Here’s how China’s 2021 crypto crackdown in 2021 differs from the 2017 ban
- Top crypto exchanges have announced plans to leave
Chinaand set up shop elsewhere.
- The 2021 ban expanded the scope of the ban that China had previously announced on cryptocurrencies back in 2017.
- Banks in China have also said they will be following guidance issued by the central government.
AdvertisementWhen China first announced its crackdowns on cryptocurrencies last month, many brushed it aside, saying it’s the same crackdown the industry saw in 2017. The country had banned initial coin offerings (ICOs) in 2017 and taken more steps to curb the industry.
Despite the restrictions, the Asian dragon still rose to become the top cryptocurrency miner in the world.
This year things are different. The 2021 crackdowns by China are not of the same tune as the 2017 crackdowns. There were signs that things will be different this time. For instance, Huobi Mall and BTC.TOP, two of the largest crypto miners in the world announced their exit from China the day after the crackdowns were announced.
Here’s what has changed over the last four years —
China’s isn’t pulling its punches this time
As reported by Reuters earlier, the 2021 ban ‘greatly expanded the scope’ of the ban issued in 2017. Simply put, it covers crypto-related services that weren’t included in the original ban.
The new regulations don’t just stop banks and other financial institutions from doing business with crypto exchanges and related companies, they also make it illegal for any institution to deal in cryptocurrencies, for payments, remittances or anything else. The conversion of crypto from and to Yuan was also banned.
Moreover, China isn’t pulling any punches. The government called on officials from some of the biggest banks to reiterate its ban on the industry. “The PBOC crackdown is going further than initially expected,” Jonathan Cheesman, head of over-the-counter and institutional sales at crypto derivatives exchange FTX, told Al Jazeera. “Mining was phase one and speculation is phase two,” he added.
And, banks have started reacting to this too. The Agricultural Bank of China, which is the third largest bank in the country, said that it will start following the government’s guidance on the same day.
AdvertisementUnlike 2017, there's a measurable impact this time. “Recent news on the China mining shutdown is very reminiscent of China every few years. They’ve banned banks from using bitcoin, but this is actually different. I’ve never seen an exodus like this before,” Darin Feinstein, founder of Blockcap, one of the largest bitcoin mining companies, told CNBC.
As mentioned before, top exchanges and crypto mines like Huobi and BTC.TOP have already announced plans to leave China. The global hash rate for Bitcoin mining, which is a measure of the amount of computing power being dedicated towards crypto transactions, has also been dropping dramatically.
“Longer term, most see hashrate moving out of China as positive — but in the near term may have/has already resulted in inventory sales," wrote Chessman, in an email, recently.
The country’s crackdowns have now wiped over $400 billion of the total digital assets market value. According to Coinmarketcap, the value of Bitcoin fell from $670 billion to $609 billion between June 18 to 22 -- a drop of nearly $70 billion in less than a week.
While Bitcoin is the market leader, and hence registered the largest drop, Ethereum too fell substantially. The second largest cryptocurrency in the world was pegged at $259 billion on June 18, which stood at $218 billion on June 22.
That said, some do still remain hopeful. “We are far from a bear market, only traders are freaking out over technicals seen on exchanges like volumes and price action,” Willy Woo, a popular on-chain analyst and statistician told CNBC.
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