Cryptocurrency: Expert discusses success of Bitcoin
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On Monday, Beijing’s central bank, the People’s Bank of China (PBOC) said it had summoned several major banks and payment companies to call on them to take tougher action over the trading of cryptocurrencies.
In a statement, the PBOC said banks were told not to provide products or services such as trading, clearing and settlement for cryptocurrency transactions.
The Agricultural Bank of China, the nation’s third-largest lender by assets, said it would follow the guidance from the PBOC.
It also said it would conduct due diligence on clients to root out illegal activities involving cryptocurrency mining and transactions.
China’s Postal Savings Bank also announced it would not facilitate any cryptocurrency transactions.
The country’s mobile and online payments platform, Alipay, said it would set up a monitoring system to detect illegal cryptocurrency transactions.
This latest move against cryptocurrency comes after authorities in the southwest province of Sichuan ordered bitcoin mining operations to close down.
The region was China’s second-largest producer of bitcoin.
But due to the shutdown, more than 90 percent of China’s bitcoin mining capacity will be shut down.
This comes as other key mining hubs in China’s north and southwest regions have taken similar steps against cryptocurrencies.
A Sichuan-based industry insider, who spoke on condition of anonymity, told the Global Times on Sunday: “The exit window is closing, and we’re scrambling to find overseas mines to place our mining devices.”
Shentu Qingchun, CEO of Shenzhen-based blockchain company BankLedger, added: “We had hoped that Sichuan would be an exception during the clampdown as there is an electricity glut there in the rainy season.
“But Chinese regulators are now taking a uniform approach, which would overhaul and rein in the booming Bitcoin mining industry in China.”
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The CEO continued: “That means that more than 90 percent of Bitcoin mining capacity, or one-third of the global crypto network’s processing power, will be suspended in the short term.
“As a result, Chinese miners must form alliances to migrate overseas, to places such as North America and Russia.”
Following China’s announcement to ban cryptocurrency services, bitcoin fell to a two-week low.
Jonathan Cheesman, head of over-the-counter and institutional sales at crypto derivatives exchange FTX, said: “The PBOC crackdown is going further than initially expected.
“Mining was phase one and speculation is phase two.”
According to research from the University of Cambridge, China accounted for around 65 percent of global bitcoin production last year.
But last month, China’s cabinet, the State Council, said it would crackdown on cryptocurrency mining and trading as part of a campaign to control financial risks.
Ruud Feltkamp, chief executive officer at crypto trading bot Cryptohopper, said: “People still react strongly to actions from China that create uncertainty so this is likely to reflect negatively on the bitcoin price.
“China is rolling its own cryptocurrency and has every incentive to have as little competition as possible.
“I think we will see miners leaving China and relocate where there is spare or cheap energy.”
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