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Tightening the noose on cryptocurrencies, China banned the mining of blockchain-based currency in Inner Mongolia. The world’s second largest economy also announced the closure of all crypto operations by next month as it preps to take stringent actions to eliminate the massive energy-consuming mining activity.
Bitcoin, the crypto headliner, bounced back from its Sunday low of US$43,000 per token, rising more than 9 per cent in the early Monday morning session to over US$ 48,500 per token.
Inner Mongolia, with its availability of cheap electricity, is one of the viable places to mine crypto, making it an industry favorite. The region came under sharp criticism as it failed to meet its energy target in 2019. The Inner Mongolia Development and Reform Commission plans to cut down power consumption by 1.9 per cent in 2021.
But this mining ban is not just an outcome of cryptocurrencies’ high energy consumption and rising carbon footprint.
China’s sounded the war bugle in 2017 after shutting down domestic cryptocurrency exchanges, crucifying nearly 90 per cent of global bitcoin trading.
As bitcoin climbs to new heights, the fear of unpredictable bubbles, financial scams, and terror-funding has gained weight.
India, the world’s largest democracy and the second-most populous nation, also wants to ban cryptocurrency through a parliament-legislation against the anonymously run virtual money. This ban will also limit all foreign exchange-based transactions.
Impact on Cryptocurrency
There will not be any short-term impact on the crypto market as the world’s two most populated nations clamp down against the emerging digital currency.
However, these regulations will put cryptocurrencies out of reach of nearly 36 per cent of the world population.
While India plans to launch their own-regulated digital currencies in near future, investors from this emerging economy won't be able to invest in private cryptos.
Official estimates suggest nearly 7 million Indians own cryptocurrencies worth over US$1 billion and a ban will impact the existing investors.
Regulators have also flagged crypto’s high volatility and security-related concerns.
India, which is one of the 10 worst-affected countries on the Global Terrorism Index 2020, has repeatedly stressed that the anonymity of the virtual currencies will encourage money laundering and terror-funding.
The fear stems from the fact that though Bitcoin is decentralized and maintained on an open ledger, the owner’s identity is concealed making it difficult to track the flow of illegal money.
Meanwhile, China’s official cryptocurrency e-Yuan has already stirred worldwide investors’ interest. Reports suggest that the Chinese government will provide support to stabilize its price in case of any volatility.
Source: Copyright © 2020 Kalkine Media Pty Ltd.
Why India & China Should Rethink Their Crypto Stance
‘Digital gold’ bitcoin has continued to outperform as an emerging asset class.
As more countries join the crypto wave, India and China need to rethink their approach.
North America views cryptocurrency as the money of the future. Biggest electric vehicle manufacturer Tesla (TSLA:US or NASDAQ: TSLA) has already invested US$ 1.5 billion in bitcoin and will accept payments in the currency.
FinTech companies have also been investing in bitcoin, despite its volatility. Square Inc. (SQ:US or NASDAQ: SQ) invested US$ 170 million in bitcoin last week.
The Canadian authorities have authorized the trading of Bitcoin exchange-traded funds (ETFs), which include Evolve Bitcoin ETF (TSX: EBIT) and Purpose Bitcoin ETF (TSX: BTCC.B). These ETFs launch could also be a big win for the giant crypto coin on the regulation front.
Mainstream Wall Street investors are also betting on cryptocurrencies.
PayPal Holdings allows users to transact in crypto coins on its platforms.
Such acceptance level certainly shows that the crypto has a bright future despite the peripheral criticism.
With inputs from Reuters