As a result, traders and investors have earnest effort and attention by investing extensively in the crypto space.
Regardless of the vital landmark made by Bitcoin globally, some countries still do not condone any form of a cryptocurrency exchange for any reason.
Why has Bitcoin (and Other Crypto) Been Declared Illegal in China?
China holds the world’s population of 1.402 billion (2020), so it is no surprise that today, it is the world’s second-largest economy and produces 9.3 percent of global GDP. China has been pivotal to Bitcoin and cryptocurrencies, with many whale investors helping exonerate Bitcoin’s mass adoption.
The financial sector and crypto ecosystem have encountered hiccups because of the ban on Bitcoin issued by the Chinese government. All Crypto-related transactions are now considered illicit economic activity, including services provided by off-shore exchanges in China.
This restriction of Bitcoin and cryptos due to the tagging is a means of fraudulent activities that have been bad for business ever since the announcement was made as Bitcoin slumped in the wake of the information, falling 8% to about $41,000 as of 9 a.m. in New York.
Traders and investors are still bewildered by these allegations as their crackdown continues to cause an upset in their investment because the losses keep growing. The ban on Bitcoin has led to a 30% decrease in value and a loss of over $1 trillion, to be precise.
Reasons for these crackdowns
There are four main reasons for the crackdown of cryptocurrency in China according to the Chinese government.
Fraudulent and Illegal Transactions in Cryptocurrencies
Fraudsters and money launderers have been taking advantage of the pseudonymous nature of Bitcoin and the anonymous nature of some other crypto tokens. They impose legal investors and traders with the false aim of making the system flourish but with the true agenda of laundering and cleaning their illicit funds in the system.
Bitcoin Mining and Carbon level
Mining, an accumulation process, requires high computational power, which is very energy-intensive and leads to high electricity costs. Most companies in other countries need a substantial initial investment or capital to lay their hands on the mining equipment due to its price.
China, on the other hand, has been pivotal to the mining industry, more like a power source of Bitcoin mining. As a result of the total maximization of the rainfalls in the summer with various hydropower stations and bitcoin mining farms, China holds the highest hash rate globally, of around 75%, due to the cheap electricity supplied vastly and advanced technology.
A study from the University of Cambridge revealed that bitcoin consumes 0.21% of the world’s electricity, equal to electricity.
Unfortunately, some Bitcoin and crypto miners carry out illegal operations which appear to be outrageous by taking advantage of the local and rural areas which are less privileged by diverting the allocated amount of power meant to process raw materials into Bitcoin mining.
Global Warming and Ozone Layer Depletion
The excessive Bitcoin mining operations carried out in China have been detrimental to the environmental condition in so many ways, one of the primary reasons for the crackdown in Communist China. It has been predicted to generate more than 130 million metric tons of carbon emissions by 2024.
The environmental pollution caused by mining cryptos due to carbon emissions not only threatens the Chinese citizens’ livelihood and plantations due to global warming but also stands as an antagonist to the Chinese President’s (Xi Jinping) plan and ambitious promise to make China carbon neutral by 2060.
Evading Taxes and Government policy
Taxation on distributed ledger technology is complicated since it is independent of the government and traditional banking systems; thus, investors use it as a means to evade their tax payments successfully without getting caught or trialed.
Furthermore, the Chinese politicians and governments find it difficult to control money circulation and shape the economy to their taste because of cryptocurrency as they cannot create hostile policies, so they have to dissuade the use of cryptocurrencies so the government can keep a lid on its use and ultimately ensure the flow of fiat currency.