China banned cryptocurrency activities and this is what we know so far.
If you’re anything like me and are constantly refreshing your crypto wallet, you will have noticed a sudden and drastic dip that occurred on Friday, September 24th. Although this is the 20th time China has done this, the Peoples Bank of China has announced yet again that they will be cracking down even harder on banning all crypto-related activity. China bans cryptocurrency activities and these crypto-related activities include the following:
- Order Matching
- Token Issuance
The reason that was given for this abrupt, but unsurprising change was due to the fact that they deem cryptocurrency to be “a threat to citizens’ assets and a tool for facilitating criminal activities” such as money laundering.
When this news went public, bitcoin fell by about 8%, while many of the smaller cryptocurrencies took an even greater hit.
This will be a tough hit to crypto users in China, particular individuals invested in crypto mining, as China has been a very popular place for mining due to low electricity costs in areas such as Mongolia.
The whole reason for China wanting to ban cryptocurrency is to simply regain more control over economic activity within the country. Cryptocurrency had become a great threat to the government since it is decentralized meaning that they had literally no control over its regulations. As you can imagine, it’s not the actual idea of crypto that the Chinese government doesn’t agree with, it’s the fact that they have no control over it and it is not regulated. With that being said, there is news that China is now trying to create their own cryptocurrency called eCNY, that will be regulated by the government as it will not be utilizing blockchain technologies.
Hold on, what even is cryptocurrency?
Cryptocurrency is a digital asset that operates as a medium of exchange. It is not a physical currency that you can touch, but it is digitally secured using blockchain and you can hold onto it in a digital wallet. Just like our regular currencies, the value of cryptocurrency is based upon the overall demand, scarcity, and utility. The difference between the two however is that cryptocurrency is decentralized, meaning that when crypto data is entered into the blockchain, it can no longer be altered. This means that all crypto transactions can be carried out online from peer to peer and the transaction will not be dependent upon a central bank or governing body acting as a third party in the exchange.
Cryptocurrency is based upon blockchain technology and is secured by cryptography. Cryptography is what keeps the transactions private and secure. Cryptography literally means “secret writing.” The privacy that cryptography and blockchain offer, makes cryptocurrency well immune to any sort of government control or manipulation. There is also a new category of crypto activity called NFT’s. Check out my latest article on everything you need to know about NFT’s.
There are already some cryptocurrencies that have been officially integrated into the physical world through crypto credit cards, but most cryptocurrency remains intangible meaning that you cannot physically touch it. It is 100% digital and stored on your device.
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How do people buy cryptocurrency?
Before China banned all crypto-related activity, it was easy to buy, sell and trade crypto with just a few clicks of a button. Crypto has become so popular over the last few years, that there is now a wide variety of crypto exchange platforms people can choose from.
Due to there being such a large choice in what platforms you can use for the purchase of cryptocurrencies, you need to ensure that you are doing some research to understand which exchange will be best suited to you. There are also plenty of scam exchanges out there so do be careful that you are researching on credible sites. You can check out this article on how you can stay safe while purchasing cryptocurrencies.
The following is a list of some of the most popular cryptocurrency exchange platforms in 2021 based on ease of use, safety and flexibility:
Coinbase: Best overall Exchange
Cash App: Best Exchange for Beginners
Binance: Popular for investing in altcoins
Bisq: Top decentralized platform for crypto
Shakepay: #1 exchange for Canadian Investors, but only for the purchase of Bitcoin and Ethereum. Shakepay even gives you free satoshis every day when you go into their app and shake your phone. A satoshi is a very small amount of bitcoin, equating to roughly one 100 millionth of a bitcoin.
Once you have chosen the cryptocurrency exchange that is best for you, you can go ahead and sign up. It will likely ask you for some personal information, which may include proof of identification. After reviewing their terms of services, the exchange will likely prompt you to make your first deposit into the platform. This process is generally easy as you can simply link your bank account for a direct deposit. Be aware that this transaction can take 3-5 days to reach your account. Once the deposit has been made, you can go ahead and convert your dollars into your desired cryptocurrency.
There is no minimum or maximum to how much money you must spend buying cryptocurrency, but a good starting point would be making a $500 – $1000 investment. If you are looking for some extra funding and have already established a strong credit history, you may want to consider looking at BlockFi. BlockFi is a lending platform which provides financial solutions for anyone who wants to start investing into cryptocurrency. This company will allow you to get loans with interest rates as low as 3% to 8%.
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What do you mean, that crypto has already been banned in China? How is this time different?
Any sort of crypto related trading or transaction has already been banned in China. In fact, it’s been banned for over 3 years now, but it has continued to be traded and utilize online through a variety of online crypto exchange platforms.
When China first banned crypto, they were essentially just warning crypto buyers that they would not be protected when purchasing or trading digital assets. The government then continued to put further pressure on the industry by directing banks and all other payment platforms to not accept or facilitate any transactions that would be using cryptocurrency. Following this, they also continued to officially ban crypto mining in the country.
The difference between those previous bans and this current one is that Chinese officials are now making it very clear to the public that engaging in any crypto-related activities is now illegal and anyone caught doing so will be prosecuted.
Prosecution will not only apply to the individuals who are engaging in crypto activity within China. According to CNBC, a statement issued by the Beijing Office of the People’s Bank of China has warned that any foreign websites providing any sort of crypto-related service to their nation, will also be held responsible for executing criminal activity and will be charged for the crime.
Is there any other reason for China’s ban other than to regain economic control?
There is one other key reason for China’s ban of all crypto-related activity. Crypto-related activity includes mining which uses significant amounts of electricity and has been a large contributor to China’s terrible carbon footprint. China desperately wants to be seen as a leader in shifting our planet out of its climate disaster.
Quick rundown of Bitcoin Mining
In short, Bitcoin mining is what allows for new bitcoins to be entered into the digital currency’s circulation and developed on the Blockchain ledger. The way that Bitcoin is mined, is by using extremely sophisticated hardware that is designed to solve incredibly complex math equations. Once the computer solves an equation, it gains access to bitcoin and then this process is repeated.
Unfortunately, not just anyone can do this because the time and equipment it takes to carry this out is very costly. On the bright side however, once this currency is in circulation anyone (except for people in China) can purchase it using an online crypto exchange.
Now back to China’s ban – How much of a contributor has crypto mining been to China’s carbon footprint?
According to the ClimateAction, China’s President Xi Jinping has pledged that China will be carbon neutral by the year 2060. More specifically, the president has stated that they will make great efforts to ensure that greenhouse gas emissions in China will peak by 2030 and reach net zero by 2060. This may have been a near impossible feat if the country continued the same path that they were on with crypto mining.
The carbon emissions in China which have been directly linked to bitcoin mining have been accelerating at such a rapid pace in China they will soon “outstrip the total annual emissions of mid-sized European countries,” according to Donna Lu of newscientist.com.
These emissions pose a serious risk to the safety of our planet and therefore all living beings. By 2024, China expects that around 130 million metric tonnes of carbon will be released from bitcoin mining alone. This huge amount of carbon exceeds the annual carbon emissions of Italy and the Czech Republic.
Is China’s ban on Crypto looking positive or negative for the rest of the world’s crypto investors?
I don’t think that anyone can provide a definite answer to this question, although Ross Gerber, the CEO of Gerber Kawasaki Wealth & Investment Management seems to have a strong opinion on the matter.
Following China’s announcement on Friday, Gerber was quick to remark “This is great news for bitcoin. The last thing we want is China [to be] involved in the currency of the world.”
Although I personally have not determined where I stand on this topic, a likely reason that Gerber was quick to make such a solidified statement is because until now, China has been at the global forefront of all crypto-related activity. With the nation stepping down from being involved in anything crypto related, this may give other countries such as the United States a good opportunity to take full advantage of the increasing opportunities cryptocurrency has presented us with.
If you are feeling bullish on the world of cryptocurrencies, be sure to sign up for BlockFi and Earn up to $250 instantly when you open an account and invest in cryptocurrencies.
Read the Entire Investing in Cryptocurrency Series
- What on Earth is an NFT!?
- Buying a $65,000 Porsche with $6,028
- Best Cryptocurrency Platforms to Use in 2021
- BlockFi Review: Investing in Cryptocurrency the Right Way
- Unboxing the New Bitcoin Credit Card | Why You’ll Want One
About the Author
Joseph Hogue is a financial expert and investment analyst. After serving in the Marine Corps, he started his career investing in real estate before becoming an investment analyst for some of the largest private investors. He's appeared on Bloomberg and on CNBC as an investment expert and has published ten books in personal finance. Now he helps investors reach their financial goals and invest in the stock market with some of the same advice he used when working for the rich.