China bans Cryptocurrency for 3rd time, US taking advantages

China has banned crypto currency for 3rd time. As US government tries to regulate crypto and gain the most out of this situation, there are definitely some massive movement going on in crypto space which is crucial to determine the future of crypto currency and the world economy.

The bitter relationship of Chinese government with the crypto market is not new. The giant cryptocurrency Bitcoin was launched on 9 January, 2009. People's Bank of China (PBOC) barred financial institution from handling Bitcoin transactions after a notice from China Securities Regulatory Commission on 5 December, 2013. The 2nd ban was on February 9, 2017 from PBOC. They declared Initial Coin Offering (ICO) as illegal. This was more of a regulatory step to stop the money flow towards crypto-space. This is the same fundraising strategy for crypto industry as traditional Initial Public Offering (IPO) where people invest their money for the commitment to receive certain service or benefit.

Banning ICO stopped Chinese individual from being part of launching a new cryptocurrency. China also shut down its local cryptocurrency exchanges responsible for 90% of global bitcoin trading. Under this ban 'Huobi.com', top crypto exchange from China stopped taking users from mainland and move their offices to Hong Kong, South Korea, Japan and United States.

Although China banned cryptocurrency exchanges and ICO websites, there was no restriction on individuals holding any cryptocurrency. On May 18, 2021, China declared ban on financial institutions and payment companies from providing any services related to cryptocurrency. Under this ban, bank of any online payment channel can't offer services including registration, trading and settlement of any cryptocurrency transaction. Trading bitcoin and other cryptocurrency was officially banned in China since 2019, but it was still continued through foreign exchanges, now this loophole is sealed.

China is launching its own digital currency e-RMB (Digital Renminbi). This might be the reason behind these hardcore restrictions against cryptocurrency. This digital currency is issued by PBOC. Trial of e-RMB was started on May'20. The use of e-yuan is exploding as the authorities are massively promoting it. Chinese stock market trembled on early September as Evergrande's share price dropped almost 80%. Evergrande is a real estate developer company in china. Evergrande crisis in china risked its 30% of national GDP and have impacted world economy as well as the crypto market.

China announced a crackdown on cryptocurrency mining, forcing miners to migrate overseas or shutdown their mining operations. They flee to Kazakhstan, Russia, North America and the majority of them has moved to USA and Canada for their suitable rules and laws. Around 70% of bitcoin mining was from china. Mr Pan, CEO of Poolin, told the BBC, "We decided to move out, once for all. Never coming back again." Poolin is world's 2nd largest cryptocurrency mining company headquartered in Hong Kong.

Poolin moved their operation to Texas, USA. The Governor of Texas, Greg Abbott is a vocal supporter for cryptocurrency, tweeted on June, "It's happening! Texas will be the crypto leader." Texas became the 2nd US state after Wyoming to recognize blockchain and cryptocurrency in its commercial law.

It's the legal protection that attracts miners to choose USA as their new home. US is taking advantages of this situation by taking regulatory steps which includes taxing mining tools. Senator Pat Toomey tweeted on September 24, "China's authoritarian crackdown on crypto, including Bitcoin, is a big opportunity for the US. It's also a reminder of our huge structural advantage over China."

In August, US Senate approved $1trillion infrastructure bill. The bill was voted on 30 September and will be active from the first half of October. This includes tax on mining equipment. It'll be the source of huge income for US Federal Reserve. Jaret Seiberg, Financial service and housing policy analyst for Cowen Washington Research group, said, "The tax reporting language is one of the clearest indication that Washington is prepared to accept crypto as a permanent part of the financial ecosystem."

The US Security and Exchange Commission (SEC) is going after the cryptocurrencies other than bitcoin. There are roughly 7000 cryptocurrencies, SEC is investigating to restrict the insecure ones. The US seems soft only towards bitcoin where mining is a must. Few advanced cryptocurrencies like Etherium2.0, Cardano is developing mechanism where proof of work (mining) isn't required. Instead, proof of stake validates transactions on the blockchain. This method doesn't require massive energy consuming 'mining'.

Earlier on September 7, 2021, El Salvador has officially adopted Bitcoin as legal tender. This paved the way to use bitcoin as a payment method for the mass people. Nayib bukele, president of El Salvador, tweeted on September 26, "2.1million Salvadorans are actively using 'chivowallet' (not downloads). Chivo is not a bank, but in less than 3weeks, it has more users than any bank in El Salvador and is moving fast to have more users than all banks in El Salvador combined."

Gary Gensler, the chairman of SEC, on 29 September, was positive to have bitcoin ETF (Exchange-Traded Fund) in US stock market. Under the Investment Company Act of 1940, there will be "futures contract" for bitcoin EFTs on Chicago Mercantile Exchange. If bitcoin ETFs become available in US, there'll be no turning back for the crypto market. As a peer to peer payment system without any central authority, it's technologically impossible to stop bitcoin or other cryptocurrency. The farsighted countries are legalizing this asset as mainstream or passive way to gain profit. The very few countries that are resisting cryptocurrencies are the ones missing the benefits.
The writer is a student, Department of Linguistics, University of Dhaka