At the beginning of 2021, we have seen a steep rise in several major and minor cryptocurrencies. In addition, the COVID-19 Pandemic saw Digital Finance become more of an essential part of people’s day-to-day activities.
Fewer people putting importance on physical currency to reduce the risk of infection. Cryptocurrency has also seen a rise in popularity due to the government-enforced lockdowns. Because more people are looking into investing in different cryptocurrencies, more establishments are looking to accept it as a payment method. This cycle has affected the prices of cryptocurrency in both positive and negative ways.
Cryptocurrency is a decentralised financial mode of payment that any government or private establishment does not control. Because of this, it may affect the way we eventually see the current currency systems in play around the world today. To counter the increase of cryptocurrency’s functionality, governments may try to regulate its usability. In 2017, China tried to do just this by shutting down its local crypto exchange. China’s crypto-exchange accounted for about 90% of Bitcoin’s global trading. This meant a massive dip for Bitcoin and all of its traders and investors.
Early in June of 2019, the People’s Bank of China or PBOC stated their intent to block all domestic and foreign cryptocurrencies by blocking the websites and platforms. This was done in an attempt to stop people from using cryptocurrency as a cover for money laundering.
What makes this particularly surprising is that within China, there are several cryptocurrency mining companies. These companies were forced to shut down because of the ban. That showed what exactly their stance was on cryptocurrency when things were a bit up in the air. And it turned out to be a massive hit on the cryptocurrency market, particularly Bitcoin.
Bitcoin took a six percent price drop because of China’s desire to be excluded from cryptocurrency trading and the consequences of its ban on cryptocurrency. This shows just how big China is in the world’s trading process, not just in cryptocurrency.
Blocking trading within their borders did not precisely halt the progress of cryptocurrency overall. The pandemic highlighted that digital finance’s necessity and growth have been ongoing in functionality despite all this. Their ban on cryptocurrency use was only regulated, for the most part, within local transactions. This meant that no company or service could offer cryptocurrency as a mode of payment for their products. However, more international companies are starting to accept cryptocurrencies as investments.
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Early in the Q2 of 2021, to maintain its stance on cryptocurrency, China banned all payment companies from making any dealings with cryptocurrency. This would differentiate several Chinese payment companies from the rest of the world and negatively affect their businesses. Due to the growing functionality of cryptocurrency in other countries, more people are using it as a payment method for goods and services. An entire market that these Chinese businesses cannot touch at the moment. In a way, these businesses are limited by this decision to turn away from cryptocurrency. While the effects may not be felt right now, the more accepted cryptocurrency becomes, the more obvious it will become.
Depending on just how quickly cryptocurrency becomes viable, China’s desire for global market dominance can be tested. Cryptocurrency will undoubtedly be a huge talking point in the coming months for both governments and banks. Watching how China decides to progress without cryptocurrency in its back pocket will be important because it will affect the rest of the world. This may be one way to be less dependent on Chinese products and open other trading routes to other states for several countries.