Bitcoin has risen above $8,000 and has left the states to question China’s policy on banning the trade of digital currency. The earlier crackdown of China on bitcoin had thrown the cryptocurrencies into a pit but however, the currency seems to have resurfaced resisting the effects of China’s ban on it. Fuad Ahmed is going to look into detail how China and other state’s ban can affect the overall digital currency market in the world.
Bitcoin, only in the previous year managed to rise ten-fold in value which is both remarkable and considerable at the same time as to gauge the future of cryptocurrency in the world. This hike of decentralized currency has left regulatory institutions perturbed and led them to the banning of the ICO (Initial Coin Opening) in many countries. The regulatory authorities, viewing the change as a threat to their local currency seem ignorant of the dynamic future bitcoin or any other digital currency has to offer.
Bitcoin mining in China
Since the inception of the digital currency Bitcoin in 2009, following the 2008 global economic crunch, the technology is perpetually undergoing many modifications and advancements. To make it more up to date with the current needs and demands of the world.
Cryptocurrencies like bitcoin, use Blockchain as its underlying technology. the blockchain technology encrypts and links all transaction data putting a time stamp on it. Since it checks for the transactional data, information regarding the bitcoin mining, the process to generate new bitcoins, also gets verified on the blockchain. All the following information from coining to the transfer of this currency remains saved on the blockchain.
Bitcoin mining happens to be intensive operation and China being the world leader in technology, possesses all the computational power required for the generation of new bitcoin or any cryptocurrency. These actions, because of China being the biggest importer of energy can be performed in the best conducive environment there.
The establishment of bitcoin requires big warehouses that have large computing machine set up installed in them. China, preceding the September ban had accounted for more than 75% of world’s Bitcoin trade.
Resistance to ban.
China being one of the largest economies in the world consists of a large number of new financial investors. These investors see a great hope in the face of bitcoin for the transfer and purchase of funds. Bitcoin with its recent hike in only a year has been a source of attraction for many who wanted to trade and make it big in finance.
The investors in China have been using bitcoin not just for fund transfer but have units of currency secure in the form of a commodity or an asset. The blockchain technology along with bitcoin is showing great avenues to the Chinese entrepreneur that has been looking for a more secure reliable system to register all the transaction and movement that take place in the business. This is the sole reason many in the Chinese country are resisting the ban and moving their servers abroad. The Chinese investor two months following the ban on currency is still striving for the revival of the bitcoin exchange.
Background of the crackdown
The ban on bitcoin trade and exchange was attributed to the apprehended rise in money laundering or other monetary crimes such as borrowing or lending to an illegal or non-banked institution. This led the regulatory authorities to presume that bitcoin users are merely the tax evaders or those escaping the financial police.
With the emergence of bitcoin, some did try to use it for criminal activities as well. Regulatory authorities in China had even found a case where scammers had collected USD 1.82 Billion by advertising a product they called the next big thing in the cryptocurrency market. Moreover, the idea was to keep a check on financial crimes taking a toll as they were posing a great threat to China’s bigger plan of growth by avoiding financial risks. As cryptocurrencies operate outside state jurisdiction, the financial authorities in the country had no control over them.
The state policymakers, as a result of it, considered it more suitable to ban the bitcoin than having no control over it.
Other options for China
China is well aware of the functional benefits of Blockchain technology along with bitcoin. It knows that the feature which keeps data in encrypted form and secured on the blockchain keeps all the information regarding bitcoin saved and viewable for the public.
Following the whole scam scene and considering it a threat to their own paper currency, China aims at developing its own cryptocurrency like other states. China’s Central bank has been observed exploring the uses of blockchain technology like Sweden, Canada, and India in order to launch their own cryptocurrency. China in the wake of the same reason is searching for encryption experts too and resist the rise with its own product.