In this series of articles, the BeInCrypto editorial team sums up the year and talks about what events have shaped the cryptocurrency industry in 2021, why it is important and what to expect next.
Deny, Allow or Control? Governments and financial regulators understand that it will no longer be possible to ignore the cryptocurrency industry, they are trying to find the best solution for themselves. China has chosen the path of radical bans.
In May of this year, the Chinese authorities introduced a ban on the mining of cryptocurrencies. This activity is now illegal. A week earlier, the Central Bank of China announced its intention to ban the use of digital tokens in financial transactions.
These measures are supposed to protect the financial system from the risks associated with the volatility of the cryptocurrency market, as well as help reduce carbon emissions.
Read about how Russian miners feel in the first comprehensive study of the Russian cryptocurrency industry.
Why is it important
By banning the mining of bitcoin and other cryptocurrencies, Beijing launched a large-scale correction in the crypto market and began the great resettlement of miners. China has lost its status as the main forge of bitcoin. The USA won – they doubled their market share and now occupy a leading position in the extraction of cryptocurrency. According to the University of Cambridge, in August 2021, the United States accounted for 35.4% of all bitcoins mined. In April this figure was 16.85%.
In addition, small and little-known mining pools, which previously found it difficult to compete with the Chinese giants, benefited from the ban. Experts believe that this dynamic will increase the decentralization of the network, making it less dependent on one region.
What other consequences
China continued its crackdown on the cryptocurrency market, resulting in several exchanges shutting down operations in the country. In particular, Huobi and OKEx restricted access to their services for Chinese residents almost immediately after the introduction of the mining ban.
Immediately after the ban on the secondary market, the supply of video cards and ASICs increased sharply, but this release did not significantly affect the cost of equipment. Video cards involved in mining wear out quickly and lose performance.
Bobby Lee, founder of China’s first cryptocurrency exchange, believes China will not stop. The next step will be a complete ban on cryptocurrencies.
“The next step, which could be the final straw, is a complete ban on cryptocurrencies,” Lee said in an interview with Bloomberg in July this year.
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