China Bans Cryptocurrency Trading & Transactions
China bans cryptocurrency on its instincts and nonaccommodative attitude towards the cryptocurrency, it has finally banned cryptocurrency transactions in its country.
Though trading was already illegal in China, such activities were usually carried out through international platforms. But with the recent legislation, China has brought in serious laws leading to penalization of any nationals within the geographical boundary and those Chinese individuals outside of China.
Thus, one can effectively state that China has effectively intensified its war against cryptocurrencies.
It is to be noted that with the advent of the newer laws, the investors in the digital contentious asset will find themselves on the wrong side of the law.
Thus, individuals will face legal risk if they indulge in cryptocurrency transactions openly or clandestinely. In fact, not only individuals but also organizations participating in such virtual currency trading will come under the ambit of China’s authoritative laws.
The seriousness of the law that has been proposed can be conjured from the fact that even Chinese nationals that are working overseas aren’t exempt from it. This comes after the Chinese government thoroughly mentioned that it will thoroughly examine and investigate such nationals too according to the law.
As it is quite natural, the bitcoin or the contentious digital market got into a frenzy when such laws were announced by the Chinese government.
This led to a serious drop in the market given that investors’ confidence was dashed by the Chinese government. According to the reports, the Bitcoin market was down by an effective 4.5 percent, whereas on the other hand, Ethereum was down by a significant 7.5 percent. Enter your email to get the Ars Technica newsletter
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but this gives rise to a pertinent question was the move by the Chinese government quite immediate without any prior notice?
It is to be noted that to state that there were no prior warnings by the authorities will be a statement that will be farther away from the truth.
The Chinese authorities, time and again, have been dropping hints about banning cryptocurrency mining and severely warning financial institutions to not effectively participate in the same.
Talking about another sector that is quite related to such a debacle is the real estate sector. One sector, other than the crypto sector, that has been gaining much traction in China in recent months, is the retail sector.
With the anticipated debacle of the Evergrande, the biggest real estate developer, many are comparing the current detestable scenario with the Lyman Brothers’ odious financial fallout.
Thus, it is quite pertinent that the connection between the two sectors is scrutinized as the crypto crackdown comes at quite in time when China’s real estate sector is facing a liquidity crunch.
It is to be noted that the retail sector in China is the biggest contributor to the GDP in China, making one-third contribution to the economy.
But with the virus exacerbating the financial health of the sector, many were cashing on the loans that were being provided by China for the development of unfished housing in the country. But with the onset of the pandemic, population migration to such households has dropped.
But Chinese authorities, instating its authoritative stance have stated that the houses are for living in, not for speculation. Thus, Cinna is trying to control the sector, when the sector itself is riddled with unfinished or unoccupied housing.
According to the reports, it has been found that the land sales have hit an all-time low with sales down by 90 percent year over year.
On top of this, Beijing is trying to rein in the sector by trying to balance the ratio of debt and emphatically lower them. This is putting undue pressure on the real estate sector.
It was in fact, due to this factor, that Evergrande had found itself at the alter of China’s mercy due to Communist Party’s new demands. One can state that such a decree was quite crippling because even before the decree, the real estate developer was already in trouble.
Given how the sale shave slowed and how the Chinese banks are trying to balance the debt ratio, Evergrande effectively hasn’t been able to generate much cash or revenue that is required to finish projects.
And since it does not have the prerequisite finances to complete its pending projects, it definitely will not have the finances to pay back its’ debt or the interest on it.
This has emphatically led the government to restrict Evergrande from issuing any new bonds to significantly pay off its near-term debt.
It is due to the bleak chances of the Evergrande estate developer and the high risk of financial fallout in the economy, that investors are trying to move their capital out of China.
This also comes after falling Chinese growth prospects due to falling demand and investments in the economy. Such capital outflows are what brings us to connect the cryptocurrency crackdown episode and the Evergrande debacle.
The Chinese government has been significantly and emphatically trying to restrict the flow of capital outside the country. This is being done to keep investors circulating their money within the nation’s economy.
But, given the anonymous character that is provided by the cryptocurrency, it is quite hard to regulate the same. Thus, this is the main reason that has motivated the Chinese government to crack down on the transactions.
Many might consider such a crackdown due to various reasons like pollution generation through bitcoin mining. Though, this is quite true, but not significant enough to make the Chinese authorities ban the transactions altogether.
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