China’s crypto crackdown is not likely to stop with Bitcoin mining — stablecoins, software, influencers are also on its radar

China’s crypto crackdown is not likely to stop with Bitcoin mining — stablecoins, software, influencers are also on its radar
China's crackdown on cryptoPixabay
  • China's crackdown on cryptocurrencies doesn’t seem like it’s going to stop with the ban on bitcoin mining.
  • The Asian giant’s central bank is also laying down the hammer when it comes to crypto-related services and other cryptocurrencies, particularly stablecoins like Tether.
  • The country seems to be worried about its financial stability and the threat stablecoins could pose if there was enough adoption.
The crackdown on cryptocurrencies by China is unlikely to stop with Bitcoin mining. Authorities in the country have indicated that other digital tokens, particularly stablecoins, are also a serious threat.

Some commercial organizations’ so-called stablecoins, especially global stablecoins, may bring risks and challenges to the international monetary system, payments and settlement system, etc.

Fan Yifei, a deputy governor of the People’s Bank of China, told reporters on July 8

With China’s financial stability coming into question, the crackdown on cryptocurrency is seen as a way to contain one of the potential sources of instability. And, the People’s Bank of China is hardly alone in being a central bank that doesn’t trust digital currencies.

The Reserve Bank of India (RBI), the US Treasury, the South Africa Reserve Bank, and others are also warning citizens to be wary of the risk that cryptocurrencies carry.

What is China’s problem with stablecoins?

Stablecoins aren't like your normal cryptocurrencies — they don’t gain their value from the number of transactions verified. Instead, they gain their value from external references. This can be a currency like the US dollar or a commodity like gold.

However, since cryptocurrencies are still in their early days, there is a certain lack of transparency. Tether, based on the dollar, has been accused — repeatedly — for not having the funds to back up its claimed holdings. And, it has also been accused of manipulating Bitcoin’s price.

Global stablecoins, if adopted by enough people, can not only have an impact on the economy but also have the power to influence a country’s monetary policy.

China’s war on crypto is far from over

Just days ago, regulators asked a software maker called Beijing Qudao Cultural Development to shut shop over allegations of cryptocurrency trading. The move is being seen as a warning shot for other Chinese companies to stay clear of crypto trading or offer any crypto-related services.

The accounts of crypto influencers on Weibo were also shut down for violating the platform’s guidelines and China’s laws last month. According to the People’s Bank of China, the action was necessary to “prevent and control the risk of speculation in virtual currency transactions”.

All this and more has been happening since late May when China issued a national-level call to clamp down on Bitcoin mining and transactions. With miners in the country accounting for more than half of the mining volume worldwide, Bitcoin’s hash rate — how fast transactions are verifying — has been dropping as miners try to find new jurisdictions to set up operations.

Now, investors and crypto players alike are waiting with bated breath to see where the Asian giant’s regulators will strike next.

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