On Tuesday, July 6, the Chinese government shut down a company that was suspected of providing software services for digital currency transactions.
Beijing Tongdao Cultural Development, which has been operating since April 2016, was also involved in the entertainment industry. In addition, the suspended firm also has its own virtual currency, which is called “cat coin” or “Mao Li Coin”.
Aside from suspending the company, the Beijing Financial Supervision and Administration Bureau, as well as the Business Administration Department of the People’s Bank of China, warned other institutions to offer other services related to virtual currencies, which include providing business hubs or marketing.
China has been regulating cryptocurrency since 2013 when it ordered a third-party payment provider to stop the use of Bitcoin.
In 2017, Chinese authorities banned token sales, and they pledged to continue targeting crypto exchanges in 2019. In May 2021, the country prohibited financial institutions and payment firms from offering crypto-related services.
Last month, there were mass arrests of people who are suspected of using cryptocurrencies illegally. Additionally, regulators pressured local banks and payment businesses to halt administering crypto services. Moreover, Weibo, which is the counterpart of Twitter in China, suspended crypto-related accounts.
As of early July, half of the world’s bitcoin miners flew off the country after Beijing called for a severe crackdown on crypto mining and trading. An analyst stated that the nation’s policy on cryptocurrency seeks financial stability. However, he added that the crackdown might be due to its geopolitical interest as it desires to remove the competitors of its own digital currency, which is the digital yuan.
Several experts are pointing to this as the main reason for China’s strict regulation of crypto in addition to its goals of lowering carbon dioxide emissions.
Bitcoin mining has been hugely concentrated in China, which accounts for 65% of the global hash rate. Also, it has been reliant on large-scale industrial crypto-mining hubs.
The manufacturer of custom hardware in the mainland has supported this trend with one in two Application-Specific Integrated Circuit (ASIC) mining hardware being distributed to Chinese miners. However, the recent crackdown has caused a significant disturbance in the cryptocurrency industry.
Due to this, the Bitcoin network’s hash rate fluctuated to a 12-month low as more Chinese provinces were directing crypto miners to shut down.
Now, miners ousted from China are looking for countries with cool climates, cheap energy, and crypto-friendly jurisdictions to migrate with. It may open up competition for other crypto-friendly policy positions in other countries to attract participants in the industry.