Why is China against mining?

As cryptocurrencies become more popular, countries adapt to the new conditions. Roughly saying, governments divide into three groups. The first group consists of neutral countries. Here, crypto money is neither banned nor legal. People simply use it without fearing legal measures against them.

Secondly, some countries heavily fancy the new kind of digital money. In such places, you can buy or sell crypto everywhere, just use a credit card option or other methods. Things are easy because authorities only encourage using cryptocurrencies. For instance, Salvador became the first country where Bitcoin became an official currency!

Finally, there is a third group of regions where the situation is quite the opposite. In fact, dealing with cryptocurrencies is a punishable crime here for specific reasons. One of such countries is China, which is notorious for being too cautious about new “western” things. Why is this republic so judgmental towards mining? Let’s find out!

Pollution problem

Indeed, the words “ecology” and “Bitcoin” appear in the same sentence over and over. When headlines and articles are screaming about the pollution from mining, they are hardly exaggerating. As an illustration, imagine that the world map obtained another small country. The imaginary place has tremendous annual carbon emissions, and everybody acts like everything is fine. This is how much threat crypto mining poses for the Earth.

Naturally, the Chinese authorities agreed that mining could occur everywhere, except for China. This reasoning is entirely understandable! The massive economy of such a giant country has already affected nature. Yes, there are solutions for ethical mining, like using:

  • Sun energy;
  • Wind energy;
  • Hydro energy.

Yet, renewable sources may hardly cover the third part of all crypto energy spendings. Because miners mostly use coal energy, the Chinese government simply prohibited local power stations from working with them. Moreover, as a special law now states, the power prices are too high for mining rigs. Technically, crypto farms are legal. Just them using electricity is illegal.

Money laundering

Another jeopardy that cryptocurrencies and mining poses is money laundering. Official China knows very well about this danger. Therefore it does everything for restricting such activity. Unfortunately, the crypto sphere is a tidbit for individuals who commit all sorts of crimes, like:

  • Drug dealing;
  • Arms trade;
  • Human trafficking.

Basically, the crypto world is safe for the darknet and the shadow economy. As soon as a criminal receives illegal income, they can easily convert it into Bitcoins or another cryptocurrency. Once somebody converts the costs back into national currency, nobody may know the real source of money. This perspective seemed scary enough for the Chinese government to declare war on criminals. 

Furthermore, this country is famous for its strict policy regarding corruption, with literal death sentences for dishonest politicians. Logically, high-ranking officials often become a part of criminal schemes, and crypto helps them avoid responsibility. At this point, the restriction of mining rigs has to put a stopper in illegal activities.

Money outflow

An equally important motive for freezing mining activity in China is a significant cash outflow. In general, the flow of money from a country isn’t inherently bad. Usually, it just indicates that the economy actively participates in global trade. Its goods and services are popular in other countries, the local businesses expand and become multinational corporations. At first glance, there are zero reasons to worry. So why does China run such a strict mining and cash outflow policy?

Unfortunately, all the positive sides of capital transfers wash away when it comes to shadow income. Often, in the case of cryptocurrencies, the risk of costs being illegal skyrockets. Just imagine, in 2020, around worth of digital coins left China and went to other unknown places.

Now, keep in mind that every Chinese citizen may legally purchase a maximum of fifty thousand dollars per year. If you do a simple calculation, you realize that the actual sums exceed the legal volumes. Therefore, letting the mining industry alone leads to:

  • Constant law violations;
  • Weakening of the national currency;
  • Flourishing of criminal activity.

Digital yuan

As a matter of fact, if something becomes a competitive rival for a country’s economy, it quickly appears out of the law. Pretty much the same thing happened to cryptocurrencies in China. In 2019, the government announced e-CNY, a digital version of fiat yuan. In other words, authorities created their cryptocurrency that had to be safe from the competition of Bitcoin and other popular tokens. Logically, blooming mining rigs would generate tension on the Chinese market, so they faced a ban.

The idea behind the digital yuan is similar to the standard crypto, but at the same time, its nature is different:

  • e-CNY has real actives behind each coin;
  • e-CNY is under governmental control.

Besides, the implementation of digital transactions aimed to get financial operations under legal surveillance. Tax evasion or corruption is hopefully becoming less popular with e-CNY. Through this plan, the officials meant to employ the best sides of crypto while still controlling citizens’ financial activity. Maybe, a person owns illegal savings, or their spendings exceed income. Now, specialized institutions have quicker access to such information for a check-up or just use a credit card option.

Altogether, it seems like China is slowly becoming a forbidden territory for the ubiquitous crypto field. Once, the republic was a sweet home for three-quarters of the mining industry! After harsh restrictions, the numbers dropped to just fifty percent. Of course, these volumes are still huge on a governmental scale, but the losses are extreme as well.

Those who survived dealing with digital currencies had to change their specialization or leave the country. Authorities put a lock on mining activity and crypto investments, trade, and exchange. Even marketing or other specialists in this sphere saw a red light. Instead, e-CNY, the first national cryptocurrency, got all the spotlight.

Regardless of all the efforts, predicting the outcome of such transformations is impossible. Because there are too many constantly changing factors, all that the world can do is watch and wait for further improvements.

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