Up until now, the cryptocurrency market remains to be unstable. Despite having many investors and users, there is still a lack of regulation to legitimize the transactions and make it a proper channel for trading. For the past years, China became an epicenter in cryptocurrency mining. Despite the fact it is illegal in the country to trade cryptocurrencies, and Initial Coin Offers (ICO) are banned, there are still a lot of cryptocurrency activity in the country.
Crypto mining generates e-waste and consumes a tremendous amount of electricity. This being the case, the Chinese government has planned to ban such activities. In addition to the e-waste of crypto mining, the business also showed detrimental effects on the Chinese economy, pushing the government to ban the same.
In a recent report by the National Development and Reform Commission (NDRC), the agency included crypto mining as one of the activities it seeks to eliminate this year. The NDRC decided to eliminate crypto mining, because it “lacked safe production conditions, seriously wasted resources, polluted the environment,” among others. The NDRC remains silent as to when the ban on crypto mining will begin; the government should also be able to come up with its regulations.
Despite having a firm decision on the ban, Dovey Wan, founding partner at Primitive Ventures, believes the ban may not be as effective as the government envisions. Wan states in a tweet that “Items that should be eliminated by the end of 2006 are still in the 2011 and 2019 versions.” This means that new entrants in the cryptocurrency scene still have a chance to make better exit plans, or for the government to create stringent regulations for the effective implementation of its strategies.
The Future of Cryptocurrency in China
Despite the looming ban on crypto mining and the unstable valuation of Bitcoin, China remains optimistic. Bitcoin estimated to have a value of $20,000 last December, but this later declined in 2019 to $4,000. Despite the significant drop in its valuation, Bitcoin slowly increased in value to $5,000. The slight increase placed a renewed hope for many investors, but will this hope be too late?
New entrants in the cryptocurrency scene will be severely affected by the ban, and they should begin their exit plan while the government remains to be lenient. Companies like Bitmain, which is among one of the top providers of mining hardware, needs to begin their exit plan on how they can work around the government’s policy.
The ban on crypto mining was expected and many have speculated the same to come true. Since its initial stages, Beijing placed the cryptocurrency market under a strict lens. The government has heard of several fraud and speculation cases, which lead to the eventual banning of ICO’s last 2017. The same can be said for crypto mining, that the government has heard of unwanted, fraudulent schemes which are detrimental to the country’s economy.
This isn’t the first time the Chinese government planned on eliminating crypto mining. In January 2018, the country already warned the people of clamping down such activities and discourage the same. However, the same hasn’t been resolved until now. In other government efforts, many believe that this attempt may be unsuccessful as it will take time to see the impact of such a ban.