China has announced that it will ban all cryptocurrency in the country. This is a significant development, as cryptocurrency is seen as a potential solution to many of the country’s financial problems. The announcement comes as a surprise, given that China has been one of the most supportive countries in the world for cryptocurrencies. In fact, some believe that this decision may be part of Beijing’s effort to control the spread of this technology. The ban will come into effect from September 1st, 2020 and will apply to all businesses and individuals who deal in cryptocurrencies. It is not clear yet how exactly China plans to regulate these new technologies.
The People’s Bank of China says it’s concerned about national security and the safety of residents’ assets. Bloomberg reports that the country’s bank says that cryptocurrency isn’t a fiat currency, which means it isn’t a government-issued currency and is not backed by a commodity.
China is also looking to root out the mining of digital assets. Chinese officials are targeting crypto because of its possible ties to fraud, money laundering, and excessive energy usage. The country has a very concentration of the world’s crypto miners, which are using a considerable amount of energy. China is already facing a severe power crisis, and excessive mining isn’t helping.
As you might expect, the price of Bitcoin and other cryptocurrencies were harmed by the announcement, with Bitcoin falling about 8%, down to just over $41,000. It has since rebounded a little and is now selling for closer to $42,000, though. Etherium also dropped, and is now selling for around $2,800, a 7.6% decrease. Even Dogecoin fell by more than 6% after the news broke.
Whether it’ll have a long-term effect on the price remains to be seen, but some experts think it’ll just be temporary. “China’s ban on all cryptocurrency trading activity will have some short-term impact on the currency’s valuation, but long-term implications are likely to be muted,” said Ganesh Viswanath Natraj, an assistant professor of finance at Warwick Business School.
