The Chinese government has finally stated a complete ban on all crypto trading and mining activities. Although many see this as a sudden move, the government had been silently cracking down on the crypto economy and industry for months. In fact, rumours about it came a long way back in mid-May about China’s ban on crypto trading.
Crypto transactions are high on privacy due to a lack of centralized infrastructure. While this may sound good for users, the governments are not pleased with it. Expectedly, with its vigorous ‘surveillance’ in public, the Chinese government wouldn’t like an independent transaction system. But that is not the only reason for the crackdown.
China has planned to become a carbon-neutral state before 2060. Moreover, the industry demand for energy consumption has gone way up in the past couple of years. So, to meet those demands, the Chinese government is cracking down on cryptocurrencies since they require a substantial amount of energy.
The Chinese government also wants to eliminate all the competitors to its in-house project, Digital Yuan. By abolishing all private cryptos, the Chinese government can push its own CBDC with effectively no competition.
But China is a huge contributor to crypto mining globally. In fact, before the crackdown, China contributed 2/3rd to the global crypto mining scene. Moreover, after the shut down of crypto exchanges and clean up of mining sites, most of the miners have shifted to countries where the regulations are more liberal for cryptos.
Many countries are taking the advantage of China’s ban on crypto trading.
As a matter of fact, United States has seen tremendous growth in crypto mining. States like Texas have relaxed norms for crypto mining. Moreover, there is an incentive mechanism for relying on renewable energy sources pushing miners to switch to more eco-friendly solutions.
Countries like Kazakhstan have also taken advantage of the overflowing miners moving out of China. The country has a cooler average temperature, a cheap source of electricity, and relaxed regulations. All of this favors crypto miners.
Even though the possibility is unlikely, industry executives say that China’s ban on crypto trading and mining is expected to boost India’s crypto space.
Kapil Rathi, founder of CrossTower states that India can benefit hugely from China’s crackdown on the crypto industry. In his words:
“China forcing out such innovation and advancement is to India’s benefit, and the country should now embrace this new technology with open arms. Crypto can make India a global leader in this new technology.”
CEO of popular crypto exchange WazirX, Nischal Shetty also gave a statement regarding the situation:
“Crypto has great potential to create more opportunities and contribute to our $5 trillion economy vision. Countries around the world are working towards crypto positive regulations and I’m confident that India will not take a regressive approach that could push us behind decades.”
While we have discussed the after-effects of China’s crackdown on cryptocurrency, there’s one more thing I want to discuss.
Overregulation on crypto is not and will never become the solution for any government.
It’s understandable for governments to get concerned with the new technology. After all, the amount of volatility it has can present very huge losses sometimes. Lack of regulations also allows scammers to get away without any accountability. Moreover, the amount of illicit transactions through crypto is shocking and a worrying affair. However, governments tackling it through a complete ban and outright accountability is not going to solve these issues.
The reason for that is: Innovation never stops. If the authorities think that banning crypto will eliminate it, unfortunately, it doesn’t. The worst-case scenario would be that the network will relocate to somewhere else. However, being the worst-case scenario, the possibility of that happening is close to nil.
Utilizing technologies like VPNs and anti-tracking features, crypto networks can easily spoof themselves without troubling the authorities.
Moreover, the crypto architecture itself is very secure and resistant to any oncoming attacks and surveillance. So, if the governments have to solve this debacle, they’ll have to open dialogue with the crypto industry for any potential ways to legalize the architecture with keeping the potential pain points in mind. Moreover, through this, they’ll not only reduce the potential of scams and losses of users in the crypto industry but can take advantage of new technology as an alternative to traditional systems.