Cryptocurrencies have become a must-have digital asset for some, with major investment banks such as Goldman Sachs asking their clients to diversify their assets. In a world of low-interest rates and negative-yielding debt, some institutional investors and retail investors have shifted to cryptocurrencies to shield their assets from low inflation.
In 2019, China was more benign on the use of cryptocurrencies and it did not explicitly prohibit consumers or businesses from trading cryptocurrencies such as Bitcoin, Litecoin, Ehtereum, and Dogecoin just to name a few. However, the central bank has since changed track and has imposed an outright ban.
The People’s Bank of China and regulators Vow to Fight Cryptos Together
China’s most powerful financial regulators imposed a blanket ban on cryptocurrencies, including cryptocurrency transactions, mining and other bit-coin-related stocks and derivatives. Ten agencies across the country, including the central bank, have vowed to work together to root out illegal cryptocurrency activity in a rare show of solidarity for China’s financial institutions. The surge in cryptocurrencies has created some market euphoria across the globe, even in China that is known for its repressive policies that priorities a conservative dictat to financial issues. In its communiqué, the People’s Bank of China said it intends to “”resolutely clamp down on virtual currency speculation … to safeguard people’s properties and maintain economic, financial and social order” ”.
As one would expect, Bitcoin tumbled on impact as traders reassessed their position in China and wondered what the implications will be across the globe. Remember that the supply of Bitcoin is fixed at 21 million coins and any access to a huge Chinese market and tech-savvy middle class would have caused the price of the currency to soar in the long run. But why did the PBOC ban cryptos?
Here’s why China is cracking down on cryptocurrencies
Environmental Sustainability: China is an emerging country and it has lifted over 98.99 million impoverished rural residents out of poverty, as well as 832 impoverished counties and 128,000 villages in 2020. When people’s income increase, they tend to consume more electricity, which has…