Is Bitcoin making a Comeback in China?
Tags: Bitcoin, Crypto, Cryptocurrency, Blockchain

The world’s most popular cryptocurrency started making a lot of noise in the news in 2017. During that year Bitcoin’s value grew more than 2000% from below $1,000 to $20,000 providing the cryptocurrency holders an unimaginable resource to grow their wealth. However, the negative attention from the skeptics started affecting the value of the currency.

As governments started cracking down on Bitcoin, it was China’s crypto community that suffered the biggest blow. China banned cryptocurrencies in early 2018 to be able to better regulate the economy and save it from the decentralized, peer to peer flow of wealth. That was the so-called beginning of an end for Cryptocurrency in Asia.

Then, a certain Global Times (China) editorial was released, that dealt with the Chinese cryptocurrency issue, noting that:“There’s an increasing belief that just saying no to bitcoin won’t be the eventual solution to the cryptocurrency issue. A more fundamental approach would be to embrace the new technology without putting the country’s financial system at stake.”

This is indeed a valid point. However, there are many factors to consider when it comes to defining what it means to “embrace” cryptocurrency, including cryptocurrency mining.

China is the Backbone of Crypto Industry

China is the location where the largest community of bitcoin miners reside. China accounted for about 70 percent of all Bitcoin mining. The low cost of electricity means that China’s mining pools are dominant over the entire Bitcoin industry. The requirement of cheap electricity makes it hard to make Bitcoin mining profitable. Chinese citizens, having access to cheap and subsidized electricity have an upper hand in becoming miners to earn the 12.5 new bitcoins pre-set to be released within each block.

This is why the world’s largest mining operation was eventually done by the Chinese company Bitmain. This privately owned company, apart from mining bitcoin and operating two mining pools, used to develop and sell ASIC chips. The ASIC chips are fundamental for the efficient mining process of Bitcoins. It was operating successfully until the regulators started clamping down on mining Bitcoin.

China was and is an inseparable part of the Cryptocurrency industry.

How the Regulators Clamped Down on Bitcoin

The Chinese central bank, the People’s Bank of China (PBOC), started to clamp down on bitcoin mining operations right after the currency grew enormously in value in 2017. The bank could not directly stop miners, but it restricted the amount of electricity available to the miners by controlling the local energy-suppliers.

Zhou Xiaochuan, who was then the PBOC governor, noted that the technological applications appeared to lack a genuine focus on the digital currency payments. Instead, they seemed to be a form of virtual asset transactions. Zhou added: “If they [Blockchain technologies] spread too rapidly, it may have a big negative impact on consumers. It could also have some unpredictable effects on financial stability and monetary policy transmission.”

Beijing took a hardline stance with an ICO-ban in September 2017 and continued the crackdowns on the remaining organizations that dealt in private Bitcoin trading. In February 2018, China started blocking the foreign cryptocurrency exchanges and ICO websites via what’s known as a “Great Firewall”.

The Change in Stance became Apparent Shortly after the Ban

If current news is anything to go by, newest developments in China are pointing towards a new chapter in its Cryptocurrency economy. China’s Ministry of Industry and Information Technology (MoIIT) recently unfurled a public cryptocurrency rating system where 28 cryptocurrencies were pitted against one another.

In a speech at the annual conference of the Chinese Academy of Sciences in Beijing, President Xi Jinping applauded the blockchain, saying “A new generation of technology represented by artificial intelligence, quantum information, mobile communications, internet of things and blockchain is accelerating breakthrough applications”.

Why bringing Bitcoin back is Not an Expiring Idea

The Chinese government and regulators know that China needs innovation, and that blocking emerging new technologies and the digital economy, enforces China’s image as a copycat manufacturer rather than an uniquene emerging economy.

As Xiao Xin, the editor of Global Times China puts it, “fencing off bitcoin exchanges can’t effectively end Bitcoin trade, and fears of a Bitcoin bubble will leave China behind in the digital currency revolution.”

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CINDX is an investment platform that allows individuals to combine several crypto exchange accounts into one trading terminal, and gives them the option to connect to the best managers without having to transfer their funds. Moreover, implementation of blockchain-based transactions will allow the trading history to be saved, and a rating system will be used to differentiate the successful managers from the less successful ones.

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