The tide of regulatory consolidation is rising, and the era of strong regulation of the cryptocurrency mining circle is coming

The interviewed experts pointed out that bitcoin is not equivalent to blockchain, and it is necessary to guide blockchain technology to support the development of the real economy.

The tide of regulatory consolidation is rising, and the era of strong regulation of the cryptocurrency mining circle is coming

In May, the “ups and downs” of the “cryptocurrency circle” attracted countless attention. The crazy crypto-digital coins, despite the huge risks, could not stop the gambler’s mentality of speculators. Crypto digital coins are difficult to regulate and can easily become a tool for unscrupulous people to take advantage of. At the same time, the big ups and downs of cryptocurrency prices are full of huge bubbles and speculative risks. It has no value in itself and will have a negative impact on the domestic financial system and economic system.

In this context, since mid-May, in order to prevent financial risks, policy documents from regulatory authorities have been released one after another, pointing directly at the chaos in the crypto-digital coin market and further strengthening the regulation and supervision of crypto-digital coins. Under the strong regulation, crypto digital coin trading and mining behaviors were further regulated and rectified.

Many experts in the industry believe that the heavy regulatory means that came one after another in May not only enable investors to fully understand the nature and risks of crypto-digital coins such as Bitcoin, but also stop investors from blindly participating in any form of trading and speculation activities, thus better maintaining the stability of the financial order.

Frequent Regulatory Policies
Calming the fire in the virtual coin market
Since this year, the crypto-digital coin market has been in a frenzy, with even worthless cryptocurrencies being frequently speculated. The dramatic increase in the price of coins on the “books” has caused frenzy to take over the entire market, with many new investors joining and some even participating in high-risk contract trading, but behind the delusion of high returns, huge bubbles and risks are accumulating.

Caught off guard, a storm instantly descended. From May 13, the bitcoin price, which had been soaring, suddenly saw a precipitous drop. It is widely believed that the direct cause of this round of bitcoin’s decline was Tesla’s call to stop bitcoin payments. Since then, the price of the coin has fallen all the way to a low of below $30,000. As of June 7, bitcoin hovered near $36,000, down more than 30% in a month; ethereum fell from its highest point this year to near $2,700, down more than 20% in a month.

Since May, while the price of Bitcoin and other crypto-digital coins has been shaking, the country has taken several initiatives to reduce the crypto-digital coin-related activities in the country, strengthening the regulation of crypto-digital coin trading practices on the one hand; and cleaning up the mining activities in the country on the other. It can be seen that the country has comprehensively rectified the crypto-digital coin and mining industry.

On May 18, China Internet Finance Association, China Banking Association and China Payment Clearing Association jointly issued the “Announcement on Preventing the Risk of Speculation in Virtual Currency Transactions” to “cool down” the crypto-digital coin market, clearly stating that financial institutions, payment institutions and other institutions are not allowed to conduct business related to crypto-digital coins. On the same day, the Inner Mongolia Development and Reform Commission issued an announcement on the establishment of a reporting platform for virtual currency “mining” enterprises, which fully accepts letters and visits for four types of crypto-digital coin “mining” enterprises. Within one day, two announcements pointed directly at crypto-digital coins, releasing signals of strict regulation.

On May 21, the Financial Committee of the State Council made a rare statement, pointing out in a meeting that it would “crack down on bitcoin mining and trading, and resolutely prevent individual risks from being passed on to the social sector”. Once again, the financial regulator’s attitude towards strict regulation of bitcoin was clarified, and the crypto-digital coin market fell again in response.

On May 25, the Inner Mongolia Development and Reform Commission issued a public consultation on the “Eight Measures of the Development and Reform Commission of Inner Mongolia Autonomous Region on Resolutely Combating and Punishing Virtual Currency “Mining” (Draft for Comments)” to strengthen the efforts to combat and punish, and build a long-term regulatory mechanism. On May 27, Baotou City Energy Consumption Double Control Emergency Command Office issued the “Notice on Accepting Letters and Visits from Virtual Currency “Mining” Enterprises and Individuals”, which stated that it would fully accept letters and visits from enterprises and individuals regarding crypto-digital coin “mining”. The report.

Industry insiders generally believe that, at present, the crypto-digital coin market bubble is huge, and a series of moves by regulators since May will play a positive role in preventing financial risks, protecting investors’ interests and maintaining normal market order.

Qi Haishen, president of Beijing Teyi Sunshine New Energy, said in an interview with Securities Daily that the biggest feature of crypto digital coins is decentralization, high invisibility and global circulation, which makes it difficult to be regulated and impossible to track through the flow of funds, thus circumventing foreign exchange regulation. Therefore, crypto-digital coins can easily become a tool for money laundering and capital flight, and the big rise and fall of trading prices, full of speculative risks, lead to a large amount of capital flowing into the crypto-digital coin market.

“Crypto digital coins represented by Bitcoin have problems in terms of inefficient payment transactions and high energy consumption in mining, and have been widely criticized; in addition, the dramatic volatility of crypto digital coins themselves make them difficult to use as a store of value and a measuring stick.” Zhou Maohua, an analyst at the financial market department of Everbright Bank, told the Securities Daily.

Overall, the strict regulation will continue. In June, Hainan also issued a risk alert, various departments on the “virtual currency” trading, initial token issuance (ICO) and disguised ICO continued to maintain high regulatory pressure, will use a combination of on-site interviews, administrative investigations, blocking websites, criminal cases and other means to crack down. In addition, over the weekend, Weibo also banned the microblogs of trader Xiaowan, Fatty Bitcoin and other big names in the cryptocurrency world. The relevant page shows that the account is now unavailable for viewing due to complaints of violations of laws and regulations and the relevant provisions of the Weibo Community Covenant.

Mining Companies “Go Overseas”
The trend of mining companies going abroad
Domestic regulation of crypto-digital coins is rising to a new level, which has prompted a new round of consolidation in the coin and mining circles.

In terms of crypto digital coin trading platforms, in recent times, several trading platforms such as BitMart, Matcha and Firecoin have announced that they are restricting new Chinese users from participating in contract trading. Any user who is associated with a Chinese cell phone number, or whose relevant account registration information shows China, will be restricted from trading contracts at BitMart.

Data from Bitcoin Home shows that as of June 7, the network-wide blowout for the last 30 trading days exceeded $30.6 billion. Investors’ participation in crypto-digital coin contract trading is extremely risky and highly susceptible to loss of digital assets. As a result, trading platforms are responding to regulatory policies and restricting the participation of domestic users.

As for crypto digital coin mining companies, several mining pools and related companies are divesting their domestic related businesses. Bitcoin Fawn and Mars Cloud Mining announced one after another that they will block all IPs in mainland China in order to actively cooperate with the regulatory spirit of the relevant countries and regions, further ensuring that the platforms do not provide services to residents in mainland China. Famous mining pools such as Firecoin Mining Pool and Lepit Mining Pool have also suspended the provision of mining machine hosting and other related services to the territory of mainland China. In addition, according to several media reports, crypto-digital coin mining in Inner Mongolia, Xinjiang and Sichuan has begun to be called off, pending subsequent policy implementation.

Industry insiders generally believe that the trend is for mining companies to “go abroad”. On the one hand, it is conducive to energy conservation and environmental protection in the place of relocation, which is conducive to reducing carbon emissions; on the other hand, it is also conducive to the return of prices of domestic graphics cards, hard drives and other accessories.

Qi Haishen pointed out in an interview with the Securities Daily, “domestic bitcoin computing power reached more than half of the world (some mining sites disguised as large data centers), domestic crypto digital coin mining activities are unusually active. If the country does not take countermeasures, the energy consumed by bitcoin will generate large amounts of carbon emissions. This is not in line with the goal of carbon neutrality and carbon peaking.”

Qi Haishen further said that previous crypto-digital coin miners and speculative traders were overzealous, which directly led to capacity mismatches in the integrated circuit and semiconductor industries (including chips, graphics cards, hard disks, etc.), exacerbating the “chip shortage” and bringing many unfavorable factors to the development of the industry, which was already suffering from a serious shortage of cores, and has adversely affected the environmental health and orderly development of the market.

“It is expected that in the future, the domestic mining industry will basically disappear completely. Previously, mainly because the relevant regulatory departments did not have a clear statement, resulting in the abnormal development of the mining industry. But by now its attitude in terms of regulation has become clear, and coupled with the imminent arrival of digital RMB on the ‘stage’, the circulation and mining activities of crypto digital coins in the country will gradually disappear.” An Guangyong, an expert from the Credit Management Special Committee of Allianz M&A Guild, told the Securities Daily.

Zhou Maohua suggested that from the perspective of maintaining the status of RMB, investors’ interests and normal order in the market, it is necessary to speed up to make up for the regulatory shortcomings, form a synergy between regulatory departments and financial institutions to improve regulatory efficiency; and improve investors’ prevention of the risk of speculation in crypto-digital coins by increasing publicity.

It is worth noting that since crypto-digital coins such as Bitcoin are stripped of blockchain technology, some people also believe that crypto-digital coins are equivalent to blockchain technology. However, they should not be confused and it is a misconception to draw an equivalence between them.

“Bitcoin is the first application of blockchain, and is also known to the public because of Bitcoin. But the slew of crypto-digital coins represented by Bitcoin are by no means equivalent to blockchain.” Zheng Lei, director of the Center for Economic Behavior and China Policy Research at the International Institute for New Economic Research, said in an interview with the Securities Daily.

“China needs to pay attention to blockchain and treat it as a project, not just limited to crypto-digital coins.” Cai Weide, director of Beihang Digital Society and Blockchain Laboratory and founder of Tiande Chain, told the Securities Daily that blockchain is a breakthrough in domestic core technology, and in fact blockchain can change operating systems, networks, databases, applications, related infrastructure, etc., which will bring great changes in the future.

The reporter noted that on June 7, the Ministry of Industry and Information Technology, the Office of the Central Network Security and Information Technology Commission issued guidance on accelerating the promotion of blockchain technology applications and industrial development. Opinions proposed that by 2025, the comprehensive strength of the blockchain industry to reach the world’s advanced level, the industry has taken shape. Cultivate 3-5 internationally competitive backbone enterprises and a number of innovation-leading enterprises, and create 3-5 blockchain industry development clusters. Preliminary establishment of blockchain standard system. By 2030, the comprehensive strength of blockchain industry will continue to improve and the scale of industry will further grow.

This means that blockchain becomes an important support for building a strong manufacturing country and a strong network country, developing a digital economy, and modernizing the national governance system and governance capacity.

Zheng Lei said that the value of blockchain does not lie in the high or low price of digital assets, but in the new thinking model of establishing a trust mechanism with decentralization and consensus technology. For blockchain technology, what we should pay more attention to is its platform attributes. At present, blockchain has been included in the scope of new infrastructure, and once it is promoted and applied, it will have great value to society. To further promote blockchain innovation, the regulator should have the right guidance for its industry and the public’s perception, correct the misconceptions about blockchain, return to the essence of technology, and guide blockchain technology to support the development of the real economy.

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