China is preparing a much stricter regulatory framework for the technology industry, including cryptocurrencies, putting the future of digital assets in the country at risk.
In the last months, Bitcoin and the rest of the crypto market were heavily affected by the strong repressions that China imposed on miners. cryptocurrencies, and towards commercial activities with these assets. Now, a new regulatory scenario is looming from the Asian power, which has just promised greater regulation on the technology industry and cryptocurrencies.
China's government published The Chinese government recently announced its plan for building a government under the rule of law for the period 2021-2025. Within this plan, the Central Committee of the Communist Party of China and the State Council want to improve and reform their regulations on various sectors, including the crypto industry. The Chinese authorities mention that they must improve their functions of economic regulation and supervision over the markets, in addition to strengthening the formulation and implementation of strategies, plans, policies, standards and other development functions applicable to the technological industry, which includes cryptocurrency innovation.
China's central government is asking all regions and provinces to adhere to the plan and comply with what is established within it, so a broader regulatory framework for cryptocurrencies may be on the way from the Asian nation.
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New crypto legislation in China
China, one of the world's most powerful nations, says it wants to ensure a better quality of life for its citizens, and is therefore considering the formulation of new requirements and legislation that would allow for the construction of a government under the rule of law, where the law prevails.
China’s recently announced plans provide some response to the nation’s strict controls on the crypto industry this year, which caused the market’s leading digital assets to plummet by more than 50%. For example, Bitcoin, the industry’s leading cryptocurrency, suffered a sharp correction in its price, losing nearly 55% of its value during the second quarter. The value of BTC dropped from $64.000 per unit in mid-April to $29.000 per unit in July.
Environmental protection
One of the key goals within the new government plan announced by the nation is environmental protection. China says it will strengthen environmental management to ensure a greener and more environmentally friendly country. The crackdown on miners of bitcoin and other cryptocurrencies based on the consensus protocol Proof of WorkPoW) has a lot to do with this objective, as the nation announced weeks ago.
For the country that once positioned itself as the world's leader in crypto mining, dominating over 60% of Bitcoin's hash power, cryptocurrency miners have excessive energy consumption that leaves a significant carbon footprint on the environment. Therefore, despite the many studies that show that Bitcoin's energy consumption is not as exaggerated as some would have us believe, the nation decided to expel miners from its territory, cutting off the electricity supply to mining farms and issuing orders for a complete shutdown.
The goal, according to authorities, is to compensate for the country's energy shortfalls by shutting down crypto miners and ensuring a green future. Many crypto industry experts criticized China's actions, which left thousands of citizens without a source of income.
China and cryptocurrencies
China's relationship with cryptocurrencies has been rather rocky for years. The first regulations on the digital industry came in 2013, when the country began implementing regulatory measures to control this developing industry. In 2017, it strengthened its measures and banned cryptocurrencies. ICO (Initial Coin Offering), considering them a risk, and even a scam, for investors. The People's Bank of China (PboC) reported criminal consequences for those who operate with this type of cryptocurrency offerings in the country.
Later, it began banning commercial banks and financial institutions from having any kind of business activity with crypto assets. This ban was extended this year to any company; even, at the beginning of July, the PboC issued a closure order against Beijing-based software company Beijing Qudao Cultural Development for allegedly engaging in cryptocurrency trading activities.
The central bank clarified that companies and entities in Beijing are prohibited “providing venues, trade displays, or advertising for cryptocurrency-related businesses”The central bank has therefore ordered the software maker to shut down its operations and deactivate its website.
However, despite a crackdown on miners and crypto trading activity by banks and institutions, Chinese citizens are still able to hold cryptocurrency investments.
Future of cryptocurrencies in China
Although the future is uncertain, and many nuances remain to be defined, the country may not have intentions of completely banning the use of cryptoassets; at least not in the near future.
As Bit2Me News reported yesterday, the Beijing Financial Court will present a regulatory framework, aligned with the nation's plans to govern under the rule of law, that guarantees and protects ownership over legal digital currencies in China. In addition to this, in its recent plan, the central government of China expressed that it intends to guarantee the «healthy development of new forms of business» that are related to the digital economy, Internet finance, artificial intelligence, cloud computing, the Internet of Things, among others.
Continue reading: Beijing wants to protect the property of users of legal digital currencies in China
