China’s Cryptocurrency Ban: Threatening Economic Freedom
Bitcoin. Ethereum. Dogecoin. Over the past year and a half, cryptocurrencies have been the hot button topic on Wall Street and in global financial markets. Slogans such as “buy the dip” and “doge to the moon” have littered Instagram and TikTok and have become synonymous with the crypto bull market. Major financial powerhouses such as J.P. Morgan Chase and Goldman Sachs have begun offering Bitcoin (BTC) to their clients, despite some CEOs having skepticism about the asset. Several Wall Street analysts have even gone as far as to say that cryptocurrency will one day replace the U.S. dollar and other fiat currencies (currencies that are backed by a country’s government). El Salvador even made BTC legal tender in the country as of September.
Despite the mad dash by people and large financial institutions to get into the crypto market, the People’s Bank of China (PBOC)—China’s top regulators—has explicitly banned all cryptocurrency mining and transactions, the first of its kind by any major nation. The move was a far cry from the country’s May ban on financial institutions from using cryptocurrency services. Chinese government regulators underscore crypto’s risk to their control of financial markets, potential financial crimes, the energy-intensive mining to create the currencies, and it is perceived as a threat in Beijing to China’s sovereign digital yuan. The news shook the crypto markets as benchmark currency BTC plunged 5% to ~$40,000, with other currencies following (a stark difference, however, from the 40% drop that BTC suffered upon the May crackdown).
However, notwithstanding the concerns outlined by the PBOC and other Chinese regulators, this ban on the crypto asset class represents a threat to the economic freedom of the Chinese people to participate in one of the most sought-after financial assets in recent times. U.S.-listed miners have so far not been massively affected by the ban, compared to miners that have originated in China. The crypto markets have proven time and again to be resilient in the face of a threat from the Chinese government. Analysts are even expecting a rise in global cryptocurrency asset prices long-term as companies and financial institutions continue to use and adopt crypto products and services. Payment companies such as PayPal have not offered crypto services in China, like Bianance since their blockade from China in 2017..
Coincidentally, the biggest losers in this move (and previous ones) are the Chinese. Prior to May, currency mining in China accounted for half of the world’s crypto supply. Crypto exchanges that originated in China—and have the most exposure to Chinese consumers—took the biggest losses, with tokens associated with the exchanges posting losses of more than 20%. With the crackdowns and bans of the past 6 months, miners have begun to move their operations overseas to more crypto-friendly countries. China will now be seeing a $6 billion loss that stemmed from annual mining revenue, which will now flow to mining regions in the U.S. and Russia (among others). This continued effort to quell the cryptocurrency movement only poses a threat to the Chinese, not worldwide consumers, in the long run, displaying the threat to the economic freedom of the Chinese people.
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