The price of the cryptocurrencies fluctuated in recent weeks as a result of a hardening of the position of the Chinese authorities regarding the mining and exchanges of these digital assets, which are very popular in the country.
On Monday, bitcoin was again losing about 9% at 10:30 GMT, after Beijing decided cut off the power to specialized companies in the mining of this virtual currency, located in the province of Sichuan (southwest).
The specialists are they ask why China acts like this, and the consequences of it for the market.
A bitcoin machine in the United States. Reuters photo
The need for government control Chinese on the financial system has been strengthened as it gained in importance.
Cryptocurrencies, and especially bitcoin, represent a challenge for Beijing, given the impossibility for the Central Bank to follow the movements of money that pass through those assets.
To “prevent and control financial risks” the authorities decided to ban cryptocurrency exchanges in the country. According to analysts, China fears an increase in illicit investments and fundraising, as its authorities try to control capital flows.
“China does not have an open capital market, and cryptocurrencies allow you to avoid this situation, which is unacceptable for the authorities, “says Jeffrey Halley, Asia analyst at Oanda, a company specializing in international exchanges.
The tightening of cryptocurrencies also allows China to introduce your own virtual currency, a project in which the Central Bank has been working since 2014, and which will allow the government to better control exchanges.
Although the creation and exchanges of cryptocurrencies they are illegal in china Since 2019, the recent actions of its authorities will lead an important mining sector to close its activities.
Today, about 80% of bitcoin exchanges are managed through data centers installed in China, that consume a lot of energy.
Access to material and very cheap energy has favored the emergence of companies specialized in exchanges, but also in the creation of new cryptocurrency assets, an operation that requires great computing power and high energy expenditure.
An important part of the industry is powered by electricity from plants that run on lignite, a very polluting coal, which could prevent China from reaching its climate goals, which in part explains its reaction.
According to the bitcoin electricity consumption index, published by the British University of Cambridge, the mining of virtual currencies should consume 0.6% of the world’s electricity in 2021, the equivalent of Norwegian consumption.
In March, China launched the testing phase of its digital yuan. This virtual currency would allow Beijing carry out international transactions in its own currency, when world trade is today mostly carried out in dollars (in more than 80% of transactions).
“The goal is to make the yuan more available internationally, while maintaining total control of the price of the currency “explains Halley.
Several countries try flip your own coin virtual. The European central bank must decide in the coming months whether or not to launch a virtual euro.
But for specialists, these state coins they will hardly be able to compete with existing cryptocurrencies, whose appeal comes precisely from the absence of state control.
“Bitcoin is marginally a mode of payment, at the moment, but its main advantage is that it cannot easily be seized, nor forbidden, nor devalued, “stresses Leonhard Weese, co-founder of The Bitcoin Association, in Hong Kong.