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Musk, China bans send crypto into a tailspin


Bitcoin, together with all the major cryptocurrencies, is taking a major beating this morning, after China came out and reiterated that “digital tokens cannot be used as a form of payment,” effectively banning the cryptocurrency. Bitcoin is now at its lowest level since early February, and Ethereum has lost more than 7%, with both cryptocurrencies falling off a cliff.

  • This follows recent comments from Elon Musk, who says Tesla is now refusing to take payments in Bitcoin, due to concerns around the environmental impact of its coin-mining operations.

    China’s ban means institutions, including banks and online payment channels, must not offer clients any service involving cryptocurrency. There has also been a fever of mining Bitcoin in China, and with Bitcoin mining factories emerging, China has become the world’s largest miner – recent research found that more than 75% of Bitcoin mining happens in China.

    Some say the move will help the country in its mission towards decarbonisation. Bitcoin mining in its present form could “potentially undermine the emission reduction effort” in China. The annual energy consumption of the Bitcoin blockchain in China is expected to peak in 2024 at 296.59 terrawatt hours (Twh) and generate 130.50 million metric tons of carbon emissions (CO2-equivalent) correspondingly, according to the research, which was jointly conducted by researchers from the Chinese Academy of Sciences (CAS) and Tsinghua University. China recently announced its projection to reach its carbon peak in 2035 and hit carbon neutrality by 2060.

    It comes at an opportune time, when China has announced its grand plans to become the world’s first country to launch its own digital currency. For the Chinese Communist Party (CCP), it’s all about control and making another power-play move in its rivalry with the US. A digital yuan will be China’s version of a digital currency that is entirely controlled by its central bank. Named the “Digital Currency Electronic Payment (DCEP),” the digital currency is aimed at dethroning and replacing the US dollar as the world’s reserve currency.

    But it does not take a cynic to note that the new digital currency will also give the CCP all sorts of authoritarian powers to monitor and control its population. Unlike Bitcoin, which was designed around encryption and anonymity, the Chinese digital yuan is just another eye built for surveillance.

    So far, no one country has been able to create an effective and stable digital currency. Russia has been plugging away on a state backed “cryptoruble” and Sweden has its “e-krona,” but none have gained traction. A few years back, Venezuela and Ecuador tried and failed.

    Beijing has not barred individuals from holding cryptocurrencies, but warned about the risks of cryptocurrency trading. A People’s Bank of China (PBOC) official said: “Virtual currencies should not and cannot be used in the market because they’re not real currencies.”

    The government is essentially trying to maintain its capital controls by banning the use of cryptocurrencies and replacing them with its own digital currency.

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