The recent events shook the entire crypto world when news of " China going to ban/crackdown on bitcoin mining companies to make them exit orderly " spread like wildfire. Now was it a concrete press release? The answer is yes NO.
The initial reports published also names the agency which issued notice to ban bitcoin but the name of the agency is either incorrect or non existent. The name of the agency is given as Leading Group of Internet Financial Risks Remediation but the Official governing authority of the sector backed by Chinese Government is National Internet Finance Association of China.
This may have you confused and asking a basic question to yourself
" WHOM DO I TRUST CRYPTO SPIRIT? "
My simple answer is firstly yourself and after that this post.
In this part I am going to tell you some basic reasons why China won't BAN anything related to cryptocurrencies and in the other upcoming parts I will explain the more Complex Reasons in detail.
Mining as we all know requires a lot of energy and computing power followed by other additional elements. The increasing competition has resulted into large number of mining companies cropping up all over the world.
China has used this to its favor by giving mining companies considerable amount of subsidies in energy and taxes which resulted in a large amount of mining companies in China. The Chinese miners own a large chunk in bitcoin mining and the people who mine bitcoin continue to receive certain amount of transaction fee too. This promoted the industry greatly. This industry has thrived well in China as energy, land, equipment and other elements collectively are cheaper compared to the profits involved.
A lot of computing equipment required are manufactured locally thus the transportation cost and other cost related to installation and maintenance of the equipment is cheap. The availability of skilled labour is really a great deal as the operations are carried out smoothly.
The mining industry in China has employed a lot of people as well as established Chinese dominance in the industry. This has also bought employment in small villages which have potential of producing cheap energy by other means like hydro electric powerplants.
China has offered mining companies a perfect condition to prosper.
China has rapidly grown into technologically advance nation with one of its cities now being known as Chinese silicon valley as a lot of startups are shifting their operations there. The city is SHENZHEN and it also has its own stock market. This city has everything available for such startups as it manufactures the hardware. Now imagine that the authorities try to impose ban on selling hardware to such startups. It can happen? No it isn't possible because why will they try to hamper economic development occurring in their city. Same is the case with bitcoin.
Chinese leaders have some huge aspirations of dominating the world. Knowing that their miners have dominant position in the crypto world they won't lose that position easily. Being a technologically advance nation they understand that cryptocurrencies and decentralized platforms will have great importance in near future. So are they dumb to allow other nations to bypass their dominance? NO they aren't. The Chinese government loves to keep a tight control on everything in their nation.
The basic reasons why china won't ban bitcoin are:
- It would affect the development of the villages which have potential energy resources.
- A ban would leave a lot of people unemployed.
- The Chinese government would lose influence over the mining companies if the mining companies shift their operations to foreign countries.
- The image of China as a global industrial and technological hub could tarnish.
HOWEVER IT IS COMPLETELY POSSIBLE THAT CHINA WILL IMPOSE SOME STRINGENT RESTRICTIONS ON MINING COMPANIES AND OTHER ENTITIES OR INDIVIDUALS WHO TRY TO DISOBEY THE INSTRUCTIONS OF CHINESE GOVERNMENT OR FAIL TO COMPLY WITH THEM.
While these are some of the basic reasons I will elaborate on other complex reasons in the next part.
Thanks for reading guys. If you have any doubts let me know. Follow me
