China Bans Cryptocurrency – Is This a Problem

There has been a large amount of FUD (fear, uncertainty, doubt) surrounding the decision by the Chinese government to ban cryptocurrency. All this FUD has caused the price of cryptocurrency to plummet. 

However, there is a lot of misunderstanding this decision by the Chinese government. In this article we will properly explain what exactly China is doing with this so-called cryptocurrency ban. We will also offer a prediction on what will happen to Bitcoin in China after the ban goes into effect. 

Did China Really Ban Cryptocurrency?

No, China has not banned cryptocurrencies. Any source that says China has banned cryptocurrency is spreading FUD, most likely by accident. 

As mentioned previously, this has had a negative impact on the price of cryptocurrency. Anyway, China has banned financial institutions from being able to offer services related to cryptocurrencies. Services include payment, trading, options, and anything that involves the institution buying or selling cryptocurrency. (Source: InvestoTrend)

This is, of course, quite different from banning citizens from possessing cryptocurrency – China has not done that, yet.

Why China Banned Financial Institutions From Offering Cryptocurrency Services?

To outsiders, the ban from the Chinese government might sound unusual. For those inside China, the ban was pretty much expected. Why was the ban expected?

China is on the cusp of launching a digital currency – the e-Yuan. In fact, China is already almost there with the majority of vendors accepting payment via WeChat and a large amount of Chinese using the mobile app for all their payments. 

Cryptocurrency is obviously viewed as a competitor to WeChat Pay or the (likely) e-Yuan, so China has decided to stamp it out. This banning most likely indicates that China is preparing to launch their e-Yuan in the near future.

Further illustrating this point about China not liking cryptocurrency is that Binance decided to leave China in 2017. They anticipated future regulation of cryptocurrency exchanges from the Chinese government. 

What Will Happen To Bitcoin Mining in China?

The biggest question that comes up when people hear that China is banning cryptocurrency is, what happens to all the Bitcoin miners in China?

Remember, the majority of Bitcoin mining takes place in China. It has the right combination of low electricity costs, a cooler climate, and relatively lax regulations (at the moment). 

The good news is that Bitcoin mining is not targeted by the current cryptocurrency ban in China. 

The bad news is that China will likely make an attempt to ban or regulate cryptocurrency mining at some point in the future. Bitcoin miners are currently tolerated by the Chinese government, but they try to keep their operations secretive to prevent government harassment or other issues.

However, there is nothing to worry about at the moment in regards to this. More importantly, cryptocurrency can survive without Chinese Bitcoin miners. The first few weeks will likely have higher transaction fees and slower transaction times. But the mining difficulty will lower accordingly. 

The more likely scenario is that miners from other parts of the world will begin mining because it will become profitable to do so in more locations. Remember, the only requirement to mine Bitcoin is an internet connection. 

To summarize, Bitcoin mining will experience a slight hiccup if miners decide to shut down operations in anticipation of a mining ban. Bitcoin is resilient enough that it can withstand this temporary setback – it has lasted through much worse downturns than that possible setback.

The Future of Bitcoin in China

The future of Bitcoin in China looks bleak at the moment. There is really no way to sugarcoat that. 

Sure, cryptocurrency is still legal to possess in China, but cryptocurrency exchanges are illegal and Chinese banks cannot even interact with foreign exchanges. 

So, will China ban cryptocurrency in the future?

That seems likely at this point. They have already made it illegal to conveniently purchase it (ie. on an exchange). The next step is to simply make it illegal to possess any cryptocurrency.

The good news with a law banning possession of cryptocurrency is that it is extremely difficult to actually enforce that law. Cryptocurrency is private by default. It is also stored on the blockchain rather than in a physical vault. 

Enforcing a crypto ban is much more difficult than enforcing a gold ban. For gold, the government could simply seize all gold as the United States did in the 1930s, which is still difficult to enforce. 

China Has Banned Crypto Before

Now, if you have been following cryptocurrency for a decent amount of time, then you might remember stories about China banning cryptocurrency. 

Again, China has never banned cryptocurrency. China banned banks from handling Bitcoin transactions way back in 2013 and banned cryptocurrency exchanges and initial coin offerings (ICOs) in 2017. They even went as far as blocking internet access to cryptocurrency exchanges in June 2019.

We mention all this because China has been trying to curtail cryptocurrency for 8 years. It clearly did not work too well as they kept having to increase the regulations. 

Bitcoin Can’t Be Banned

This is a point that cannot be overstated enough – Bitcoin cannot simply be banned. Sure, exchanges can be made illegal, services can be blocked, and big mining companies can be forced out of countries. 

However, the decentralized nature of Bitcoin, and cryptocurrency in general, makes it borderline impossible to ban. In fact, it can still be pretty easily used online for transactions.

Final Thoughts

That covers everything you need to know about the China cryptocurrency ban. As we mentioned, it is really not that big of a concern for the actual nature of Bitcoin. The problem is that Bitcoin is extremely sensitive to any sort of FUD. 

Basically, people saw that China was banning cryptocurrency and freaked out. In reality, the ban is mostly meaningless as it does not really add to anything that China has already limited in regard to cryptocurrency. Furthermore, it should not have come as a surprise to anyone because China has not liked cryptocurrency for the past 8 years. 

Disclaimer: This is a press release. Readers should do their own due diligence before taking any actions related to the promoted company or any of its affiliates or services. AZCoin News is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in the press release.

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