It doesn’t help that Bitcoin (BTC) mining uses so much energy and contributes to global warming, either, Yeung further explained. China has pledged to achieve carbon neutrality before 2060, and its “emissions target is real.” The government is already imposing emissions restrictions on the country’s steel industry, and it just introduced a national emissions trading scheme. Bhatia added, “China does not want Bitcoin miners hogging their grid.” “China is a state that wants to keep everything under its control,” agreed Ong, adding, “This can be seen from the recent crackdown on tech firms and even private education firms.” Bitcoin’s decentralized structure gives Chinese authorities fits, he suggested, and they would much prefer to create something that they can manage, like their digital yuan, which is in the process of being rolled out. Has China made an error of judgement?
But what’s with China? Since the beginning of summer, it has taken steps to curb — if not outright ban — cryptocurrency mining and trading. Do China’s financial guardians know something that U.S. bank leaders don’t? “We can see that banks and other financial institutions, such as JPMorgan and Citi, are starting to realize that blockchain technology is not just a passing trend,” Bobby Ong, co-founder and chief operating officer of CoinGecko, told Cointelegraph. He added that “as such, they are beginning to explore ways for them to offer cryptocurrency products to their clients.”
“China doesn’t like crypto. It’s not a sovereign currency, and it’s beyond the Chinese government’s control,” Raymond Yeung, author of China’s Trump Card: Cryptocurrency and its Game-Changing Role in Sino-US Trade, told Cointelegraph, adding, “Even if it’s mined in China, it’s still not administered by them — it’s bypassing the PBoC (People’s Bank of China). That’s not acceptable.” “Yes, U.S. banks are firmly embracing Bitcoin as an investment tool,” Nik Bhatia, author of the book Layered Money: From Gold and Dollars to Bitcoin and Central Bank Digital Currencies and adjunct professor of finance and business economics at the University of Southern California, told Cointelegraph, adding, “JPMorgan and Goldman, for example, have greenlit Bitcoin investment products such as GBTC (Grayscale) for their clients.”
There may be some nuances with regard to Bitcoin mining, too. The People’s Republic of China could be using the mining crackdown to drive down the price of Bitcoin so the state can purchase more BTC at a cheaper price, Bhatia suggested, further explaining to Cointelegraph: “They might not care about mining rewards anymore. They could be trying to acquire billions worth of Bitcoin and using the mining ban as misdirection. They could also be using the coal-mining ban as proof that China is serious about climate change in order to receive a more favorable standing on the global scene.” “I think it’s difficult to say what China’s goals are in this particular situation,” commented Ong. He added, “They are aggressively trying to introduce the digital yuan as the de facto currency in the country and as a proxy to reduce the world’s reliance on the U.S. dollar.” As a result, when it comes to the core objective, this may not be a bad move: “It is in line with their goals of pushing for a centralized currency that is completely traceable by the government.”
“It might very well be a huge blunder, as hash rate that comes offline is very hard to get back,” Bhatia said, adding, “That hash power has likely left China forever.” If a trade war is indeed underway between the U.S. and China, hasn’t China miscalculated, though, by shutting down BTC mining operations, especially since North American miners are only too happy to take over China’s role as the world’s crypto mining center?
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