Writing History: China Bans Crypto. A Full Breakdown
If you’ve been following crypto for a while now, you probably know that China has been monitoring it very closely. China’s hostility towards cryptocurrency began back in 2013 when cryptocurrencies were still in their early years. After laying dormant for several seasons, old bans originally implemented in 2013 and 2017 got reinstated anew, and much more. But first, let’s see what happened at the start of it all and how it turned out to become this way.
2013 – In Cold Bans
On December 5, 2013, a statement was issued by the People’s Bank of China (PBoC) and the Ministry of Industry of Information, alongside other institutions that specialize in finance monitoring.
Thus, it was a currency considered to have no legal backbone like a nation or another centralized authority. Oh, and it was noted that bitcoin could be used for money laundering.
Anyone who wanted to trade it was free to do so, but at their own risk. Perfect timing, indeed, for those who did as this is the period when BTC broke the $1,000 ceiling for the first time ever.
Have you heard of MtGox? If not, then you must be new to bitcoin. MtGox was the exchange that made everyone go off unanimously after bankrupting. Nope, not because something happened to it, but because it got goxxed. That’s the verb used to describe extremely specific fraudulent behavior. And someone (the CEO Mark Karpeles, of course) at MtGox was doing just that – in fact, they got ahold of 850,000 bitcoins which was $480 million back then and would be $8.5 billion today.
It would make sense that the price of bitcoin, consequently, got squashed down 30% right after the announcement from Chinese entities, resulting in a loss for the largest BTC exchange during that period.
Reinforcement followed within BTC China that barred fiat deposits in CNY (Chinese Yuan) shortly after, further pushing the crypto’s price down.
2017 – No more ICOs
In early January, 2017, China’s People Bank of China issued a press release that kickstarted a new series of investigations. This time, the targets were crypto exchanges that had been causing a drop in the CNY and driving money outside the main-state of China. So, they looked into their anti-money laundering and forex management approaches to see what was going on. Lo and behold, a decision was made to put a ban on initial coin offerings (ICOs) on 4 September, 2017.
At the time, ICOs were the craze on the block(chain) ((ba-dum-tss)) because of their function as frictionless fundraising mechanisms for projects and businesses. When the PBoC found out, it led them to illegalise ICOs. In the order, tokens got banned and funds that previously raised now had to be returned back to investors. ICOs were deemed a national economic threat. Their functioning became next-to-impossible due to a restriction on handling token-based fundraises by institutions dealing with finance and companies performing non-bank payment activities.
Given until 15 September, 2017 to cease all operations, Chinese exchanges were subsequently replaced with foreign exchanges and peer-to-peer platforms in order to cater crypto traders’ needs.
2019: The Road to BTC Mining
In April 2019, bitcoin mining received its first industry label from the China’s National Development and Reform Commission (NDRC) – “undesirable”. Guess why – pollution. Crypto mining, as in real life, takes its toll on the environment when equipment that utilizes large quantities of a resource is used. In the case of bitcoin, that resource is electricity.
And in China, electricity is cheap – no wonder BTC miners using it made up more than half the world’s mining power. Moreover, parts required for creating mining rigs were all made in China. Panic almost peaked, but the NDRC thought long and hard until eventually once again pulling the plug on mining. However, everything up until that moment had been a big enough prerequisite for what was about to unfold.
2020 – The Block Saga
Along with the pandemic, 2020 was a harsh year for crypto over-the counter traders. Prominent individuals were captured by the police, and even whole trading desks were emptied of their employees who had been taken away. More than 100 foreign crypto exchange websites became a target of blocking. Pages on Weibo, China’s most famous news outlet, talking of such exchanges and their services were also blocked. All in all, a massive blockade on crypto, a precursor of this year’s final event.
2021 – China’s Cryptanic
The first months of 2021 were unstable for miners who had begun to feel stifled by local policies introduced by major provinces. However, May was the first to hit on crypto seriously. The State Council called for a restriction due to fear of risk that could spread on to the “whole society”.
And so came everything else, like a flood. Regions and provinces were lining up on who would be first to put bitcoin to rest. Needless to say, the official reasons were simple – energy concerns and environmental goals that otherwise, could not be reached. Crackdowns all around forced bitcoin miners to either go abroad or take up another hobby (for some, profession).
September rolled around and crypto trading found itself lost somewhere along the way between the world and China, when the PBoC published a list of forbidden activities. Now, it was the whole Chinese government – the central bank, the police, the supreme court, and other state bodies – against crypto. Thus, on the basis of damaging people’s investment and the “normal economic and financial orders”, regulators had made their decision – all crypto transactions, trading and investing included, were henceforth considered illegal. Following that, people in tech support and marketing of those industries would be legally prosecuted, and the NDRC’s next step is set to be the eradication of crypto mining.
And they lived crypto-less ever after.