the Chinese mainland. Its destination has been set for North America. Huobi Mall, an offshoot of the Huobi exchange, also announced that it would no longer sell crypto mining rigs in China. Its mining operations in the country will also be suspended.
At the same time, mining firm HashCow said it would stop buying new rigs in China for now.
All of this news caused a significant drop in the Bitcoin hashrate. The metric fell as much as 30 percent leading up to the warnings from Chinese authorities. While this could mean that miners are simply moving to other profitable coins amid the Bitcoin price drop, many believe it to mean that a lot of miners in China are going online and fleeing the country.
Legacy Crypto Isn’t Left Out
The crackdowns haven’t skipped legacy crypto companies as well. Exchanges and trading firms are still banned in China, and there’s no hope of anything changing anytime soon. Last week, journalists discovered that search engines in China have completely blocked access to several top exchanges.
Per reports, search results for exchanges like Binance, Huobi, and more will pull up no results. While searches for things like “Binance Academy” and “Huobi Research Center” can still bring some results, this only goes to show the lengths that the Chinese government is going to in order to keep crypto out.
Later, Weibo - one of China’s largest social media platforms with over 530 monthly active users - suspended the accounts of several crypto-related content creators.
Censorship has always been China’s last resort as it looks to curb content and keep its citizens in line. The government continues to work on its CBDC, but it is even more evident now that it is doing everything possible to remove all traces of other cryptocurrencies.