Published: October 1st, 2021
China’s ongoing crackdown on the crypto industry continues. Last week, authorities in the country made CoinGecko and CoinMarketCap, two of the most popular market data sources for crypto traders, inaccessible inside China’s borders. TradingView, which offers interactive charts for crypto and other financial markets, also found itself shut out.
While it was initially thought that CoinGecko and CoinMarketCap had given in to pressure from Beijing and decided to block Chinese IP addresses, both domains appear to be blocked behind the so-called Great Firewall, a DNS-based barrier between the country’s internet infrastructure and the outside world. The Chinese government has already used it to stop or censor foreign sites, including Twitter, Google, and Facebook.
‘We have not blocked any Chinese IP addresses,’ CoinMarketCap said in a statement. Figures from domain analysis service Greatfire.org seem to confirm this, showing both CoinMarketCap and CoinGecko on the site’s 100% Blocked listing. TradingView is also on the list.
CoinMarketCap went on to say that China is ‘intensifying its crackdown on the crypto industry and data providers have been caught in the dragnet. Our company has been placed on a blacklist, simply for providing crypto market data’.
China’s efforts to cut off traders’ access to crypto market data came off the back of a sweeping government diktat issued last week that said virtual currencies are not legal tender in China and that all crypto-related transactions, including crypto trading, are now illegal.
The People’s Bank of China (PBoC) published a list of prohibited crypto-related activities on Wednesday, including trading in cryptocurrencies and issuing tokens. Crypto exchanges based overseas were also barred from providing services to anyone based in mainland China.
Major crypto exchanges like Huobi Global and Binance fell into line quickly, halting new sign-ups for Chinese users.
Beijing’s ramped-up campaign to eliminate crypto activities was another blow to the mining industry, which has already taken a beating in 2021.
Shanghai-based Sparkpool, formerly one of the planet’s biggest ethereum mining pools, announced on Tuesday that it had discontinued both domestic and international services.
Chinese e-commerce giant Alibaba also raised the white flag, announcing that sales of crypto mining equipment would now be stopped on the platform.
A statement from the Chinese government on Tuesday explained the rationale for its cryptocurrency ban.
‘A recent rise in overheated speculation in virtual currencies trading is disrupting China’s economic and financial order, risking criminal activities such as gambling, money laundering, illegal fundraising, pyramid schemes, and fraud,’ the statement read.
To stop these risks from metastasizing, the government said virtual currencies do not have legal status in China as a form of payment. It also re-stated what has been on the law books for years, that cryptocurrency trading in the country is against the law.
The statement also called for more robust risk monitoring measures and the creation of an early warning system to detect crypto trading.
Crypto markets reacted sharply to the news. Bitcoin plunged by five per cent within an hour of the announcement while and dropped 3.4 per cent. Crypto exchange Huobi’s own native token (HT) was down 15 per cent on the news.
Chinese crypto industry has had a tumultuous 2021. In February, Beijing all but shuttered its huge domestic crypto mining industry.
While the crypto mining ban generated loads of press coverage, China's efforts to restrict crypto trading started in 2017. The crackdown has delivered mixed results, so authorities tried to erase any doubts about their objectives last week.
Using the most unequivocal language yet, Beijing said it would root out miners and eliminate crypto transactions. Huobi stopped new user registrations emanating from mainland China immediately and said in a press release that it would ‘gradually retire’ existing China-based users by year’s end.
PwC’s crypto unit said in a market commentary that while the announcement was not a surprise given Beijing’s recent history of crypto bans, ‘this time there is no ambiguity.’
‘Cryptocurrency services and transactions of all kinds have been banned in China, full stop. There are no more grey areas or room for discussion’.
The PBoC and nine other institutions, including the police, supreme court, and internet and securities watchdogs, issued their own declarations around the total ban, signalling that enforcement efforts will be multi-pronged. The joint statement also closed a longstanding loophole that allowed domestic crypto traders to open trading accounts with offshore exchanges such as Huobi. Those platforms are now forbidden to offer domestic services or hire locally.
Authorities went further to clarify that stablecoins like Tether aren’t legal tender, a recognition that stablecoins can play a fiat-like role in crypto trading, and a sign that regulators are watching stablecoin activity closely, even if it doesn’t directly affect exchange rates for the yuan.
Bitcoin’s price dropped by as much as nine per cent to about USD 40,680 on the news before recovering. It was trading above USD 43,000 at mid-week in Hong Kong. Some crypto enthusiasts noted in a popular thread on social media that previous attempts to ban cryptos have often jumped the price of BTC.
China’s lead agency for economic planning has directed local officials to look for instances of abnormal power usage, suspend loans, and repeal preferential tax rules to deliver a final death blow to China’s once-massive mining sector.
Many operations have already left the country, which once drove almost half of the global bitcoin hash rate, a measure of the total computing power used to verify BTC transactions.
Data from Blockchain.com shows that China’s contribution to the global hash rate dropped by more than half since the crypto clampdown started. However, an overall recovery in hash rate suggests that operations formerly based in China have set up shop elsewhere. In the immediate aftermath of this week’s announcement, the hash rate remained stable.