Bitcoin was a fantastic invention. Its utility is clear: a completely decentralized and pseudonymous digital cash system with no single point of failure that can be used as a payment system for online transactions. The potential of Bitcoin is clear: the ability to cut out the middleman, transfer value directly from one party to another without the need for a trusted third party, and even be used as a currency in the real world. The problem is that Bitcoin isn’t being used the way it was intended.
A bitcoin exchange called Mt. Gox was recently shut down. This is a huge blow to the bitcoin community. But when was the last time you saw Mt. Gox on the news? Mt. Gox is not a gold mine, or a gold bullion company, or a mining company, or a mining company that produces gold bullion. Mt. Gox is a bitcoin exchange. It’s not the first bitcoin exchange to go belly up, but it is the most prominent one. Unfortunately, it has been the exchange used by a large number of bitcoin traders. There are other bitcoin exchanges, but they are smaller. Mt. Gox is very large. This has led many to suspect foul play.
In what can only be described as a “crypto-conundrum” a couple of publishers have reported that Chinese miners have received with multiple bans. The action taken by the Chinese government has led to allegations that Chinese mining pools (and other mining entities) are being targeted by the Chinese government. This has resulted in a number of exchanges suspending their services due to the actions by the Chinese government.. Read more about what does mining crypto mean and let us know what you think. This weekly round-up of news from mainland China, Taiwan and Hong Kong seeks to gather key industry news, including influential projects, regulatory changes and blockchain business integrations.
Chinese law, FACT or FUD?
This weekly column usually covers all the events, news and even gossip happening in China. This week, most questions were overshadowed by the news that a new wave of repression has engulfed the sector and threatens to plunge the markets into an outright bear market.
Closure of the mine
It was all fun and games until the decision came from above. Liu He, vice premier of China and member of the all-powerful eight-member Politburo, chaired a meeting on financial risk prevention and management. One of the decisions made was a restriction on the mining and trading of bitcoins, which was a stab in the heart for all those hoping for a more open regulatory environment. Immediately there were signs that the closure would not be taken lightly: A hotline has been established in Inner Mongolia province to report cases of contempt of court. BTC.TOP, one of the world’s largest mining pools with a 2.5% share of the global hashrate, immediately complied and announced that it was ceasing operations. That didn’t stop BTC.TOP founder Jiang Zhuo from saying on microblogging platform Weibo that bitcoin is a tool China can use to break the US dollar’s monopoly on international trade.
Western experts seeking answers
China’s role in the mining community has been a major source of distrust between East and West, with some bitcoiners believing that China’s potential control over the mining community could undermine the blockchain’s ability to remain fully decentralized. Therefore, some welcomed the news of the ban, thinking it would further fragment the mining community. But the fact that China is banning the deal does not mean that Chinese companies will lose their dominant position in the industry. As Primitive Capital partner Dovi Wang noted, many miners simply pack up and leave. Registering and locating their operations in areas like the US, Kazakhstan or even Africa will not prevent BTC mining from being owned by Chinese miners, it will just make it harder to track network centralization. The stock markets and trading platforms have not suffered much so far. In 2017, when exchanges were first subject to regulation, the impact was much greater, as many of the major exchanges were registered in China. Today, the platforms are all located in other countries, have offshore servers and serve a much more diverse user base. Local authorities will be much less interested in getting involved in these operations because their impact on Chinese society is much less clear. Huobi has temporarily suspended term-time operations for Chinese users, but this does not appear to be a permanent change in their operations. Futures platform Bybit said it would close accounts registered under Chinese phone numbers from the 15th. The month of June will be closed. However, since most of their users are not Chinese, the negative impact will be much less than the risk they take if they continue to serve Chinese users.
You can’t have it both ways.
It seems that China is winning because it can get closer to its carbon neutrality goals by reducing the number of bitcoin miners. At the same time, the eCNY has become the only digital asset in the country. Finally, mining and trading profits are still likely to flow back to the continent, as trading and mining offices are unlikely to follow materially out of the country.
Don’t forget Hong Kong
Hong Kong is about to ban retail trading of cryptocurrencies, announcing measures that set a minimum investment threshold of about $1 million. Christopher Hui, Hong Kong’s secretary for financial services and finance, defended the requirements, saying they protect investors, prohibit market manipulation and protect against money laundering and terrorist financing. This decision will certainly make it easier to track cryptocurrencies in the special administrative district and make it harder for mainland Chinese citizens to circumvent the rules.The Bitfinex and Tether slates are hardly the only cryptocurrency exchanges that are being targeted in a sweeping crackdown. Chinese exchanges are being raided, the US SEC has announced they’re looking into the space, and even the Russian government is making noises about the need to regulate.. Read more about cost to mine bitcoin and let us know what you think.
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