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The Chinese Communist Party (CCP) has maintained a hostile relationship with bitcoin and other cryptocurrencies for years now. The leadership in the Asian country considers crypto a threat to its ability to exert overarching influence on individuals’ freedoms.
Peer-to-peer, distributed networks like Bitcoin offer folks the ability to evade government surveillance and capital controls. They have therefore become the CCP’s worst nightmare.
The Chinese government has continued to expand the scope of its crypto bans since 2013. That’s how it reiterated that all crypto-related activity is illegal. Each set of new crypto restrictions has often generated increased fear, uncertainty, and doubt (FUD) in the budding sector.
Here is a look at China’s attempts to hammer crypto with bans over the years and how the attacks have affected bitcoin prices.
2013 Crypto Ban Raises FUD Levels
The Asian giant nation first made its direct attack on cryptocurrencies in 2013. At the time, the People’s Bank of China (PBoC) published a note prohibiting banks from providing bitcoin-related services.
The top regulator argued that bitcoin was a currency without real value and lacked the backing of any central authority. The PBoC stated that they imposed the ban because BTC served as an outlet for criminals to launder money. The top financial watchdog followed up its initial ban with a directive to top payment services providers, prohibiting them from doing business with crypto exchanges.
Although the financial watchdog did not ban bitcoin trading, it warned citizens of the volatile nature of digital assets. The initial clamp down on crypto came as BTC prices surged above $1K for the first time in history.
The restrictions impacted Bitcoin’s first prominent bull run significantly, dragging down the price by over 30% on Mt. Gox, the largest BTC exchange at the time.
In March of 2014, just as the world’s first crypto was recovering from the 2013 China FUD, disaster struck again. This time around, a report from social platform Weibo falsely claimed that the PBoC had imposed an outright ban on crypto trading.
The news devastated the market as thousands of investors rushed to liquidate their positions. The BTCUSD pair, which was trading near $1K at the time, nosedived towards $400 in a matter of days.
The ICO and Crypto Exchange Ban
Chinese regulators continued their clampdown on cryptocurrencies in 2017. As a result, that year saw more FUD than in previous times. Government officials targeted the Initial Coin Offerings (ICOs) boom this time around, claiming that these fundraisers were illegal.
On September 4, 2017, regulators ordered all ICOs to be discontinued immediately and banned any platform conducting this form of public financing. The PBoC also demanded that all ICO platforms return raised funds to investors and ordered financial institutions to stop providing token-based fundraising services.
The primary purpose of the ban was that ICOs were prone to scams and posed serious risks of “business failure.” The authorities also argued that ICOs, which were the hottest topic in the crypto space at the time, threatened to destabilize the economy.
Again, the news triggered a severe market crash that sent BTC prices tumbling by nearly $1K in a week. The ban on ICOs was followed up by yet another regulatory bomb that would dampen the market sentiment.
On September 9, Chinese regulators mandated that all crypto exchanges operating in the country discontinue their services. Government officials argued that it increasingly used crypto to finance criminal activities such as money laundering and fraud.
The notice instructed exchanges to wind down their services and close shop by September 15. That gave these service providers just a few days to facilitate withdrawals and cease operations in China. However, many local exchanges such as BTCC adhered to the government’s mandate and relocated to other more crypto-friendly locations.
Despite the FUD generated by the two bans, crypto trading exploded over the next three months. In addition, more Chinese nationals started accessing bitcoin services from overseas exchanges via VPNs, catapulting the coin to a new lifetime high near $20K in December of 2017.
China’s Crackdown on Crypto Mining
2018 saw the PBoC and other financial watchdogs turn their attention to crypto miners. The mining industry had been thriving in China for years, with the Asian nation boasting some of the largest crypto mining hubs in the world. At the time, the miners’ community in China contributed over half of the hash rate for the Bitcoin Network.
However, things took a turn in early 2018 as unconfirmed reports surfaced that China was ready to institute a far-reaching ban on crypto mining. The news came as bitcoin shed about 65% off its value since its peak in December of 2017. Consequently, reports emerged tying rumors of the crackdown on mining to the BTC price crash.
As the crypto community awaited confirmation of the mining ban from official sources, regulators tightened the restrictions around the asset class. In August 2018, the CCP reiterated its ban on all crypto-related activities. Furthermore, the government went a step further to prohibit e-commerce platforms like WeChat and media outlets from hosting crypto-related activities.
Fears of a massive clampdown on mining-related activities were confirmed a few months later, sparking some panic in the market. Then, in April 2019, a draft report by the NDRC noted that Bitcoin mining is highly polluting and energy-intensive.
The agency went ahead to propose the eradication of mining activities from the region but omitted that recommendation in the final report. Thus, although miners were off the hook at the time, the NDRC draft hinted at what was to come.
Regulators Tighten their Grip on Crypto
In the recent past, China has renewed its crackdown on crypto transactions, exchanges, and miners. In mid-2020, the PBoC ramped up enforcement efforts on crypto exchange activities.
Later that year, officials revealed they would soon block foreign websites that offer crypto exchange services to Chinese nationals. Nevertheless, China’s crypto industry continued to thrive as BTC went on a run to a new all-time high in December 2020.
Also, 2021 has seen a more relentless effort from the Asian giant nation to stifle the crypto sector. Nevertheless, the year started positively for the broader crypto market. For instance, BTC extended its 2020 rally to climb from $30K in January to highs of $64K by mid-April.
PBoC imposed fresh curbs.
However, in May, things took a dark turn as the PBoC imposed fresh curbs on crypto trading, instructing banks and payment firms to stop offering crypto-related services.
Although the crackdown did not impose any new regulations on crypto, it sought to expand the scope of prohibited services in a way never seen before. Many market participants viewed the renewed crackdown as a more dogged attempt by China to intensify the fight against digital money.
In June, regulators instituted a complete ban on all mining activities, causing the BTC price to fall below $34K for the first time in three months. FUD continued to dominate market sentiment over the next several weeks as traders sold off their holdings, fearing the BTC price would crash even further.
In August, Chinese government agencies turned their attention to crypto influencers and shut down high-profile websites and social media platforms.
They then reiterated their hostile stance on Bitcoin on September 24. This time, they reminded their citizens that crypto-related activity such as order matching, derivatives, and token issuance was illegal. That latest attack on crypto hit the market hard as expected, wiping out 5.6% of the overall market cap.
China hasn’t been a fan of cryptocurrencies for as long as the asset class has existed. As a result, the communist nation has attempted to restrict crypto-related activities a whopping 19 times over the past decade. However, Beijing’s repeated prohibitions have done little to curtail Bitcoin’s success.
Many retail and institutional investors continue to jump into the Bitcoin market. That’s because they view crypto’s open-source technology as a tool to fight oppression and government control. Besides rocking the need for short periods, China’s string of increasingly restrictive bans has minimal impact on the cryptocurrency industry.