For the umpteenth time, China “bans” cryptocurrencies on its soil. After stopping the sale of crypto services and mining in mid-2021, it banned all transactions of this type at the end of September. But why are bitcoin enthusiasts irritating Beijing so much?
Since the start of the year, China has stepped up attacks against cryptocurrencies. After banning Chinese financial institutions from selling cryptocurrency-related services, then cutting off power to bitcoin miners, Beijing handed over a layer on September 24, 2021, outright banning all crypto transactions.
What bothers China so much about cryptocurrencies? The rather libertarian-inspired philosophy of cryptocurrencies is, of course, far removed from that of the Chinese Communist Party. The reasons for Beijing’s attacks on this sector, however, are much broader than an ideological conflict.
Beijing tightens the screw across the sector
As CoinDesk points out, China isn’t just tackling cryptocurrencies right now. It has undertaken to regulate more firmly the entire sector of fintech which certainly encompasses cryptocurrencies, but also many other areas where finance and technology intersect: mobile payment, online banking, etc.
” China has one of the fastest growing FinTech markets in the world », Writes Viviana Zhu, political analyst specializing in the Asia zone at the Institut Montaigne. The new payment systems quickly caught the interest of the Chinese population – many of whom live in rural areas and do not have traditional bank accounts. China has, moreover, actively supported its local businesses by “ delaying the opening of the financial sector to foreign groups », Points out Viviana Zhu. This favorable environment has enabled the Chinese FinTech sector to develop very quickly. According to the Institut Montaigne, 87% of the country’s connected population uses at least two FinTech services (mobile payment, online banking, crypto, etc.).
If Beijing has made the deliberate choice to regulate this sector little in order to promote its development, it is now undertaking to tighten the screws. ” Between 2010 and 2015, the sector was still very poorly regulated, writes Viviana Zhu. This has led to the emergence of many Ponzi scheme scams in the private lending industry.s (…) To this is added the stock market crash of 2015. This event, which showed the weaknesses of the Chinese financial system and the failure of the government to manage them, was considered politically embarrassing, but not only: it also sounded the alarm. ” alert on a risk of capital outflows », Notes the expert from the Institut Montaigne.
Tech companies overshadow Chinese state banks
Chinese authorities have also started to be alarmed that Chinese FinTech giants are becoming bigger than state-controlled banks and gaining influence, both economically and politically. Beijing has started to tighten the screw very firmly in this area. The company Ant Group, which manages the popular AliPay mobile payment application, has recently paid the price: Beijing stopped its IPO at the end of 2020 and strengthened the regulations that apply to online microcredit companies. Ant Group found itself forced to completely restructure, and especially to share its credit data with the Chinese authorities, specifies the newspaper Les Echos.
” This is just the tip of the iceberg, warns Viviana Zhu. The implementation of new regulations shows that the Chinese government wants to find a new balance between innovation and regulation in the FinTech field. “
On the subject of cryptocurrencies, other factors also weighed in the implementation of certain restrictions. One of the reasons China has decided to cut off the power to bitcoin farms – which there were many on its soil until recently – is because mining crypto such as this is very energy intensive. And while some farms took advantage of Sichuan’s abundant green hydroelectric power during the wet season, much of China’s electricity still comes from coal-fired power stations.
The ecological impact of cryptocurrencies
Even though China is now the country that emits the most greenhouse gases, and its environmental policy is far from flawless, it seems more and more to take the measure of the gravity of climate change. Beijing still does not commit to achieving zero carbon in 2050 at this time, but the country has indicated it is targeting it by 2060. And China is increasingly taking steps to support the transition. climate (development of renewables, cessation of investments in coal-fired power plants abroad, etc.)
As long as they are not mined in a less energy-consuming way, or with 100% green electricity, cryptocurrencies such as bitcoin have a bad carbon footprint and therefore stand out in the greener policy that attempts to put up China.
China’s latest attack has little effect on bitcoin
Note that the impact of China’s new restrictions on cryptocurrencies has been moderate. The Chinese restrictions of May 2021 and the closing of crypto farms in June on its soil had been a thunderclap, as China was then home to between 65 and 75% of the world’s mining activity.
the hashrate – the amount of calculations that all miners are able to perform per second – had been almost halved. And the price of bitcoin had plummeted between mid-April and mid-June, dropping 53,000 euros below the 30,000 euros mark in the meantime. The price of bitcoin, on the other hand, changed very little on September 24, after China’s last ban. This is a sign that industry players have come to terms with the idea that cryptocurrencies are no longer welcome there, and were not otherwise surprised by these announcements.