China announced last week that financial institutions in the country would no longer be able to sell Bitcoin services, and that mining would be prohibited. Many in the Bitcoin community, including this paper, reacted with skepticism to the news, noting that China has previously “banned” its companies from using Bitcoin with little effect, and that it is also theoretically impossible to outright ban Bitcoin from personal use.
However, it is clear that this new regulatory move is having a significant effect on the Bitcoin ecosystem, as local miners and exchanges are restricting or discontinuing Bitcoin-related activities.
Reactions To The Ban
On Sunday prices slumped as miners halted Chinese operations in the face of increasing scrutiny from authorities.
From a low of $31,107 on Sunday, Bitcoin climbed as high as $35,970, but the frothy market’s rising sense of a shakeout made it difficult to make more progress, and it remains 45% below last month’s record high of $64.895.
The crash has brought the world’s most valuable cryptocurrency back to where it was in February, just before Tesla reported a $1.5 billion bitcoin acquisition and announced its decision to accept bitcoin as payment for vehicles, which has since been reversed.
Bitcoin mining companies such as BTC.TOP, HashCow, and Huobi Mall have all responded to the new ban. Huobi Mall has recently stopped mining BTC, a cryptocurrency used by Chinese customers. According to Reuters, TOP has halted its operations in China, and HashCow has stopped purchasing new bitcoin mining rigs.
“On Sunday, [bitcoin] prices slumped as ‘miners,’ who mint crypto by verifying transactions, halted Chinese operations in the face of increased scrutiny from authorities,” Reuters reported. “The trigger for the initial crypto selloff appeared to come from toughening language from Chinese regulators.”
The bitcoin trading scene appears to be undergoing dramatic transformation as well. Those operating in Hong Kong, at the very least, will be expected to obtain a license from the city’s market regulators and will be limited to only providing services to professional investors.
“Dozens of cryptocurrency exchanges operate in Hong Kong, including some of the world’s largest,” according to a follow up Reuters report. “According to Hong Kong law, an individual must have a portfolio of HK$8 million ($1.03 million) to count as a professional investor.”
Elon Musk and Michael Saylor Push For Bitcoin Mining Council
The Technoking of Tesla, Elon Musk, announced on Twitter Monday that he has spoken with bitcoin miners. He wrote:
“Spoke with North American bitcoin miners. They committed to publish current & planned renewable usage & to ask miners worldwide to do so. Potentially promising.”
Spoke with North American Bitcoin miners. They committed to publish current & planned renewable usage & to ask miners WW to do so. Potentially promising.
— Elon Musk (@elonmusk) May 24, 2021
Saylor proceeded to say the meeting included executives from Argo Blockchain, Blockcap, Core Scientific, Galaxy Digital, Hive Blockchain, Hut 8 Mining, Marathon, and Riot Blockchain.
According to the Microstrategy CEO, the executives present at the meeting have “decided to establish an organization to standardize energy reporting, pursue industry ESG goals, & educate and grow the marketplace.”
Although Bitcoin does not need the permission of any government or other third party to operate, it appears that China’s recent legislation could alter the Bitcoin business environment, at least in the short term.
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Featured image from Unsplash, Charts from TradingView.