The topic of cryptocurrency is extremely controversial, whether due to its environmental impact, its volatility, or the increasing number of scams related to it. It should come as no surprise that countries around the world are taking steps to regulate cryptocurrencies at various levels. The latest example announced on Friday is China. Plans to punish illegal cryptocurrency mining were announced in a joint statement by 11 government agencies of China, with the central bank of China announcing a ban on cryptocurrency financial activity.
The joint statement by China’s government agencies describes its efforts as an attempt to stem the risks posed by the “blind and disorderly development” of the cryptocurrency. According to the People’s Bank of China, virtual currency business activities now equate to illegal financial activities. The explanation for this, according to the bank, is that cryptocurrencies “seriously endanger the security of people’s assets.” More specific explanations were not provided and are unlikely to happen in the future.
In fact, these new policies in China ban the use of all cryptocurrencies within the country. This means that cryptocurrencies can no longer be traded or exchanged for physical currencies. This includes Chinese users using exchanges outside China or storing cryptocurrency internationally. As such, international exchanges would be required to block all transactions or account activities conducted within China. Domestic cryptocurrency exchanges have already been banned for some time, but the new rules are much more detailed.
To be clear, cryptocurrency mining, the process involved in using computer graphic processors to “farm” coins, was already banned in China. This happened earlier this year. The new rules revolve around a ban on balance mining and exchanging cryptocurrencies digitally. While a portion of the miners were leaving China since the ban, a significant amount of them remained within the country. The new rules could force miners to move more quickly.
A significant amount of Chinese cryptocurrency miners are predicted to move to the United States, where regulation of cryptocurrency trading and mining remains minimal. Due to a polarized Congress and surprisingly strong legal protections for the types of financial transactions employed by cryptocurrencies, this is unlikely to change anytime soon.
For some time now, the value of cryptocurrencies has been falling in response to China’s announcements, although volatile fluctuations in cryptocurrency values are not uncommon. However, the long-term impact of China’s policies is unclear. Perhaps this will mean more GPUs will be available, so PC gamers will be able to get the 3080 for their new gaming builds before Nvidia’s 40 series arrives in late 2022.
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