In the summer of 2021, the Chinese authorities announced that they would restrict users from mining and trading cryptocurrencies because of its extremely volatile market. This news has subjugated the news cycle of cryptocurrencies, and it has led to a drop in the value of all crypto coins. Chinese authorities first urged all the financial service providers to strangle the crypto transactions and trading and then ordered crypto trading providers to shut down everything. All the initiatives coming from Beijing had great consequences on people who invested in cryptocurrencies, which has led to a downturn in the market.
Are all these actions of Chinese officials affecting the crypto market? Will it affect the demand and supply of digital assets? Moreover, it has been seen that whatever happened in China is also affecting other countries but not in a negative way.
Supporting Digital Yuan
It can be easily seen how intensifying tightening up on mining and trading of digital currencies comes along with China’s Central Bank Digital Currency project. Chinese officials implemented a lottery system in which stacks of fiat currencies in electronic money have been added to the wallets of around 200,000 Chinese citizens. This is done to test the digital currency electronic payment systems. It can be expected that China is working on large-scale trials and is soon to implement something big in the coming months.
If we talk about the distribution of economic or political power, leaders of China are in the habit of encouraging rivalry and pluralism. The sprawling crypto sector of China could avoid analysis as it was not in straight conflict with strategic plans made by the government of China. The professor of business analytics of China named Yu Xiong said in an interview that China would not allow Bitcoin revolution or other cryptocurrencies to grow or explode. He added that Bitcoin would be a financial disaster if China started using it as a currency. He explained that China has CBDC, which is centralized and controlled by financial institutions, and there is simply no need to promote any decentralized digital currency.
The Global Situation
The entire world is witnessing that the crypto industry is breaking into pieces. Chinese traders will cease crypto trading, and mining will vanish or open up shop in another jurisdiction. Chinese citizens who loved using digital assets will now have to use the government centralized alternative instead of digital assets.