26/1/2021–|Last updated: 1/26/202110:43 PM (Makkah)
Evan Shaker Aldobardani *
China is one of the countries that prohibits the circulation of cryptocurrencies, as the government has imposed strict restrictions on its trade, foremost among which is the “bitcoin” currency, and the Chinese government sees this currency as a threat to its financial system; Because many capital in China is being transferred from banks to cryptocurrencies.
What is Bitcoin?
Bitcoin is a cryptocurrency that was created via blockchain technology in 2009 by an anonymous person using the pseudonym “Satoshi Nakamoto”. The first official price of Bitcoin was a few cents, and after about 12 years the value of Bitcoin is now more From $ 36K.
It is traded electronically through many platforms, the most famous of which is Binance, Houbi, and Bitterx. What distinguishes Bitcoin is the number of its limited units, which are only 21 million units that cannot be increased, unlike currencies. Paper-based traditional, which is unlimited; Which leads to inflation.
China and the fight against Bitcoin
The Chinese government banned the circulation of Bitcoin across all platforms, and closed all exchanges that trade them, as it is considered a safe haven for money laundering.
Also, Bitcoin will cancel the role of middleman – banks, for example – in the near future, so that no institution or government can control it or monopolize it. Because it is a decentralized currency.
The transfer is done directly in Bitcoin without the need for financial intermediaries. That is, it is done directly between the seller and the buyer without the need for a third party or an intermediary like other traditional paper currencies Therefore, Bitcoin is a major threat to the Chinese banking system.
The Chinese government fears one of the characteristics of Bitcoin, which is the identity of the owner of the currency; Because it is written in the form of encrypted symbols, and for these reasons the Chinese government does not allow its circulation, and it is also afraid that Bitcoin will compete with the Chinese national currency, the digital yuan, and it is hoped that it will be launched in the coming months after it passes all the tests from the People’s Bank of China (the Central Bank), so that users can They deal with it even if they do not have bank accounts.
The new Chinese digital currency will depend on the national credit, unlike Bitcoin, and Bitcoin is now the queen of cryptocurrencies; Because of its high market value, its value recently rose to nearly $ 42,000, breaking a new record, before falling to $ 31.5,000 in a short period of time.
For its part, the Chinese government bans the circulation of Bitcoin and other cryptocurrencies. But the irony is that it allows, on the other hand, to officially mine Bitcoin, and now there are the largest bitcoin mining farms around the world in China.
Although the Chinese government has banned the circulation of Bitcoin across all platforms; However, in recent times, it has become a fertile ground for prospectors for cryptocurrencies, especially Bitcoin, and China is a safe haven for investors in the mining process. Because of the cheapness of extracting it in it.
And recently, many cryptocurrency mining companies have flocked to China, as most of the investors around the world in the field of cryptocurrency exploration are located in China, and this is due to two main reasons:
The first reason is that the Bitcoin mining process is solving complex algorithm problems for Bitcoin and other cryptocurrencies; Therefore, developers need computers with extraordinary capabilities to solve complex mathematical problems, and these devices are very expensive. But it is present in China in abundance and at competitive prices, and China is the one who manufactures these devices, and is the largest market in the world for computers dedicated to mining cryptocurrencies, and for this reason, China is a safe haven for most prospectors around the world.
The second reason is that the Bitcoin mining process consumes a large supply of electricity; Therefore, investors in the mining process rely on low-cost electricity, as electricity costs are the most important factor in mining costs in the long run, and because electricity prices in China are very appropriate, they are low compared to the rest of the countries that invest in Bitcoin mining. Which constituted a magnet for investors around the world to open their bitcoin mining farms.
Thanks to these two characteristics, the Chinese government allowed Bitcoin to be mined, making China the stronghold of this process around the world, surpassing more than 50% of the total mining operations around the world, according to a report issued by Bitooda, a company specialized in cryptocurrencies, as well as thanks to government support. Chinese bitcoin mining farms.
Note that the value of one Bitcoin coin is currently equivalent to approximately 31 thousand US dollars; That is, China reaps huge profits from the mining process; Therefore, we can say that the Chinese government is sifting Bitcoin according to its national interests, and at the same time its national currency is protecting the digital yuan from any competitor, and this indicates that China is dealing intelligently, cautiously and wisely with Bitcoin, in a manner consistent with its national interests.
And now China has all the tools available to acquire cryptocurrencies, especially Bitcoin. Will it lead the encrypted digital currencies? Will it be a stronghold for it and a spark for its launch around the world?
* Researcher in Iraqi and international economic affairs.