How China Rivals Elon Musk in Rattling Crypto Markets


Not much moves cryptocurrency markets like Elon Musk tweets — except, perhaps, the idea of another crackdown in China, the world’s second-largest economy. From a trading ban on domestic exchanges to squeezes on power-consuming digital currency miners, Chinese regulators have tried to tamp down risks related to the stratospheric rise of Bitcoin and its peers for years. However, a recent spate of official warnings has unnerved traders anew, even though some appear to reiterate previous positions. While the statements can be tough to decipher, they seem to indicate that China is watching crypto closely and could take further steps to rein it in as President Xi Jinping seeks to reduce financial risk in the economy and meet the country’s ambitious goals for combating climate change.

1. What has China done?

In 2017 China told exchanges to stop trading in cryptocurrencies and banned initial coin offerings or ICOs, which are the equivalent of initial public offerings for new virtual currencies. The government also bans financial institutions and payment service providers from getting involved in crypto trades even tangentially — like opening a bank account for those who engage in them. It also has moved to discourage Bitcoin mining — the energy-intensive computing process involved in creating the digital currency and verifying transactions — which has long been concentrated in China.

2. Why the new attention?

On May 21, China’s State Council — the country’s cabinet — called for a renewed crackdown on Bitcoin mining and trading activities at a meeting focused on promoting financial stability, according to a government statement. It was the first time that top Chinese officials singled out crypto mining at the national level since dropping it from a proposed list of dirty industries to be eliminated in 2019. Previously there have been regional clampdowns in places with cheap energy such as Inner Mongolia, but enforcement has always been a big question mark. Starting in April, however, the government in the coal-rich region banned mining, set up a whistle-blowing system and said it would raise penalties for violators. Meanwhile, a slew of semi-official financial industry associations issued a notice to remind businesses not to get involved in crypto.

3. Why is China cracking down?

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