With frequent regulatory actions, how has the cryptocurrency market been affected?

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In addition to the fall in cryptocurrency prices, mining-related companies have also been greatly affected.

Original Title: “The Currency Circle Under Supervision”
Written by: Sui Qilin

In the past month, the word “strict” in the supervision of the currency circle has taken the lead, and the state has attacked the virtual currency market. First, there was a joint announcement by the three major industry associations in the financial industry. Later, the Financial Committee proposed to crack down on Bitcoin mining and trading. It was also accompanied by the release of measures to resolutely crack down on virtual currency “mining” by many local governments in Southwest China. These successive developments all indicate that the domestic supervision of the virtual currency market is rising to a new level.

Affected by many factors such as regulation, the prices of mainstream cryptocurrencies continue to fluctuate sharply. Bitcoin has plummeted by more than 35% in the past month, and the price of Ether has also fluctuated close to 40%.

The state has taken action, supervision has arrived

On May 18, the China Internet Finance Association, the China Banking Association, and the China Payment and Clearing Association jointly issued the “Announcement on Preventing the Risk of Speculation in Virtual Currency Transactions”, stating that virtual currencies do not have currency attributes. As early as in the “Notice on Preventing Bitcoin Risks” in 2013, Bitcoin was identified as a specific virtual commodity, which does not have the same legal status as currency, and cannot and should not be circulated in the market as currency. In addition, this announcement also emphasizes that relevant institutions must not engage in virtual currency-related business , financial institutions, payment institutions and other member units must not use virtual currency to price products and services, and must not directly or indirectly conduct virtual currency-related businesses. Obviously, even if many foreign institutions, including Tesla, have previously announced that they support the use of Bitcoin for payment, this behavior is currently not feasible in China. The announcement also reminded consumers to strengthen their risk awareness and called on consumers to invest carefully.

At present, the overall format of the virtual currency market has basically taken shape, and many well-known projects in the industry chain have also experienced several rounds of big waves. But for most ordinary investors, the virtual currency market is still in the early stage of development, and the speculative nature of participating in virtual currency transactions is significantly higher than that of investment. The previous market driven by animal currency has amplified the enthusiasm of the market. Some virtual currency “xiaobai” who did not understand and have relevant investment experience before were attracted by the legendary wealth effect of 100 times currency and 10,000 times currency, blindly. Participate in related investment activities. This also makes the financial risks brought by virtual currency exchanges further expand and spread. In this situation, it is very necessary to remind consumers to strengthen their awareness of risk prevention. This is also the original intention of the announcement to prevent overheated currency speculation.

On the same day that the three ministries and commissions issued the announcement, the Inner Mongolia Autonomous Region Development and Reform Commission issued the “Announcement on the Establishment of a Reporting Platform for Virtual Currency “Mining” Enterprises” to comprehensively clean up and shut down virtual currency “mining” projects , and give full play to the role of mass supervision and protection. Accept letters and reports about virtual currency “mining” companies.

Inner Mongolia is an important energy source base in my country. The power plants in Inner Mongolia are mainly coal-based power plants. Many of these power plants are built near coal mines. The cost of power generation is relatively low. Therefore, low electricity prices attract a large number of’miners’ to mine here. The reason why Inner Mongolia became the first place to ban Bitcoin mining is related to the deployment requirements of the Inner Mongolia Autonomous Region on ensuring the completion of the “Fourteenth Five-Year Plan” Energy Consumption Double Control Target Tasks. Several Guarantee Measures. Inner Mongolia needs to achieve dual energy consumption control. Goal to promote low-carbon development.

On May 21, the Financial Stability and Development Committee of the State Council held its 51st meeting and continued to emphasize the resolute prevention and control of financial risks, “combating Bitcoin mining and trading behaviors, and resolutely preventing the transmission of individual risks to the social field.” This is the first time that the State Council has clearly issued a crackdown on Bitcoin mining and trading. If the announcements of the three major associations are used as an appeal, then this meeting of the Financial Committee has released a strong signal to strengthen supervision and resolutely prevent the spread of risks.

This is not the end. On May 25, in order to further clean up the virtual currency “mining” behavior and strengthen the crackdown, Inner Mongolia immediately issued the “Eight Measures to Resolutely Combat and Punish the Virtual Currency “Mining” Behavior (Draft for Solicitation of Comments)”.

On May 26th, the National Development and Reform Commission issued the “National Integrated Big Data Center Collaborative Innovation System Hash Hub Implementation Plan”. The plan stated that it is necessary to lay out the national computing power hub nodes and implement the “Eastern Digital and Western Computing” project to support Large-scale computing power dispatch, build a new computing power network pattern oriented by data flow. The proposal of the “Eastern Data and Western Calculation” project is highly strategic, leading and innovative. It is of great significance for accelerating the construction of digital infrastructure, implementing carbon peak and carbon neutral requirements, and coordinating the coordinated development of the eastern and western regions.

On May 27, the Sichuan Regulatory Office of the National Energy Administration issued a notice on holding a research seminar on virtual currency “mining”. According to the notice, in accordance with the relevant requirements of the National Energy Administration, in order to fully understand the relevant situation of Sichuan virtual currency “mining”, a seminar will be organized on June 2.

In this round of policies, it can be seen that mining has been suspended, not only because the virtual currency itself is not recognized by the current law, but also because its huge energy consumption characteristics run counter to the carbon neutral policy. Therefore, mining consolidation is imperative. While the state is vigorously supervising mining activities, it is also actively promoting the construction of digital infrastructure. The “Eastern Data and Western Calculation” project plays an important supporting role in realizing green development and the coordinated development of the digital economy of the east and the west. The implementation of this project will enable data centers across the country to form a new pattern of integrated infrastructure with reasonable layout and green intensive.

Why does the country strike hard?

From the perspective of environmental protection, the Chinese government proposed at the 75th United Nations General Assembly: “China will increase its national independent contribution, adopt more powerful policies and measures, and strive to reach its peak carbon dioxide emissions by 2030, and strive for 2060. To achieve carbon neutrality before.” Under the joint initiative of global environmental protection, this is a major strategic decision based on the internal requirements of promoting the responsibility of building a community with a shared future for mankind and achieving sustainable development.

Obviously, in the context of carbon neutrality, such an energy-consuming industry for cryptocurrency mining has become an obstacle to achieving this goal. According to data from the Alternative Finance Research Center of the University of Cambridge, as of May 19, 2021, the global annual power consumption of Bitcoin “mining” is approximately 133.68 TWh. What is the concept of this number? The electricity consumption of Sweden in 2020 will be only 131.8TWh.

With frequent regulatory actions, how has the cryptocurrency market been affected? Source: FINANCIAL TIMES

Moreover, mining not only consumes a lot of electricity, but also aggravates carbon dioxide emissions if thermal power is used to mine Bitcoin. Domestic virtual currency mining sites are mainly located in Inner Mongolia, Xinjiang and western Sichuan. Among them, Inner Mongolia and Xinjiang use thermal power generation more, and Sichuan mainly uses hydropower. Thermal power generation converts heat energy into electricity by burning coal or other fossil energy sources. During the process of burning coal, carbon dioxide is emitted, which causes environmental problems. In the long run, this is not conducive to the sustainable development of the blockchain industry, and of course it drags on the carbon. And the hind legs.

In addition, the current uneven distribution of energy in the east and west of our country , densely populated and economically developed areas (such as Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area, Chengdu-Chongqing) energy shortage, western regions, economically underdeveloped regions are rich in energy, Inner Mongolia It has the important task of transmitting power to the grids of Beijing-Tianjin-Hebei and other places, and is an important west-to-east power transmission area. Moreover, the current rapid development of 5G, industrial Internet of Things and smart cities will also generate considerable energy consumption demand. If Bitcoin’mining’ is allowed to proliferate in Inner Mongolia, it will affect the power balance of Inner Mongolia and the strategy of power transmission from west to east to a certain extent.

For Sichuan, which mainly uses hydropower, the energy structure of Sichuan itself is dominated by hydropower, and Sichuan’s topography is dangerous, with large river drops, and the power generation of nearby small hydropower stations cannot be sent to the Internet. In addition, the water volume is relatively large during high water periods. The large energy abandonment phenomenon in Sichuan is a real problem. Therefore, the use of waste energy and mining with water and electricity do not pollute the environment, which is helpful for consuming excess electricity during the high water period. Although mining is very good during wet periods, there is not so much electricity in normal and dry periods. Therefore, how to solve this problem will probably be discussed at the forum on June 2.

In addition to environmental protection, the crazy trend of cryptocurrency in recent months has made the market a little overheated, and the bubble is very large. Affected by market speculation, a large number of ordinary investors participate in the cryptocurrency market investment, which is mostly regarded as a kind of speculation. A large amount of money invested in Bitcoin transactions will weaken the support for the real economy, making the spread of financial risks possible. More importantly, Bitcoin is a specific virtual commodity, which has no real value support and does not have the same legal status as currency. Therefore, Bitcoin investment transactions are not protected. Intensifying supervision at this time is to cool the overheated market.

What is the impact on the cryptocurrency industry?

After the Financial Committee meeting, the cryptocurrency market bubble suffered a major blow. The price of Bitcoin has been declining. On May 23, the price of Bitcoin hit a minimum of $31,815.67. As of 2:45 on June 8th, Beijing time, the price of Bitcoin rebounded to 35544.78 US dollars, a decrease of 0.97% in the past 24 hours. Also on May 23, other cryptocurrencies also collapsed collectively. Ethereum slipped from above $2,400 to a minimum of $1,739.03. XRP Ripple fell by approximately 12.94%, and Dogecoin fell by more than 10%.

In addition to having a huge impact on the price of cryptocurrency, this round of policies has a certain impact on mining-related companies. Relatively speaking, this series of policies has a greater impact on the head and large mines and mining pools. Many head mines have stepped up their overseas mines. Central Asia and North America are the main directions, while some small mines The impact on farms or individual miners is not significant.

In addition to the withdrawal and closure of mines, a number of mining machine service platforms have announced the blocking of IP in mainland China. On May 23, Huobi, which owns a mining pool, suspended providing mining machines and derivative services to users in mainland China, and users who have purchased BTC mining machine products suspended providing mining machine custody services. On May 26, the cloud mining platform Bit Deer blocked all IPs in mainland China and stated that it will ensure that the platform does not provide services to residents in mainland China. Mars Cloud Mine, a physical mining machine mining platform, also announced that Mars Cloud Mine will block IP access in mainland China from 20:00 on May 26, Beijing time.

Attitudes of countries around the world towards cryptocurrencies

Not only China, but countries around the world have recently strengthened the supervision of the cryptocurrency market.

United States:

On May 19th, Sherrod Brown, Chairman of the US Senate Committee on Banking, Housing and Urban Affairs, issued an open letter proposing that the Occupational Regulatory Commission (OCC) suspend the issuance of cryptocurrency institutional bank trust licenses and review several licenses issued by the previous government. On May 20th, the U.S. Office of the Comptroller of the Currency (OCC), the Federal Reserve (Federal Reserve) and the Federal Deposit Insurance Corporation (FDIC) are considering the establishment of an “interagency sprint team” to supervise virtual currencies.

Turkey:

On May 1, the “Official Gazette” issued a presidential decree that Turkey included cryptocurrency asset companies on the list of institutions that need to comply with money laundering and terrorist financing regulations. The decision will take effect immediately from its issuance and will make it easier for financial regulators to investigate cryptocurrency assets. On May 7, Turkish Finance Minister Lütfi Elvan announced that the country’s cryptocurrency exchanges must report any transaction exceeding 10,000 Turkish Lira (approximately 1,200 US dollars) to the Financial Crime Investigation Commission (MASAK). Elvan pointed out that next, MASAK will be granted the power to audit and supervise cryptocurrency exchanges.

Iran:

On May 7, the central bank of Iran banned the trading of cryptocurrencies mined abroad. Local media said that the move was to prevent domestic capital flight, and the capital flight may be due to the depreciation of the domestic currency, the rial (Rial).

Most countries are strengthening the supervision of the cryptocurrency industry, but some countries are encouraging. For example, in India, on May 31, the Central Bank of India stated that India does not prohibit cryptocurrency transactions. “Investing in cryptocurrency has always been 100% legal in India. The central bank’s new announcement clearly confirms the right to trade with cryptocurrency companies.” Avinash Shekhar, co-CEO of ZebPay, India’s oldest cryptocurrency exchange, said that the statement of the Central Bank of India will attract more Indian investors to buy virtual currencies.

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