China impact on cryptocurrency
In May , the Chinese government announced a major crackdown on cryptocurrency mining and trading. CBDCs are cryptographically secure digital currencies issued by central banks. Every fraction of the digital currency is recorded on an immutable and traceable ledger, for full transparency. The advantage of CBDCs is that they will allow faster, cheaper and fully transparent payment systems. China has historically dominated global Bitcoin mining operations. If Bitcoin were a country, it would be in the top 30 energy users worldwide, according to the University of Cambridge Bitcoin Electricity Consumption Index with China ranking first at almost double the energy consumption of the US in second place.
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- Does the Chinese New Year really affect Bitcoin's price?
- US leads world in bitcoin mining after China crackdown sends industry overseas
- Bitcoin plunges 14% to $51,541 due to power outage in China
- China cracks down harder on cryptocurrency, banning all transactions
- Bitcoin plunges below US$40,000 as China widens its crypto crackdown
- Digital Yuan: China’s Attempt to Replace Cryptocurrency / USD
- Cryptocurrency market plunges on China fears tied to Evergrande property developer
Does the Chinese New Year really affect Bitcoin's price?
In July, we introduced our commentary series focused on how Chinese government policies shape investment opportunities in China, in emerging markets and globally. Digital currencies are the focus of our fourth case study on how the visible hand of the Chinese Communist Party CCP creates significant disruption and opportunity. China has been cracking down on cryptocurrencies for years, but the enforcement has been inconsistent. As a result, investors have found workarounds and the market has flourished.
However, there is a growing consensus that the CCP means business now, and this time will be different.
The last big crackdown occurred in when regulators simultaneously banned domestic cryptocurrency exchanges and initial coin offerings. These bans were intended to make it more difficult for the average citizen to participate in the crypto market, but most active Chinese traders eventually found ways to access foreign exchanges and remained a considerable force in the global crypto market.
The current crackdown was initiated in mid-May shortly after cryptocurrencies started selling off on news that Tesla had suspended the acceptance of bitcoin because of environmental concerns. The first shot across the bow was a statement by the Chinese central bank the Peoples Bank of China, or PBoC reiterating that financial institutions and payment companies were prohibited from providing any services related to cryptocurrencies.
A joint statement from three financial industry associations echoing the same warning quickly followed. The growing consensus that this time is different arguably has more to do with the source than the actual directives. Now that top leadership is championing the crypto crackdown, it is sure to be a priority. We are already seeing signs of increased execution: key provincial governments have banned cryptocurrency mining, regulators have summoned bank leadership teams to reiterate the ban on providing cryptocurrency services, companies have shut down amid allegations of providing crypto trading and services, the microblogging site Weibo suspended crypto-related accounts, and there have been mass arrests of people suspected of using cryptocurrencies to launder money.
Now, the Chinese are arguably on the cusp of leading the next major innovation in the global monetary system by turning legal tender into computer code. Libra was recently rebranded in anticipation of its launch and is now called Diem. Most major governments saw Libra as a threat to monetary sovereignty. Technical details are limited, but unlike most other cryptocurrencies, DCEP is run on a centralized closed network that provides the PBoC with complete access and control.
Similar to paper money, the digital yuan does not require internet access or pay interest. The issuance and distribution is via a two-tiered system where PBoC issues the digital yuan to intermediaries first tier , and then it is distributed to retail market participants via digital wallets second tier.
The intermediaries currently include the major state-owned banks and large payment companies like Alibaba, Tencent and UnionPay. The two-tiered system combined with the lack of interest payments is expected to minimize any potential competition with bank demand M1 and time deposits M2 due to concerns that disintermediating the banks would risk destabilizing the broader financial system.
To ensure nationwide acceptance, the government has already mandated that all merchants who accept digital payments must accept the digital yuan. Although there is currently no timetable for the official nationwide launch of the DCEP, the government seeks to achieve extensive domestic circulation by the Winter Olympics.
The PBoC also recently announced that it will explore cross-border payment programs in coordination with other central banks. But disruption on this scale is likely to create big opportunities for some companies and significant headwinds for others. We expect the digitalization of money to drive continued growth in digital payments.
However, digitization also lowers the barriers to entry for new players and thus could foster increased competition in global digital payments as well as more broadly across the financial tech industry. The adoption of the digital yuan will generate vast amounts of data, creating increased demand for AI and other technology needed to store and analyze this data.
Our portfolios include many technology companies that we believe will benefit from big data and the increased production of data globally. Data needs to be stored, which increases demand for companies at the cutting edge of cloud technology and hardware. And, the data also needs to be analyzed, providing tailwinds for AI, database and software companies. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice.
The views and strategies described may not be appropriate for all investors. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations.
As a result of political or economic instability in foreign countries, there can be special risks associated with investing in foreign securities, including fluctuations in currency exchange rates, increased price volatility and difficulty obtaining information. In addition, emerging markets may present additional risk due to potential for greater economic and political instability in less developed countries.
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US leads world in bitcoin mining after China crackdown sends industry overseas
The digital yuan is the second central bank digital currency after the Bahamian Sand dollar , and the first issued by a major economy. Chinese authorities have announced that they plan on using e-CNY during the Beijing Winter Olympic Games and throughout the various Olympic venues. We have analyzed the current conditions:. However, in contrast to regular cash, digital yuan cannot be pickpocketed and does not require carrying extra change in your pocket.
Bitcoin plunges 14% to $51,541 due to power outage in China
China intensified its crackdown on cryptocurrency Friday, declaring all financial transactions involving cryptocurrencies illegal and issuing a nationwide ban on cryptocurrency mining, the power-hungry process in which vast computer networks compete for newly created crypto tokens. Also read: Explained What's new in China's crackdown on crypto? The bank reiterated that it was illegal for offshore crypto exchanges to serve customers in mainland China, one way that traders there have skirted a long-standing ban on domestic crypto exchanges. China banned domestic cryptocurrency exchanges years ago, but trading has continued clandestinely by other means. And China has remained a major hub for cryptocurrency mining operations, in which computer farms compete to solve complex equations in return for Bitcoin, despite restrictions on the practice. As recently as , Chinese mining groups generated more than two-thirds of all Bitcoin issued daily. China is not the only country to have restricted access to crypto exchanges and related services. But crypto traders have found workarounds, masking their locations or using peer-to-peer methods to buy and sell digital currencies. US officials have also recently expressed concern about users gaining access to offshore crypto exchanges that operate under different rules. The exchanges are required to block access to US users, which has prompted some to hop countries in search of more amenable jurisdictions.
China cracks down harder on cryptocurrency, banning all transactions
Experts say China's crackdown on cryptocurrencies is likely in part because it wants to remove competitors to its digital yuan, which will be controlled by the government. The guidance, which was issued on 15 September, was posted online on Friday. As per Kapil Rathi, founder, CrossTower, India has a huge opportunity to benefit from China's crackdown on the crypto industry. Crypto can make India a global leader in this new technology," he said.
Bitcoin plunges below US$40,000 as China widens its crypto crackdown
Experts say large-scale Chinese miners of cryptocurrency — the likes of Bitcoin and Ethereum — will take their high-powered, electricity-guzzling servers offshore. Exchanges of the digital money and the numerous Chinese startups linked to the trade also are expected to rebase offshore after dropping domestic customers from their rosters. On Sept. The notice, issued in tandem with nine other government agencies, including the Bureau of Public Security, declared all related business illega l and warned that cryptocurrency transactions originating outside China will also be treated as crimes. Chinese banks began to prohibit the use of digital currencies in and stepped up regulations after
Digital Yuan: China’s Attempt to Replace Cryptocurrency / USD
Luke Sully, CEO at digital asset treasury specialist Ledgermatic, said in an email that people "may have sold on the news of the power outage in China and not the impact it actually had on the network". Some widely-followed blockchain analysts on Twitter pointed to a sharp drop in "hash rate" due to the outage. Hash rate refers to the volatility index that measures the processing capacity of the entire Bitcoin network, and it determines the power required by miners to produce new Bitcoins. A hash rate reduction slows transactions, which ironically makes it harder to move coins to exchanges for sale. The recent price drop is well within the bounds of typical volatility, it is noise not signal," said Edan Yago, co-founder at Bitcoin-based decentralised finance protocol Sovryn.
Cryptocurrency market plunges on China fears tied to Evergrande property developer
SHANGHAI — China intensified a crackdown on cryptocurrency trading on Friday, vowing to root out "illegal" activity, hitting bitcoin and other major coins and pressuring crypto and blockchain-related stocks. Ten Chinese government agencies, including the central bank as well as banking, securities and foreign exchange regulators, said in a joint statement they would work closely to maintain a "high-pressure" clampdown on trading of cryptocurrencies. The People's Bank of China PBOC said cryptocurrencies must not circulate in markets as traditional currencies and that overseas exchanges are barred from providing services to mainland investors via the internet.
The price of Bitcoin has fallen to its lowest point in months after China issued a new wave of restrictions clamping down on its use on Tuesday. The move, which also affects all other cryptocurrencies, means financial institutions and payment companies are unable to provide cryptocurrency services, such as transactions, in China. Other affected services include registration, trading, and settlements, according to Chinese industry bodies the National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China. The groups also warned against speculative trading of cryptocurrencies, which they said has the effect of "disrupting the normal economic and financial order. The coin's fall in price can be seen in the below graph by Statista , which uses data from Coindesk. However, Bitcoin does not appear to be the only cryptocurrency affected.
Bitcoin and ethereum have plunged sharply after a statement by Beijing that essentially signals the end for cryptocurrencies in China. That sounded the death knell for the digital trade in China after a crackdown on the volatile currencies. The price of bitcoin has been on a rollercoaster ride this year amid the crackdowns from China. It also plunged when Tesla abruptly suspended the use of bitcoin for vehicle purchases , citing fossil fuel and climate change concerns. The crypto crackdown also opens the gates for China to introduce its own digital currency, already in the pipeline, allowing the central government to monitor transactions. In June, Chinese officials said more than people had been arrested for using the profits from crime to buy cryptocurrencies.
Cryptocurrencies that seemed to be defying gravity just weeks ago came back down to earth with a bump on Wednesday after a roller-coaster ride which could undermine their potential as mainstream investments. The two main digital currencies, bitcoin and ether, pared back their losses in early afternoon trading after two of their biggest backers — Tesla Inc. While many analysts thought the explosion in crypto interest this year was not sustainable, the trigger for the shake-out was China's move on Tuesday to ban financial and payment institutions from providing cryptocurrency services.