Key Takeaways:
- A senior Chinese official was arrested for abusing his power to support companies to engage in cryptocurrency mining.
- The official was arrested because he got engaged in cryptocurrency mining activities that do not meet the requirements of the national industrial policy.
A senior Chinese official was arrested for abusing his power to introduce and support companies to engage in cryptocurrency mining activities. He was arrested because he did not meet the requirements of the national industrial policy. China’s industrial policy aimed to create jobs and economic growth at home, but it also helped international companies. Beijing’s aims included removing bureaucratic regulation of business activities after joining the World Trade Organization in 2001.
On 24th September 2021, China declared all cryptocurrency-related financial transactions unlawful. In addition, it imposed a nationwide ban on cryptocurrency mining, the energy-intensive process in which large computer networks compete for newly produced crypto tokens.
China’s crackdown comes as its central bank puts its digital currency, the electronic Chinese yuan, to the test. The central bank published a notification specifically mentioning Bitcoin and Ether are the two most popular cryptocurrencies issued by “non-monetary authorities.”
According to George Selgin, an economist and senior fellow at the Cato Institute, the Chinese government’s decision to create a central bank digital currency and make crypto transactions illegal is part of a larger effort to divert citizens away from popular private financial services providers. A government-controlled digital currency would permit the government to collect data and keep track of residents’ daily transactions and manage access to an individual’s funds, among other things.
George Selgin also said, “This is really about establishing a state monopoly in payments. The most obvious implication is that the state will have more opportunities to monitor citizens’ economic activity.”
According to China’s central bank, other operations related to cryptocurrencies, such as trading, token issuance, and derivatives for virtual currencies will be rigorously restricted. In addition, according to the bank, offshore crypto exchanges serving customers in mainland China are illegal, which is one method that traders have gotten around a long-standing restriction on domestic crypto exchanges.
China outlawed domestic cryptocurrency exchanges years ago, but underground trading has continued. Moreover, despite prohibitions on the practice, China has remained a key hub for cryptocurrency mining operations, in which computer farms compete to solve complicated equations in exchange for Bitcoin.
China isn’t the only country where crypto exchanges and related services are outlawed. But, on the other hand, Crypto traders have devised workarounds, such as disguising their identities or buying and selling digital currencies over peer-to-peer networks.
