The subject of cryptocurrency is extremely controversial, whether it's due to its environmental impact, its volatility, or the growing number of scams related to it. It's unsurprising, in that light, that countries across the world are taking steps to regulate cryptocurrency to various degrees. The latest example, announced on Friday, is China. A joint statement by 11 of China's government agencies announced plans to punish illegal cryptocurrency mining, coinciding with China's central bank announcing the prohibition of cryptocurrency financial activity.
The joint statement from China's government agencies describes its efforts as an attempt to stop risks stemming from the "blind and disorderly development" of cryptocurrency. According to the People's Bank of China, virtual currency business activities are now equivalent to illegal financial activities. The explanation for this, according to the bank, is that cryptocurrency "seriously endangers the safety of people's assets." More specific explanations were not provided and are unlikely to be in the future.
In effect, these new policies in China ban all cryptocurrency use within the country. That means that cryptocurrency can no longer be traded or exchanged for physical currencies. This includes Chinese users using exchanges outside of China or storing cryptocurrency internationally. As such, international exchanges will need to block all transactions or account activities made within China. Domestic cryptocurrency exchanges have already been banned for some time, but the new rules are much more expansive.
To be clear, cryptocurrency mining, the process involving using computer graphic processors to "farm" coins, had already been banned in China. That happened earlier this year. The new rules revolve around a crackdown on remaining mining and the exchange of cryptocurrency digitally. While a portion of miners had been leaving China since the ban, a significant amount of them remained within the country. The new regulations may force miners to move much more swiftly.
A significant amount of China's cryptocurrency miners are predicted to move to the United States, where regulation of cryptocurrency trading and mining remains minimal. That isn't likely to change soon, due to a polarized Congress and surprisingly robust legal protections for the types of financial transactions that cryptocurrency employs.
For the time being, cryptocurrencies are dropping in value in response to China's announcements, though volatile fluctuations in cryptocurrency values are not uncommon. The long-term impact of China's policies, however, is unclear. Perhaps it'll mean there will be more GPUs available, so PC gamers will be able to get a 3080 for their new gaming build before Nvidia's 40 Series arrive in late 2022.
Sources: BBC, New York Times