Bitcoin was received with utmost warmth by China when it was introduced as the world’s first decentralized currency. Its stance however on the digital currency has changed completely since then. This change can be accredited to the governments’ dislike of decentralization that bitcoin can bring to financial transactions within the country and overseas as well. The authorities started to clamp down on all bitcoin trading activities in 2017, they put up an entire firewall to block all kinds of trading activities in the cryptoverse, with penalties announced for those who tried to indulge in any bitcoin trading activity.
The essence of bitcoin lies in its decentralization. The fact that no central authority can govern all the transactions occurring over the bitcoin blockchain makes is bias proof. In the event bitcoin starts to garner more attention than the national currency of China, the economy could be destabilized and the government could no longer exercise control on a decentralized ledger. Moreover, initially, criminals thought bitcoin to be a great tool for transferring illegal money overseas. This became a major concern for the governing entities and they decided to turn their backs on bitcoin and all related trading activities.
It started out as initial warnings given to the public about the implications and risks of using a digital currency with no central entity exercising control over it. In 2017, China put a firewall that blocked all crypto and bitcoin trading websites, the violation of which would result in serious charges and criminal prosecution with the exception of Hong Kong. This ban had a very big impact on the price of bitcoin and its value fell from $9,052 to $6,914. China did more than account for the 90% of the Bitcoin trading to the renminbi. It also has the world’s largest bitcoin mining pool, as well as companies that produce hardware (GPUs and high-speed computing chips) for bitcoin mining. Fast forward to today, China is now hunting down bitcoin miners as well due to its detrimental effects on the environment and aforementioned reasons.
Following this came the ICO ban where the government warned people of the airdrops deeming them to be a sort of ICO (Initial Coin offering). China’s government maintained its tough stance on ICO’s declaring them to be illegal fundraising activities. Even the Chinese nationals living overseas were subject to these bans and were expected to conform to these laws and regulations. After this, the fraudulent ICO’s were identified and shut down. As if this wasn’t enough to ensure there wouldn’t be any crypto-related activity taking place, the Chinese government released new rules that would prevent the nationals from making discussion groups about bitcoin and cryptocurrencies in Social Media applications. The ones that existed were shut down. In order to stay off the radar, some of them renamed their groups to the blockchain, the underlying technology of bitcoin.
Contrary to bitcoin, blockchain’s popularity has surged in China with the passage of time. The technology is considered to be a revolutionary tool that can be utilized in many different ways to ensure security, reliability, and transparency. The president of China, Xi Jinping himself, has expressed his support for the technology on many occasions.
To conclude, a decentralized ledger granting anonymity to its users acted as an intimidating technology to governments determined to exercise control over the financial system over their country. For now, China is allowing nationals to hold on to their bitcoins, but how long will that last?