China “flashes out” Bitcoin

Nakamoto 2025-9-23 18:17 48831人围观 BTC

“The two countries with the greatest influence on cryptocurrency in the world are China and the United States. China’s policy is absolutely crucial.” In September 2016, in a computer room in Sichuan, 550 Bitcoin mining machines were running day and night

“The world’s biggest influence on cryptocurrency

The two countries are China and the United States

China’s policies absolutely matter”

In September 2016, in a computer room in Sichuan, 550 Bitcoin mining machines were operating day and night. Picture/Visual China

China “snapped” Bitcoin

Staff reporter/Chen Weishan

Published in the 998th issue of "China News Weekly" on June 7, 2021

After reaching the highest point in history in April this year, the price of Bitcoin has plummeted. The increase in China's regulatory policies in mid-to-late May is undoubtedly one of the incentives.

Starting from May 18, China has intensively released regulatory policies on cryptocurrency: On May 18, the Inner Mongolia Development and Reform Commission established a reporting platform for virtual currency “mining” companies.； On the same day, the China Internet Finance Association, China Banking Association, and China Payment and Clearing Association issued the "Announcement on Preventing the Risks of Speculation in Virtual Currency Transactions"” ； On May 21, the Financial Affairs Commission of the State Council requested to crack down on Bitcoin mining and trading activities and resolutely prevent individual risks from being transmitted to the social sector. ； On May 26, the Inner Mongolia Development and Reform Commission issued eight measures to resolutely crack down on and punish virtual currency “mining” to solicit opinions.

From 2013 when Bitcoin trading was still regarded as a commodity buying and selling activity that ordinary people could freely participate in, to the removal of domestic virtual currency exchanges in 2017, to the clear crackdown on mining this time, China's regulatory policy on cryptocurrency is the most stringent among the world's major economies. Given the influence of Chinese players in the cryptocurrency world, every statement made by Chinese regulators will be directly reflected in significant fluctuations in the value of Bitcoin.

Chinese regulations shake up Bitcoin price

“The price of Bitcoin is like a child's face, it changes at will, often rising and falling sharply. ”A former Bitcoin "mine" owner told a reporter from China News Weekly that due to a sharp drop in Bitcoin prices, his "mine" suffered losses and was shut down before the outbreak of the epidemic in 2020. At that time, the price of Bitcoin hovered at seven to eight thousand US dollars, and he missed the Bitcoin market that started in the middle of last year.

By the end of 2020, the price of Bitcoin was close to US$30,000. This trend continued in 2021 until it hit a record high price of US$64,863 on April 14.

“In order to cope with the impact of the epidemic, central banks of various countries had to adopt some extremely loose monetary policies, resulting in very abundant liquidity in the market. At the same time, loose funding caused some institutions to worry about the devaluation of legal currencies, so they turned to some hedging products. Institutions began to recognize cryptocurrencies such as Bitcoin as a type of investable asset allocation. ”When explaining to reporters why Bitcoin has experienced a surge in prices, a senior person in the currency circle believed that in the past year or so, there has been an obvious trend of support from foreign institutions, especially Wall Street institutions. “Cryptocurrency will also be listed as an investable asset class in the research report, and cryptocurrency asset-related services will be provided to customers."

It’s not just institutions investing in cryptocurrencies, but companies like Tesla. Tesla’s profit in the first quarter of 2021 reached US$438 million, nearly a quarter of which came from Bitcoin transactions. Its financial report shows that Tesla purchased $1.5 billion worth of Bitcoin in the first quarter of this year and made a profit of $101 million after selling part of it.

Tesla's "coin speculation" is behind Musk's platform cryptocurrency. “Another reason for the enthusiasm for cryptocurrencies this year is the platform of business leaders like Musk, whose comments on social media can easily disturb the value of currencies. ”The aforementioned veteran in the currency circle said that in addition to the above reasons, technological evolution also provides underlying support. “An important tipping point in this market is the explosion of the decentralized DeFi ecosystem, which has spawned many functions and platforms similar to those of traditional financial institutions."

In his view, the influence of these three factors, including loose funding, institutional entry, and technological evolution, continues. “Especially in the recent period, institutions may not have exited the market, because those addresses with a large number of currency holdings on the chain are still increasing their holdings, and some even believe that some institutions are entering the market at the bottom."

But the short-term effects brought by Musk on cryptocurrencies are weakening. On May 12, Musk questioned the high carbon emissions generated by Bitcoin mining and trading on social media and announced that Tesla would suspend Bitcoin payments. Affected by this, Bitcoin fell by more than 10% that day, all the way to around $49,000.

A senior cryptocurrency analyst told China News Weekly, “Since the beginning of this year, the price of Bitcoin has been trending upward, even showing some overheating sentiments. In the later period, animal coins and even meaningless air coins have appeared. There is a need for adjustment, and there is indeed a price bubble. ”

Just a week after Musk's question, on May 19, Bitcoin experienced a decline that was "severe enough to rank among the top ten in history," the aforementioned senior analyst told reporters. On May 19, Bitcoin directly broke through the US$40,000 mark, and even approached the US$30,000 mark, with a maximum decline of 30% in one day. The final decline narrowed, but still exceeded 13%. Other types of cryptocurrencies have not been spared. According to statistics from the Bitcoin Home website, the total liquidation amount on major exchanges within 24 hours was US$7.006 billion, approximately 46 billion yuan, which has set a record for the largest single-day liquidation in the history of cryptocurrency.

At the end of May, the price of Bitcoin was almost cut in half compared with the historical high it reached this year. “The reason for the recent decline must be China’s latest regulatory policies. The two countries with the greatest influence on cryptocurrency in the world are China and the United States. China’s policies definitely play a decisive role. ”Said the aforementioned veteran in the currency circle.

“Can “mining” be banned?

“It can be said to be a complete ban. ”Chen Weigang, director-level supervisor of the supervisory board of key financial institutions of the China Banking and Insurance Regulatory Commission, told China News Weekly.

“It should be that almost no one will invest anymore. The drop has been huge. From the price point of view, there must be more selling than buying, otherwise how could it have dropped so much. ”A Bitcoin holder told reporters.

“In fact, the trading of virtual currencies, including Bitcoin, was banned more than three years ago, and there is currently no exchange in the country. ”Chen Weigang said. The ban he mentioned refers to the "Announcement on Preventing Financing Risks of Token Issuance" jointly issued by the central bank and seven other ministries and commissions on September 4, 2017, which clearly prohibits virtual currency transactions.

About a year later, in July 2018, the central bank revealed that the 88 virtual currency trading platforms listed in the list had basically achieved risk-free exit. Bitcoin traded in RMB had dropped from more than 90% of the world's share before to less than 1%, which was considered to have avoided a virtual currency bubble.

After the "9.4 ban", domestic cryptocurrency exchanges moved their servers overseas one after another, and regulators continued to block virtual currency trading platforms that "went overseas". As of the end of May 2018, 110 websites including trading platforms such as Huobi.com and Binance.com had been blocked.

Although cryptocurrency exchanges no longer exist in the country and related websites have been blocked, players in the currency circle have not stopped trading.

A person close to the regulator told China News Weekly that there are currently two main ways to trade cryptocurrencies, including Bitcoin, in the country. One is to trade on overseas exchanges through "circuit the firewall", and the other is to trade through underground banks.

“For example, underground banks registered two companies in China and the United States, used companies in the United States to purchase Bitcoins, and then used domestic companies to receive the currency payments. ”He explained to reporters that the controls on such capital flows have become increasingly strict. “In the past, payments were often made in the name of business payments. Now such payments also require sufficient proof, such as sales contracts, etc., to ensure that there are real business transactions, otherwise it will not be possible. Although it cannot be completely eliminated, it is becoming increasingly difficult to trade through such channels, and the supervision of currency speculation funds has been treated the same as anti-money laundering. ”

Trading has long gone underground. This time, supervision has been tightened. Whether it is the "Announcement on Preventing the Risks of Speculation in Virtual Currency Trading" issued by the three associations or the Financial Commission's statement, the "9.4 Ban" requirements are still followed for the trading process. Many people in the industry also said in interviews with reporters that the Financial Commission has clearly cracked down on Bitcoin mining and trading and "puts mining before trading. You can also see that this time supervision is directed towards mining."

This is also true from the reaction of local supervision. Inner Mongolia first issued detailed rules on May 26. Among the eight measures issued by the Autonomous Region Development and Reform Commission on resolutely cracking down on and punishing virtual currency "mining", the scope of the crackdown includes mining big data centers, cloud computing companies, communication companies, Internet companies, Internet cafes, etc., as well as entities that provide venues and power support for mining companies. Companies and related personnel who engage in mining behavior are included in the blacklist of dishonesty in accordance with relevant regulations. Inner Mongolia's crackdown on mining began in March, when it announced a comprehensive cleanup and shutdown of virtual currency mining projects. All virtual currency mining projects will be withdrawn by the end of April 2021. At the same time, new virtual currency mining projects are strictly prohibited.

Some mine owners also told reporters, “In fact, there have always been requests to close down mines, so don’t take it too seriously. ” But this time the regulatory stance is obviously more stringent. Although other places have not yet issued detailed rules like Inner Mongolia, many mines contacted by China News Weekly reporters said that mining of cryptocurrencies such as Bitcoin and Ethereum has been suspended. Only FIL mining projects with less energy consumption are retained, and mining machines are being transferred overseas. "The transfer speed is not that fast, and the company has no overseas layout before."

Mars Cloud Mine also announced that in order to cooperate with the regulatory spirit of relevant departments, after careful study and decision, some mining machines of Mars Cloud Mine will be transferred to the mine in Kazakhstan. The relevant mining machines will be shut down on May 23. The transfer period is expected to be 3 to 4 weeks, and access to mainland IPs will be blocked from 20:00 on May 26, Beijing time.

“Domestic mining is still difficult to completely ban, this time it mainly targets corporate mining behavior. Management and control can be achieved through financial audits on the income and expenditure side. For example, corporate mining will eventually be reflected in revenue and profit appreciation. If part of the profit is derived from mining, the company may not be allowed to enter the account. In this way, the mining behavior of the company can be blocked. ”Chen Weigang said that some individuals purchase mining machines for mining, especially in areas with abundant water and electricity. How to block them remains to be seen in the next step. “But it is equivalent to cutting off the large households. Although the number of remaining small households is large, the total number is not large. ”

Regulatory gaps bring challenges

“This round of domestic regulatory policies may be more based on considerations of reducing energy consumption. ”The aforementioned senior cryptocurrency analyst told China News Weekly.

In the global distribution of Bitcoin computing power, China occupies the absolute first place with 65.08% of the computing power, far surpassing the United States, which ranks second, with only 7.24% of the computing power. Specifically in China, the top four provinces and regions with the highest computing power distribution are all located in the west: Xinjiang, Sichuan, Inner Mongolia, and Yunnan, with Xinjiang accounting for more than 35%.

Behind this is a lot of power consumption. According to the index released by the Alternative Finance Research Center of the University of Cambridge, it is estimated that the annual power consumption of mining is about 115.54 TWh at the end of May. Intuitively, it accounts for 0.53% of the global annual power consumption. If compared with the power consumption of various countries, you will find that it ranks 33rd in the world after the United Arab Emirates and before the Netherlands.

In addition to their excessive carbon footprint, how cryptocurrencies such as Bitcoin should be regulated as investment products, and even whether they can be called an investment product, have been the focus of recent regulatory statements by various countries.

“Some people confuse the two concepts. Cryptocurrencies such as Bitcoin are not legal tender. Currency must be guaranteed by national sovereignty. It can also be seen from the evolution of currency forms. From precious metal currencies such as gold and silver coins to banknotes and digital currencies, the value of itself has been declining, but now people are hyping the value of Bitcoin itself. ”Chen Weigang believes that Bitcoin is not even an investment product, but can only be regarded as a "speculation product." "The 'tulips' that were popular in Europe at that time can still see a bouquet of flowers, but now Bitcoin is just air and nothing. ”

In its "Financial Stability Review" released in May, the European Central Bank also compared the speculation in cryptocurrency prices to "Tulip Mania", reminding it of its risky and speculative nature. On May 19, when the value of Bitcoin fluctuated violently, European Central Bank Vice President Guindos said bluntly that Bitcoin is an asset with very fragile fundamentals and is highly volatile. Cryptoassets should not be considered “real investments” because it is difficult to discern their underlying value. But Guindos also said that cryptocurrency asset market fluctuations do not pose a risk to overall financial stability.

Overseas supervision has indeed become stricter in recent times, but more emphasis is placed on regulating cryptocurrency transactions to prevent risks and avoid illegal activities such as tax evasion. For example, U.S. Securities and Exchange Commission Chairman Gary Gensler pointed out during a congressional hearing on May 26 that crypto-assets have both the nature of commodities and securities, and it is necessary to strengthen supervision of cryptocurrency exchanges with the goal of allowing investors to enjoy the same protection in securities transactions. The U.S. government also recently proposed that cryptocurrency transfers exceeding $10,000 must be reported to U.S. tax authorities.

On May 21, the Hong Kong SAR government recommended that cryptocurrency exchanges operating in Hong Kong must obtain a license from the Hong Kong market regulator, that is, a "licensed operation" and can only provide services to professional investors.

“Overseas regulatory authorities have been strengthening supervision of cryptocurrency exchanges. This year, there are exchanges such as Coinbase listed on the market. Coinbase's operations are quite conservative. For example, it will not open leveraged trading tools to retail investors, but will only open them to some qualified institutions. ”The aforementioned senior cryptocurrency analyst said, “Because of regulation, the operations of exchanges are relatively standardized, and institutions also trust exchanges, forming a virtuous cycle. Most Wall Street institutions will place large amounts of funds in exchanges like Coinbase, rather than some small, wild exchanges. ”

He believes that “Foreign regulatory stances are indeed becoming stricter, but they are not as strict as China’s. Domestic regulations have not chosen to gradually regulate cryptocurrency transactions, but to a certain extent, shut them down across the board. ”

In fact, in 2013, the central bank and five other ministries and commissions issued a notice on preventing Bitcoin risks. While clarifying that Bitcoin is not legal tender, it stated that "Bitcoin trading is a commodity buying and selling behavior on the Internet, and ordinary people have the freedom to participate at their own risk." However, regulatory standards have gradually tightened since then, and the domestic investment structure dominated by retail investors may be one of the reasons.

“Cryptocurrency trading should not be encouraged for individuals because of the high volatility and the cognitive demands of investing in cryptocurrencies. ”Someone in the "currency circle" told China News Weekly that more than ten cryptocurrency ETF funds have been established around the world, and institutional investment should become mainstream.

Chen Weigang also believes that foreign Bitcoin transactions are more of a game between some institutions and consortiums, but in China, retail investment is the main focus. “Just like the previous P2P, it actually appeared earlier in countries such as the United Kingdom and the United States than in China. However, when P2P was at its peak in China, a very wide range of people participated. The same is true for the Bitcoin hype this time. Just because something can exist abroad does not mean it is reasonable to exist in China. ”

“In fact, if all exchanges are blocked, or there is a gap in domestic and foreign supervision, it will also bring challenges to supervision, because anyone can register an account on the relevant website, and the generated code is the Bitcoin payment account, which is completely anonymous and cannot be traced. However, because there are subsequent transactions, the exchange may also track the holder's information. In this case, the exchange can play the role of an 'informant' for supervision. ”A senior person in the "currency circle" revealed to China News Weekly that as far as he knows, although some exchanges are currently unable to operate within the country, they still cooperate closely with domestic regulatory authorities and are willing to provide information to the government.

Editor on duty: Xiao Ran

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