“The two countries with the greatest influence on cryptocurrency in the world
are China and the United States
China’s policies are absolutely crucial”
After reaching the highest point in history in April this year, the price of Bitcoin has plunged all the way. The overweight Chinese regulatory policy in mid-to-late May is undoubtedly one of the incentives.
Since May 18, China has intensively released its regulatory policies on cryptocurrencies:On May 18, the Inner Mongolia Development and Reform Commission established a virtual currency”mining” corporate reporting platform; on the same day, China Internet Finance Association, China Banking Association, China Payment and Clearing Association”Announcement on Preventing the Risks of Virtual Currency Trading Hype”; On May 21, the Financial Commission of the State Council requested to crack down on Bitcoin mining and trading, and resolutely prevent individual risks from being transmitted to the social field; On May 26, Inner Mongolia Development and Reform Commission issued a resolute crack Eight measures to punish virtual currency”mining” behavior solicit opinions.
From 2013, Bitcoin trading was still regarded as a commodity trading behavior that ordinary people can freely participate in, to the withdrawal of domestic virtual currency exchanges in 2017, and then to the clear crackdown on mining behavior this time, China The regulatory policies for cryptocurrency are the strictest among the world’s major economies. In view of the influence of Chinese players in the cryptocurrency world, every statement made by the Chinese regulators will directly reflect the large fluctuations in the value of Bitcoin.
Chinese regulation shakes up the price of Bitcoin
“The price of Bitcoin is like a child’s face. It changes when you say it changes. It often rises and falls sharply.” The former owner of the Bitcoin”mining farm” told the reporter of China News Weekly that his”mining farm” was at a loss due to a sharp drop in the price of Bitcoin and was shut down before the outbreak of the epidemic in 2020. At that time, the price of Bitcoin was hovering around. For seven or eight thousand dollars, he also missed the bitcoin market that started in the middle of last year.
By the end of 2020, the price of Bitcoin has been close to $30,000. This trend will continue in 2021 until it hits the highest price in history of $64,863 on April 14.
“In order to deal with the impact of the epidemic, central banks have to adopt some extremely loose monetary policies, resulting in ample liquidity in the market. At the same time, the loose funding has caused some institutions to worry about the depreciation of legal currency, so they turned to For some safe-haven products, institutions began to recognize Bitcoin and other cryptocurrencies as a type of investable asset allocation.” While explaining to reporters why Bitcoin ushered in a wave of market trends, a veteran in the currency circle believed that in the past year Many, foreign institutions, especially Wall Street institutions, have a clear trend of blessing.”In the research report, cryptocurrency will also be listed as an investable asset class, and at the same time, customers will be provided with cryptocurrency asset-related services.”
There are not only institutions that invest in cryptocurrency, but also companies like Tesla. Tesla’s profit in the first quarter of 2021 reached 438 million U.S. dollars, and nearly a quarter came from Bitcoin transactions. Its financial report shows that Tesla bought $1.5 billion worth of bitcoin in the first quarter of this year, and sold some of it for a profit of $101 million.
Tesla’s”speculation of coins” is behind the cryptocurrency of Musk’s platform.”Another reason that fueled the enthusiasm for cryptocurrencies this year is that business leaders like Musk’s remarks on social media can easily disturb the value of the currency.” The aforementioned cryptocurrency veteran said that in addition to the above reasons, technological evolution has also Provides bottom support.”An important tipping point of this round of market is the outbreak of the decentralized DeFi ecosystem, which has spawned many functions and platforms similar to traditional financial institutions.”
In his view, the influence of these three factors is still continuing.”Especially from the recent period of time, the institutions may not exit the market, because the addresses on the chain with a large number of coins are still increasing their holdings, and some people even think that some institutions are entering the market by bargaining.”
However, the short-term effects of Musk have weakened the impact of cryptocurrencies. On May 12, Musk questioned the excessive carbon emissions generated by Bitcoin mining and trading on social media and announced that Tesla suspends Bitcoin payments. Affected by this, Bitcoin fell more than 10%that day, falling all the way to about 49,000 US dollars.
A senior cryptocurrency analyst told China News Weekly, “Since the beginning of this year, the price of Bitcoin has trended upwards, and even showed some overheating sentiment. Animal currency has appeared in the later period, and it is even meaningless. Aircoin itself has the need to adjust, and the price does have a bubble.” Just a week after Musk questioned, on May 19, Bitcoin ushered in”the shock range was enough to rank among the top ten in history.” One of the declines, the aforementioned senior analyst told reporters. On May 19, Bitcoin directly broke through the $40,000 mark, and even approached the $30,000 mark, with a maximum drop of 30%in one day, and the final drop narrowed, but it also exceeded 13%. Other types of cryptocurrencies have not been spared. According to the statistics of the Bitcoin Homes website, the total amount of liquidation in major exchanges within 24 hours was 7.006 billion US dollars, about 46 billion yuan, which has created the largest single-day liquidation record in the history of cryptocurrencies. .
The price of Bitcoin at the end of May was almost”halved” in comparison 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 cryptocurrencies in the world are China and the United States. China’s policies are absolutely crucial.” The aforementioned currency circle veteran said.
Can”mining” be banned?
“It can be said to be a complete ban.” Chen Weigang, director-level supervisor of the board of supervisors 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 again. The decline is huge. In terms of price, it must be sold more than bought, otherwise how could it fall so much.” A Bitcoin holder told reporter.
“In fact, virtual currency transactions including Bitcoin were banned more than three years ago, and there is currently no exchange in the country.” Chen Weigang said. The ban he referred to refers to the”Announcement on Preventing Token Issuance Financing Risks” jointly issued by the Central Bank and other seven ministries on September 4, 2017, in which virtual currency transactions have been explicitly prohibited.
About a year later, in July 2018, the Central Bank revealed that the 88 virtual currency trading platforms listed in the search have basically achieved a risk-free exit. Bitcoin traded in RMB accounted for 90%of the global share. The above drop to less than 1%is considered to have avoided a virtual currency bubble.
After the”9·4 ban”, domestic cryptocurrency exchanges have moved their servers abroad one after another, and the supervisory authorities continued to block virtual currency trading platforms that”go to sea”. As of the end of May 2018, including Huobi, Binance and other trading platforms 110 websites have been blocked.
Although cryptocurrency exchanges no longer exist in the country and related websites are also blocked, players in the currency circle have not stopped trading.
A person close to supervision told China News Weekly that there are currently two main ways to trade cryptocurrencies, including Bitcoin, in China, one is to”override the wall” to trade overseas The transaction is also through underground bank transactions.
“For example, an underground bank registers two companies in China and the United States, and uses companies in the United States to buy bitcoins, and then domestic companies receive the money.” He explained to reporters that such funds Flow control has become more and more stringent.”Previously, payment transactions were often carried out in the name of business payments. Now such payments also require sufficient proof, such as sales and purchase contracts, to ensure that there is a real business transaction, otherwise it will not be realized. Although it cannot be completely eliminated, it is becoming more and more difficult to trade through such channels. The supervision of speculation funds has been treated the same as anti-money laundering.”
Transactions have long been underground, and this time supervision is overweight, whether it is The”Announcement on Preventing the Risk of Virtual Currency Trading Hype” issued by the three associations is still a statement by the Financial Committee, and it still follows the requirements of the”9·4 Ban” for the transaction link. Many people in the industry also stated in interviews with reporters that the Financial Commission clearly cracked down on Bitcoin mining and trading,”putting mining before trading, you can also see that this time supervision is directed to mining.”
From the perspective of local regulatory response, Inner Mongolia first issued detailed rules on May 26. Among the eight measures issued by the Development and Reform Commission of the Autonomous Region to resolutely combat and punish virtual currency”mining” behavior, the The scope includes mining big data centers, cloud computing companies, communication companies, Internet companies, Internet cafes, etc., as well as entities that provide site and power support for mining companies, and companies and related personnel that have mining activities are included in accordance with relevant regulations. Blacklist of dishonesty. The crackdown on mining in Inner Mongolia began in March. At that time, it was announced that virtual currency mining projects will be completely cleaned up and shut down. All of them will be withdrawn before 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, the requirements for the closure of mines have always been there. Don’t take it too seriously.” But this time the supervision statement is obviously more stringent, although other places have not yet issued detailed rules like Inner Mongolia. However, a number of mines contacted by reporters from China News Weekly stated that the mining of cryptocurrencies such as Bitcoin and Ethereum has been suspended. Only FIL mining projects that consume less energy are retained, and mining machines are being transferred overseas. ,”The speed of transfer is not so fast, the company had no overseas layout before.”
Mars Cloud Mine also announced that in order to comply with the supervision spirit of relevant departments, after careful research and decision, some of the Mars Cloud Mine will be transferred to Kazakhstan mines, related mining machines were shut down on May 23. The expected transition period is 3 to 4 weeks, and it will be at 20:20 on May 26, Beijing time. Starting from 00 to block IP access in mainland China.
“Domestic mining is still difficult to completely ban. This time it is mainly aimed at corporate mining. It can be controlled through financial audits on the income and expenditure side. For example, corporate mining will eventually be reflected in revenue and profit. Value-added, if part of the profit is derived from mining, the company can 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 buy mining machines for mining, especially in some hydropower rich sources. How to block mining in the region remains to be seen in the next step.”But it is equivalent to cutting off large households. Although the number of remaining small households is large, the total amount is not large.”
Supervision gap brings challenges
“This round of domestic regulatory policies may be more based on the consideration 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 second-ranked United States, with only 7.24%of the computing power. Specifically in China, the top four provinces in terms of computing power are all located in the west:Xinjiang, Sichuan, Inner Mongolia, and Yunnan. Xinjiang accounts for more than 35%.
Behind this is a lot of power consumption. According to an index released by the Alternative Finance Research Center of the University of Cambridge, estimated at the end of May, the annual power consumption of mining is about 115.54 TWh. Intuitively, it accounts for 0.53%of the global annual power consumption. Electricity comparison shows that it is located behind the UAE and before the Netherlands, ranking 33rd in the world.
In addition to the high carbon footprint, how to supervise Bitcoin and other cryptocurrencies as investment products, and even whether they can be regarded as an investment product, are the focus of recent regulatory statements by various countries.
“Some people confuse the two concepts. Bitcoin and other cryptocurrencies are not illegal currencies. The currency must be guaranteed by national sovereignty. It can also be seen from the evolution of currency forms that from gold coins and silver coins The value of precious metal currency has been declining after it has been converted into paper money and digital currency, but now people are hyping the value of Bitcoin itself.” Chen Weigang believes that Bitcoin is not even an investment product, but only a “speculation work”.”,”The’tulip’ that swept Europe back then, you can still see a bunch of flowers, now Bitcoin is the air, there is nothing.”
“Financial Stability Review” issued by the European Central Bank in May In”, the hype of cryptocurrency prices is also compared to”tulip mania”, reminding its risk and speculative attributes. On May 19, when the value of Bitcoin fluctuated drastically, the European Central Bank Deputy Governor Gindos bluntly stated that Bitcoin is an asset with very fragile fundamentals, and it is highly volatile. Crypto assets should not be regarded as”real investments” because it is difficult to discern their potential value. But Jindos also stated that the volatility of the cryptocurrency asset market will not pose a risk to overall financial stability.
Overseas supervision has indeed been tightening recently, but more emphasis is placed on regulating cryptocurrency transactions to prevent risks and avoid illegal acts such as tax evasion. For example, the chairman of the US Securities and Exchange Commission Gary Gensler pointed out when he participated in the congressional hearing on May 26 that crypto assets are both commodities and securities in nature, and it is necessary to strengthen the supervision of cryptocurrency exchanges so that investors can enjoy trading in securities. The same protection as the goal. The U.S. government has also recently proposed that cryptocurrency transfers of more than $10,000 must be reported to the U.S. tax authorities.
On May 21, the Hong Kong Special Administrative Region government suggested that cryptocurrency exchanges operating in Hong Kong must obtain the license of the Hong Kong market regulator, that is,”licensed operation” and can only provide services to professional investors .
“Overseas regulatory authorities have been strengthening the supervision of cryptocurrency exchanges. This year, there are also things like Coinbase such a listed exchange, the operation of Coinbase is quite conservative. For example, it will not open leveraged trading tools to retail investors, but will only open it to some qualified institutions.” The aforementioned senior cryptocurrency analyst said,”Because of regulatory Therefore, the operation of the exchange is relatively standardized, and institutions also trust the exchange to form a virtuous circle. Most Wall Street institutions will place a large amount of funds on exchanges like Coinbase, rather than some small, wild exchanges.”
He believes,”Foreign regulatory stances are indeed becoming stricter, but they are not as stringent as China. Domestic regulation has not chosen to gradually regulate cryptocurrency transactions, but rather shuts down to a certain extent’one size fits all’.”
In fact, in 2013, the central bank and other five ministries issued a notice on preventing Bitcoin risks. While clarifying that Bitcoin is not an illegal currency, they stated that”Bitcoin transactions are a commodity on the Internet.” In buying and selling behavior, ordinary people have the freedom to participate under the premise of taking their own risks.” However, since then, the scope of supervision has gradually tightened, and the domestic investment structure with retail investors as the main body may be one of the reasons.
“Cryptocurrency trading should not encourage individuals to participate because of the high volatility and the high cognitive requirements for investing in cryptocurrencies.” A person in the”coin circle” told China News Weekly, At present, there are more than ten cryptocurrency ETF funds established in the world, and institutional investment should become the mainstream.
Chen Weigang also believes that foreign bitcoin transactions are more of a game between some institutions and consortia, but in China, it is mainly retail investment.”Like the previous P2P, in fact, it appeared earlier in the United Kingdom, the United States and other countries than in China, but the range of people who participated in P2P at its peak in China was very wide. The same is true for the hype about Bitcoin this time. There is nothing that can exist abroad. It means that there is a reasonable existence in China.”
“In fact, if all exchanges are blocked, or there is a gap in domestic and foreign supervision, it will also pose a challenge to supervision, because anyone can log on the relevant website Register an account on the website, the generated code is the Bitcoin receiving account, which is completely anonymous and cannot be traced, but because there are subsequent transactions, the exchange may also track the holder’s information. In this case, the exchange is In terms of supervision, it can play the role of’informant’.” A veteran of the”coin circle” revealed to China News Weekly that according to his understanding, although some exchanges cannot operate within the country, they still have a relationship with domestic regulatory authorities. Close cooperation and willing to provide information to the government.
Column editor:Gu Wanquan Text editor:Fang Ying Title picture source:Shangguan picture editor Picture editor:Li Xi
Source:Author:China News Weekly Chen Weishan