If the past week’s headlines about China banning crypto are giving you déjà vu, that’s probably because the country — home to the world’s second largest economy — has been announcing various cryptocurrency crackdowns for over a decade. China’s latest announcement aimed to curb trading via offshore platforms, and BTC dropped nearly 10% following the news. But how successful will China’s new rules be in preventing citizens from buying and selling crypto, and how will the measures impact the broader market? Let’s take a look back at previous crypto bans for clues:
- June, 2009 (BTC value $0.0001): Six months after Bitcoin was invented, China announces it will prohibit virtual currencies, primarily out of a desire to prevent gamers from using in-game money to purchase real-world goods. (Bitcoin isn’t mentioned.)
- December, 2013 (BTC value $900): The People’s Bank of China (PBOC) prohibits Chinese banks from engaging in Bitcoin-related business, although individuals can still trade. Prices drop 13% after tech giant Baidu stops accepting BTC and crypto exchange BTCChina is temporarily unable to accept yuan deposits.
- January, 2014 (BTC value $850): Prices fall again after e-commerce behemoth Alibaba follows Baidu’s lead, proactively banning bitcoin transactions and sales of mining equipment. (This week, the company published a reminder about this policy.)
- September, 2017 (BTC value $4,000): The Wall Street Journal reports on Chinese authorities’ plan to shutter all Bitcoin exchanges: “the government’s attack on Bitcoin comes amid a focus on preventing capital from fleeing to digital currencies.”
- May, 2021 (BTC value $37,000): Despite previous bans, China remains the global hub for bitcoin mining, with about 46% of the average hashrate as of April, according to a Cambridge University estimate. After government officials begin a widespread mining crackdown, miners begin to halt Chinese operations and migrate abroad — especially to North America. Mining power has steadily recovered since.
- September, 2021 (BTC value $43,000): As the PBOC reiterates existing restrictions on trading and mining, and moves to close a loophole around offshore crypto accounts, some vestiges of crypto activity (including over-the-counter trading) begin to shut down. Notably, the possession of crypto still appears to be legal — and many longtime local traders took advantage of low prices to add to their holdings. “These policies are not new to us, so we view them as a buy signal,” one Shanghai-based crypto investor told Bloomberg.
Why it matters… Historically, China’s crypto crackdowns have been motivated by a need to stem “capital flight” and control economic freedom in an authoritarian regime. But why so much focus now? Bitcoin’s soaring price may be one reason — as well as a desire to support the value of China’s central bank digital currency, which is beginning to roll out. As for the long-term impact China’s latest moves will have on BTC’s value, only time will tell. Each previous crackdown has roiled markets, but BTC has also historically recovered significantly. And some U.S. crypto proponents even see opportunity in Beijing’s rejection of crypto: “China’s authoritarian crackdown on crypto, including #Bitcoin, is a big opportunity for the U.S.,” tweeted Pennsylvania Sen. Pat Toomey. “It’s also a reminder of our huge structural advantage over China.”