While China has been continuously progressing with its CBDC efforts, it has maintained an anti-crypto stance by banning all cryptocurrency-related operations. However, a former Chinese official has expressed his disapproval regarding the stance.
Recently, Huang Yiping, former advisor to China’s central bank, suggested that the Beijing government reconsider its strict cryptocurrency embargo. He believes that the ban on crypto-related activities may do more harm than good as it might result in missed opportunities to innovate in cutting-edge technologies.
The former financial advisor sees immense potential in researching blockchain technology and advocates for a thorough examination of the possible long-term advantages of cryptocurrencies for China. Nonetheless, he acknowledges that there are also numerous hazards involved with cryptocurrencies.
As a developing nation, China faces a challenge in finding a way to maintain stability and control over cryptocurrencies, but an eventual effective strategy might still need to be established.
According to data from the Cambridge Centre for Alternative Finance (CCAF), about 20% of all Bitcoin hashrates came from China between September 2021 and January 2022. The figures signify a sizable underground mining sector in the nation, with miners becoming more secure and satisfied with the security provided by local proxy services as the ban took effect.
The history of Bitcoin mining goes back to 2009 when the first-ever cryptocurrency was introduced. Since then, the nation has become a hub for Bitcoin mining due to resources available, like cheap electricity and large amounts of computing power. Despite this, the Chinese government has taken an antagonistic stance on cryptocurrencies.
Todayq News reported in November 2021 that China was forcing its state-owned enterprises to stop mining cryptos. Meng Wei, a spokeswoman for China’s National Development and Reform Commission (NDRC), stated during a media briefing that the NDRC aimed to oversee industrial-scale Bitcoin mining and any engagement by state firms in the industry as China’s top economic planner. The state mulled punitive sanctions, such as higher energy costs, for corporations that persist.
In September 2021, China also imposed a complete ban on all cryptocurrency-related activities citing concerns about the potential for illegal activities and the disruption of the nation’s financial stability.
Interestingly, China has not always been that against cryptocurrencies. The history of cryptocurrencies in China is somewhat complex as the government has taken a shifting approach over the years. Initially, the tech-savvy nation was relatively open to cryptocurrencies and sheltered some of the largest Bitcoin exchanges.
However, in 2017, the Chinese government cracked on cryptocurrencies and implemented a series of restrictions, including a ban on initial coin offerings. (ICOs) and a limit on the amount of money individuals could invest in cryptocurrencies. In 2021, the government further cracked down, resulting in a complete ban on all cryptocurrency-related activities.
Notably, despite the government’s restrictions, the use of cryptocurrencies in China continues to grow, with many people turning to cryptocurrencies as a way to protect their wealth from the depreciation of the Chinese currency.
While Huang wants the nation to reconsider its decision to ban cryptocurrencies, in a recent media interaction, Charlie Munger, vice Chairman of Berkshire Hathaway and a close ally of Warren Buffett, said that the United States should impose a federal ban on cryptocurrencies. He criticized cryptocurrencies and suggested that the US follow China’s lead by prohibiting cryptocurrencies.