BITCOIN CRASHES! China Has It In for Crypto

China is cracking down on virtual currency Bitcoin, and it's getting Chinese companies to help. There are strategic reasons it's doing this. But like many things the Chinese Communist Party does, there could be a silver lining for users. Earlier this week, the price of Bitcoin dropped below $30,000 for the first time since January, after hitting an all-time high of almost $65,000 in mid-April.

While Tesla chief executive Elon Musk's tweets are one of the reasons for this price dip, another major reason is China's massive crackdown on the digital coin and cryptocurrencies in general.

The country has always had a firm stance against cryptocurrencies. Back in 2013, China’s central bank had barred financial institutions from handling Bitcoin transactions when the price of the digital coin jumped from $100 to $1,000 within a few months. It had also banned fundraising through initial coin offerings and shuttered domestic Bitcoin exchanges in 2017. However, the government has intensified its crackdown on cryptocurrencies in recent months, looking to put an end to even their mining and trading.

In May, Chinese Vice Premier Liu He and the State Council issued a warning saying it was necessary to “crack down on Bitcoin mining and trading behavior, and resolutely prevent the transmission of individual risks to the social field”.

This was after three Chinese state-backed financial associations raised concerns about risks emerging from the volatility of cryptocurrencies, and directed their members including banks and online payment firms to not provide any cryptocurrency-related services. According to Wood, this is a big deal since the message is that China does not want its citizens owning crypto assets. “This is in part because of the clear ability to use so-called stablecoins like Tether to circumnavigate the closed capital account. It is also, more importantly, because China does not want any competition when it launches the digital renminbi nationally, most likely in the fourth quarter of this year," Wood opined

China’s central bank digital currency (CBDC) is expected to give the government total transparency on its citizens’ savings and spending habits.

“Certainly, the decentralized aspect of blockchain technology, which is so appealing to libertarians opposed to fiat currencies as state monopolies, is the complete antithesis of China’s collectivist system. The People's Republic of China clearly understands this. This is certainly a far more important issue to Beijing than the carbon generating aspects of bitcoin mining," Wood wrote.

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