Putting Complex Things into Simple Terms In 2011, Bitcoin began to gain momentum in China due to increase public interest in cryptocurrencies. Bitcoin China, a centralize exchange create by software engineer Bobby S. Lee (brother of Litecoin’s Charlie Lee), playe a significant role in the spread of BTC. Bitcoin China became a major player in global Bitcoin trading in the early days of the crypto industry.
Putting Complex Things into Simple Terms Growing hype around cryptocurrencies
As Bitcoin grew in popularity in China, businesses began accepting it as a form of payment. Notably, Baidu, the country’s largest search engine, announce that it would accept BTC payments in 2013. At the same time, the Chinese were introduce to Bitcoin’s proof-of-work (PoW) algorithm, which le to the growth of the BTC mining industry in the country. To meet the growing demand for mining, Micree Zhang and Jihan Wu founde Bitmain, a well-known ASIC manufacturing company. ASICs are specialize computers designe to solve algorithms on the Bitcoin blockchain. To this day, Bitmain remains a major player in the production of cryptocurrency mining equipment.
Putting Complex Things into Simple Terms First attempts at banning
However, in 2013, China made its first attempt to restrict Bitcoin trading. The People’s Bank of China (PBOC) introduce regulations that prohibite financial institutions from conducting cryptocurrency transactions. Chinese banks were no longer allowe to hold or transact virtual currencies such as BTC.
While this initial ban did not affect the legality of Chinese citizens buying, holding, or sending cryptocurrency, it did make it more difficult to access cryptocurrency on exchanges like Bitcoin China. In response to the PBOC’s rules, Bitcoin China suddenly announce that it would stop accepting yuan deposits. While this ban did not completely stop Chinese people from engaging in cryptocurrency, it did significantly limit their participation.
Cryptocurrency ICOs Are Becoming Illegal
Amid the cryptocurrency bull market of 2017, Chinese authorities introduce stricter measures against cryptocurrency trading. However, their focus was not on bank transfers or Bitcoin mining, but on the spread of “initial coin offerings” (ICOs). ICOs involve digital tokens that represent ownership stakes in new crypto projects.
With the advent of smart contract blockchains like Ethereum (ETH) and a surge in speculation during the 2017 bull market, ICO trading has seen a significant upswing. Unfortunately, the lack of regulatory oversight in the crypto space has le to the emergence of numerous ICO scams.
To cope with the excessive
Demand and reuce the risks associate with ICOs, China banne all platforms offering ICOs. Exchanges that facilitate ICO trading were require to return the funds investe by participants. In addition, many centralize crypto exchanges (CEXs) were force to cease operations. In response to these events, Bitcoin China change its name to BTCC and move its headquarters to the Unite Kingdom (UK).
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Ban on cryptocurrency mining
China considere banning Bitcoin mining in 2019, but it wasn’t until 2021 that authorities cracke down on the sector. The announcement of an official ban on the complete guide to utm cryptocurrency mining came when Bitcoin was hovering around $55,000 per coin. The consequences were immeiate. A 50% drop in the Bitcoin network’s hash rate cause the price of BTC to drop significantly to around $30,000 in the following months.
In conjunction with the ban on Bitcoin mining, Chinese regulators have impose a corresponding ban on all forms of cryptocurrency trading and transactions. Currently, individuals working for Chinese tech firms involve in cryptocurrency could face jail time. Sending cryptocurrency mailing lead has become illegal for Chinese residents, and businesses and banks are prohibite from accepting popular cryptocurrencies such as Bitcoin and Ethereum. These measures highlight China’s strict stance on the crypto industry.
How China Banne Cryptocurrencies: Stage by Stage
China’s total cryptocurrency ban covers three main aspects of interaction with digital assets.
Bitcoin Mining : The ban prohibits Chinese residents and businesses from mining cryptocurrencies via Proof-of-Work (PoW). Mining digital currencies like Bitcoin using computing power is currently illegal in China.
Cryptocurrency trading and transactions: Chinese investors are prohibite from buying, sending, or participating in any transactions involving digital currencies such as Bitcoin or Ethereum. The ban also applies to trading in digital collectibles such as non-fungible tokens (NFTs).
Employment in the crypto sector
The Chinese government is seeking to discourage innovation in the crypto industry. Tech companies and entrepreneurs involve in cryptocurrency-relate activities may face significant fines. The goal of such measures is to discourage individuals and organizations from participating in the crypto sector.
Although the use and purchase of cryptocurrencies is considere illegal, there are currently no specific rules against storing digital assets such as Bitcoin, Dogecoin or Ethereum. Therefore, residents of China who have cryptocurrencies in their wallets are not breaking existing laws.
Why China Banne Cryptocurrencies
There have been suggestions that China’s restrictions on decentralize digital assets could be a precursor to the introduction of centrally controlle cryptocurrencies. The country’s officials have publicly state several reasons for China’s cryptocurrency ban.The combination of these reasons influences China’s stance on cryptocurrency, providing insight into the motivations behind the restrictions and the government’s broader goals in the digital asset space.
