China is one of the countries that was still developing when it adopted fintech. The country as a whole experienced a great amount of growth due to its outdated regulations that left room for inhibited growth.
In 2018 its investments reached $25.5 billion, taking up half of the total fintech investments that year. In the same year, China was also the home to 5 of the top 10 fintech hubs worldwide. Two years later, China dropped from having 5 cities in the top 10 fintech hubs to having just one in 2020.
The fintech industry as a whole in China has fallen due to the government winding down on online lending. As of now, there is no report of China explicitly outlawing cryptocurrencies, while the government has issued a warning about trading and mining crypto in May. The government also announced to the country’s financial giants that they would have to stop dealing in crypto.
But why start cracking down now after all of the growth the industry has found in China?
The government says that it is acting now because of the increased concerns of crypto’s volatility and its use for black market deals such as illegal dealings and money laundering, according to Reuters.
Now just because there are no reports explicitly outlawing crypto, the government has taken many steps towards that. Following Beijing’s crackdown on Bitcoin mining in May and Inner Mongolia’s shut down of crypto mining altogether, authorities in China’s Sichuan province have ordered miners to shut down their operations altogether. Many bitcoin mines in southwestern Chinese provinces closed as well. With Bitcoin breaking below $30,000 for the first time since January 27 because of these new orders, crypto users are worried about what the future of China holds.
The effects of China’s crackdown do not only affect crypto in China but crypto overall. A CNBC report states that it has caused $400 billion in value to be wiped from the digital currency market.
While China’s new regulations are a big topic of conversation, it is not the only country cracking down on crypto. Iran has issued a temporary ban on mining until September 22, and India is on the verge of making crypto ownership illegal altogether. A country that is heading on the complete opposite would be El Salvador which is becoming the first country in the world to make Bitcoin a legal tender.
Will countries follow suit with China and crackdown on crypto, or will they use El Salvador as an example to promote the use of crypto? It will be interesting to see which way other countries decide to go.
Clark, Mitchell. “What We Know about China’s Cryptocurrency Crackdown.” The Verge, The Verge, 23 June 2021, www.theverge.com/2021/6/23/22544367/china-crypto-crackdown-bitcoin-mining-sichuan-ban-hydro-cryptocurrency-trading.