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Why Is China Cracking Down Cryptocurrencies?

bitcoinimproves jan29 23jun21 lt

Cryptocurrencies have seen a drastic change in their fortunes in the last few weeks as China started to / on the industry. China is the largest hub for bitcoin mining-- the process of generating,b storing, and encrypting bitcoins-- and its recent actions are posing serious threats in the crypto industry.

This week, Bitcoin dropped below the threshold of $30,000 for the first time, eliminating all of their gains in 2021. While the cryptocurrency did recover, it managed to end Wednesday's session at $32,417 per share. Volatility is one of the key features of cryptocurrencies, but the steady decline has put investors in a dilemma about the future of the currency.

China started warning against trading and mining cryptocurrencies in May. Earlier this month China's biggest crypto mining region, Xinjiang province, powered by hydroelectricity, closed one of the biggest mines, while the Sichuan province also imposed a ban on mining as the electricity companies were ordered to stop serving any such miners.

Yunnan province is also in the act as it asked the electricity and financial companies to cut ties with bitcoin miners. Inner Mongolia, another prominent location for miners, is also in the process of imposing a ban. Xinjiang, alone, is responsible for 35% of mining across the globe. On Monday, the People's Bank of China also sanctioned the major banks from being associated with cryptocurrency companies.

The huge requirement of power to mine these coins has been one of the key concerns for the critics of the technology. This has increased the use of fossil fuels in the process. Recently, Elon Musk's Tesla (TSLA) also said that it will stop accepting Bitcoins for its environmental impact. However, later on, Musk said that Tesla will accept Bitcoins if the holder can prove at least half of the coin's mining process has involved renewable energy.

Recently, China has pledged to be carbon-free by 2060 so the country's move to put a stop to Bitcoin mining can be understood as a step towards its goal. China has also introduced the digital version of their currency, the Yuan, in recent months. China's crackdown has resulted in the companies slowly migrating away from China to different countries like the USA and El Salvadore, the latter has made Bitcoin a legal tender.

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