The People’s Bank of China Blasts Bitcoin And Crypto. Once Again.

For a minute there, it seemed like the FUD was over. The People’s Bank of China contributes to its country’s crypto-crackdown at the “Financial Knowledge Popularization Month,” People’s Daily Online reports from Beijing. Speaking at an event, Yin Youping, Deputy Director of the Financial Consumer Rights Protection Bureau of the People’s Bank of China, claimed: 

“We remind the people once again that virtual currencies such as Bitcoin are not legal tender and have no actual value support.” 

Related Reading | “The Death Of China’s Bitcoin Mining Industry,” 7 Takeaways From The Article

Furthermore, Yin Youping classified all cryptocurrency-related investments as pure speculation. He advised the public to “consciously stay away” from virtual assets to avoid unnecessary risk, and to “protect their “pocket.” Nothing crazy coming from a fiat-fuelled bureaucrat. Nevertheless, an interesting new piece in China’s crypto-puzzle.

Disclaimer: This article used Google-Translated quotes and information. Small inconsistencies are a possibility. 
What Else Did The People’s Bank Of China Said?

Besides contributing to China’s crypto-crackdown, Yin Youping responded to the “rebound” in cryptocurrency trading in his country. The People’s Bank of China will:

  • Work overtime to “detect overseas exchanges and domestic traders.”
  • Block “trading websites, apps, and corporate channels.”
  • Intensify “policy publicity,” to let everyone in China know the law of the land. 
  • Establish “a normalized working mechanism” and continue to crack down on cryptocurrency transactions. 
  • Maintain “a high-pressure situation.”

The People’s Bank of China’s aim is pretty clear. And it seems to be working, Youping claimed that “the popularity of virtual currency trading has dropped significantly.” The Deputy Director also encouraged the general public to report “illegal fund-raising crimes” to the relevant authorities.

BTC price chart for 08/27/2021 on Bitstamp | Source: BTC/USD on TradingView.com
Does This Offer Insight Into China’s Crypto Strategy?

In a thread summarizing the case, Chinese journalist Colin Wu gave us inside information that wasn’t part of the article. “By blocking exchanges and strengthening policy publicity, China’s popularity has dropped significantly.”

3. By blocking exchanges and strengthening policy publicity, China's popularity has dropped significantly4. Crack down on illegal fund-raising activities with virtual currency and blockchain.

— Wu Blockchain (@WuBlockchain) August 27, 2021

One of the surprising revelations from Chainalysis’ Global Crypto Adoption report is that P2P trading “declined dramatically” in China. At the time, we naively asked: 

Why are Chinese people abandoning P2P trading so radically? Wouldn’t the “government crackdowns on cryptocurrency trading” cause a surge in old P2P trading instead?

This “high-pressure situation” that the People’s Bank of China maintains might be the answer to both questions. As we learned, both  “the popularity of virtual currency trading” and “China’s popularity” dropped significantly. China’s cracking down on the general population as much as on their biggest industries. Bloomberg tried to explain their moves by defining the “New China Model” as:

If China is abandoning the Silicon Valley model, what will it replace it with? Insiders suggest it will be less founder-driven and more China-centric.

Related Reading | China Banned Bitcoin Mining. What Happens To Small Hydropower Stations Now?

We finished that article with more questions than answers. From “Why is China dwarfing its biggest industries and players? Is the “China Model” just concerned with scale?” To “Is their crackdown on Big Tech even related to their crackdown on Bitcoin mining?“ And concluded:

There’s only one thing we can know for sure: China’s making big coordinated moves when it comes to tech. And they seem to have a plan.

Maybe their plan is simpler than we thought. It’s possible that The People’s Bank of China is just going to make it really really hard for the common citizen to access Bitcoin. And, China’ll use propaganda and repetition to keep people in check and scared of the unknown. One of Bitcoin’s prototipical adversarial scenarios. A battle that Bitcoin expected sooner or later.

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Why Chinese Banks Are Adding Digital Yuan To Apps? Here’s What You Need To Know

The Chinese Central Bank Digital Currency (CBDC) is progressively spreading out to more users. This can be seen as 35 banks in China include the digital Yuan in their mobile apps.

According to a local report, the digital RMB App reveals a recent addition of more banks to the interface. Before now, the digital app only had 6 state-owned banks.

Furthermore, these added banks now have access to the digital renminbi App to recharge digital RMB wallets. The banks include city commercial banks, joint-stock firms, rural commercial banks, rural credit cooperatives, and others.

Related Reading | Bitcoin Bull Cathie Wood Attracts Big Short Michael Burry To ARK Innovation ETF

Also, the report from Shanghai Securities Journal states that both small and medium-sized banks are embracing digital currency. The state-owned journal explained that these financial firms are striving to avail e-CNY services to their clients.

How The Digital Yuan Testing Has Progressed

From the initial testing of the digital yuan in the country, the process had only the prominent Chinese 6 state-owned banks. Subsequently, as more adoption of cryptocurrency flow into several mainstreams, the testing includes more firms.

As a result, financial organizations such as city banks, joint-stock companies, and rural credit cooperatives constitute the recent 35 banks in the testing.

In the same vein, 94 banks are planning to embed the digital yuan. The local report includes 3 foreign banks,15 private banks, and 76 city commercial banks. They plan to utilize a new clearing platform to access the digital yuan.

Furthermore, the report discloses a private Shanghai-based firm, City Bank, that built the clearing platform. City Bank Clearing is a reputable platform in the financial industry, and it also provides outstanding financial technology.

Related Reading | SushiSwap Narrowly Escaped A $350 Million DeFi Hack, Here’s How

Moreover, the report mentions that JD.com, an e-commerce giant, has successfully undergone CBDC testing on its platform. Before now, the company participated as well as funded trials in readiness for its testing. It’s making a move to meet the demands of its business customers.

The recent activities indicate more expansion of digital yuan trials across the country. Due to the popularity of cryptocurrency, more companies are opting for digital yuan testing. Even the People’s Bank of China has indicated its interest in the test during Beijing Winter Olympics in 2022.

Featured image from Pixabay

Could The New “China Model” Be The Reason The Country Banned Bitcoin Mining?

What is the new “China Model”? And why would that country ban an industry that made them the ultimate leaders in the most important development in recent times? The world is still scratching its head. There has to be something else to this story. Is it only control that they want? Or does China have a secret plan nobody’s been able to figure out?

We at NewsBTC have been studying the case, looking for clues, reporting on related news. After the ban, when Bitcoin’s hash rate collapsed, we posed Bitcoin Magazine’s Lucas Nuzzi’s theory that it all had to do with the Digital Yuan, China’s CBDC. Then, we found out Chinese entrepreneurs are selling small hydropower stations and wondered if decommissioning them was part of their plan. After that, the shocking reveal that China’s dominance over Bitcoin mining was already waning before the ban raised more questions than answers.

The fine people at Bloomberg might’ve found new clues by tackling a related but different question. In the article titled “The China Model: What the Country’s Tech Crackdown Is Really About,” they pose a theory about the reasons behind their attack on Alibaba and DiDi. Two of China’s giant unicorn tech companies, also world leaders in their respective fields. Bloomberg thinks that, after following Silicon Valley’s footsteps for years, China is trying a new model.

Do they have a case or do China’s motives remain a mystery for us westerners? Keep reading to find out.

What Does The New China Model Consists Of?

The article starts by summarizing what happened when Uber-clone DiDi and “Alibaba’s fintech offshoot, Ant Group Co.” tried to do public in the United States. The Chinese government started actions against both companies. Alibaba’s Jack Ma disappeared from the public eye as a result.  

“Just because you are a highly successful tech company does not mean you are above the CCP,” says Michael Witt, a senior affiliate professor of strategy and international business at Insead in Singapore. “Ant Group and Jack Ma found that out for themselves last year, and it is surprising DiDi did not get the message.”

What does this “China Model” have to do with Bitcoin mining? Well, the Chinese government seems to be cracking down on everything huge and technological that isn’t aligned with their interests. And we in the industry know how much Bitcoin those immense mines were producing.

“China is actually taking the lead in setting some boundaries around the power of Big Tech,” says Thomas Tsao, co-founder of Gobi Partners, a venture capital firm based in Shanghai. “People are missing the bigger picture. They’re trying a new model.”

Is Size the Problem For The Chinese Government?

As we learned when we analyzed the “The Death Of China’s Bitcoin Mining Industry” article, China only banned industrial Bitcoin mining. Individuals can still mine.

“Despite the government’s hardline approach, Ye is determined to carry on: “This industry is extremely volatile. High emotions and stress are involved, but that’s also its appeal. Companies are banned from mining Bitcoin, but individuals aren’t,” Ye said, adding that he plans to turn around his operation by purchasing old equipment and downsizing.”

The Chinese government was only worried about industrial-sized private mining operations. The question is why. What are they planning? 

The Chinese government seems to be playing a similar game when it comes to Big Tech.

Andy Tian, who led Google China’s mobile strategy in the 2000s and is now CEO at Beijing social media startup Asian Innovations Group, says it will be “positive for innovation” and “competition in China will be fiercer than in the U.S.,” because smaller companies will benefit from policies that rein in the largest competitors.

And they’re using the country’s unique characteristics to do this fast and mercilessly.

Angela Zhang, director of Hong Kong University’s Centre for Chinese Law and the author of Chinese Antitrust Exceptionalism, says the intervention will reshape the tech industry in China faster than it could happen elsewhere. “The case against Alibaba took the Chinese antitrust authority only four months to complete, whereas it will take years for U.S. and EU regulators to go after tech firms such as Facebook, Google, and Amazon, who are ready to fight tooth and nail,” she says.

BTC price chart for 08/10/2021 on Coinbase | Source: BTC/USD on TradingView.com
What Does The New China Model Want To Achieve?

This is where Bloomberg’s case falls flat. They have no idea what the Chinese are thinking.

If China is abandoning the Silicon Valley model, what will it replace it with? Insiders suggest it will be less founder-driven and more China-centric.

Why is China dwarfing its biggest industries and players? Is the “China Model” just concerned with scale? Or is control their focus? Are they cracking down on people and companies with too much power that work on a global scale? We wouldn’t know. However, this paragraph’s facts and assumptions could provide a clue.

Xi has called the data its tech industry collects “an essential and strategic resource” and has been pushing to tap into it for years. Following a 2015 mandate, cities from Guiyang to Shanghai have set up data exchanges that facilitate the transfer of anonymized information between corporations. This could lead to a nationalized data-sharing system that serves as a kind of digital public infrastructure, putting a massive trove of data into the central government’s hands.

Is it data they’re after? Does Bitcoin’s pseudo-anonymity scare them? Is their crackdown on Big Tech even related to their crackdown on Bitcoin mining? There’s only one thing we can know for sure: China’s making big coordinated moves when it comes to tech. And they seem to have a plan. A “China Model,” if you will.

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“The Death Of China’s Bitcoin Mining Industry,” 7 Takeaways From The Article

Did China make the mistake of a lifetime by banning Bitcoin mining or do they have a secret plan? That’s the question the whole Bitcoin ecosystem is struggling to answer. And today, we got another piece of the puzzle. In the article titled “It’s Over, It’s All Over” – The Death Of China’s Bitcoin Mining Industry,” a pseudonymous manager by the name of Ye Lang tells his story. And in his tale, a bigger story is reflected.

Related Reading | Bitcoin Hash Rate Goes On Death Spiral Post China’s Crackdown On Miners

On May 21st, in a “meeting of the State Council’s Financial Stability and Development Committee, a top-level economic and financial policymaking body chaired by Vice Premier Liu He,” China decided to ban Bitcoin mining. Less than a month later, on June 19th, the Sichuan government ordered “the closure of Ye’s facility, along with 25 other cryptocurrency mining projects in the province.”

That story started like this:

Ye decided to jump on the Bitcoin mining bandwagon in 2018 when he closed down the majority of his internet café business, mortgaged his apartment in Anqing, Anhui province, borrowed money from relatives and left his wife and daughters to move to Sichuan

What can we learn from Ye’s first-hand experience?

1.- It Only Takes 80 Employees To Manage An 80,000 Bitcoin Miners Operation

At the peak of the facility’s Bitcoin mining operations, Ye was in charge of 80 employees and a total of 80,000 mining machines, with the entire project estimated to be earning more than 90 million yuan ($14 million) during the peak six months when Sichuan’s rivers are glutted and electricity is especially cheap

The numbers are staggering. Evidently, supersizing mining operations offers a huge advantage. Especially in regions with cheap electricity.

2.- Clean An Renewable Energy Didn’t Save Sichuan

The fact that the electricity for crypto mining in Sichuan came from clean hydropower meant that many thought the province would be a safe haven for Bitcoin miners. As pressure on local governments to cut carbon emissions mounts, projects were successfully shuttered in some other provincial-level regions — such as Xinjiang and Inner Mongolia — where the mining was chiefly fueled by coal. 

The only thing we can know for sure about the Chinese government’s plan is this: the environment is not on their radar. They’re closing these mining operations for other reasons altogether. 

3.- Bitcoin’s Energy Use Is Not The Issue

The fact that the Sichuan crackdown was about to hit, confirms what everyone has known: the “justification” for cracking down bitcoin miners, the cold shoulder on bitcoin by social luminaries (such as Elon Musk) and the use of the ESG bullshit excuse that crypto is “dirty” have always been merely a socially-acceptable smoke screen for a regulatory crackdown on cryptos when they become too big.

Enough said. ZeroHedge nailed it on the head. 

It’s also worth noting that Nic Carter also nailed it on the head regarding China’s energy mix when it came to Bitcoin mining.

4.- Individuals Can Still Mine Bitcoin In China

Despite the government’s hardline approach, Ye is determined to carry on: “This industry is extremely volatile. High emotions and stress are involved, but that’s also its appeal. Companies are banned from mining Bitcoin, but individuals aren’t,” Ye said, adding that he plans to turn around his operation by purchasing old equipment and downsizing.

The Chinese government was only worried about industrial-sized private mining operations. The question is why. What are they planning? Nobody seems to have figured that out.

5.- One Owner Mined Between 70 and 80 Bitcoins Per Day

Another character enters the scene, the owner of the mine. We’ll call him Liu Weimin, also a pseudonym. 

Liu owned more than 10 Bitcoin mining farms, which industry insiders estimated accounted for one-eighth of the total electricity consumed by all Bitcoin mines in the province.

During peak seasons, Liu said his farms could mine 70 to 80 Bitcoins every day. About 900 Bitcoins are issued each day globally, according to an industry information platform.

Almost 10% of the total daily issuance seems like too much for a single individual. The Bitcoin world scored a huge win with the Chinese ban on Bitcoin mining. 

BTC price chart on Bitstamp | Source: BTC/USD on TradingView.com
6.- A Industrial-Sized Mine Can Break Even In A Year

“Mining farms are somewhat like conventional crop farms. No matter how the Bitcoin market changes, the mining process remains. Opening such facilities is a relatively stable investment, and I can generally break even in a year,” Liu told Caixin.

There are few businesses in the world that can give you that ROI. At least among the legal ones. Food for thought for the young entrepreneurs out there.

Related Reading | How China Bitcoin FUD Is Lowering The Cost To Produce BTC

7.- Bitcoin Mining Used To Be A Respected Business In China

Thanks to the Sichuan government’s mining-friendly policies back then, Liu’s business continued to flourish for the past three years. He quickly made a name for himself, and was a frequent guest at government events and meetings, where he was recognized as one of many model energy consumers who had helped lift locals out of poverty.

From a respected businessman to a social pariah. It would be easy to feel sorry for Liu if he wasn’t on his way to restore his business.

Following the government’s May 21 crackdown announcement, he arranged teams of employees to scout for new venues in North America and Kazakhstan. In mid-June, his company bought an oilfield in Canada that could potentially provide fuel for his Bitcoin mining business.

So, why did China banned Bitcoin mining? We have no idea. We know, however, that their hold over the industry was already waning and that entrepreneurs are selling small hydropower stations. And we have both Ye and Liu’s stories. Is the picture clearer? Are we closer to the real deal?

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