BTCCourant
Crypto-News

Not Accidental China’s U-Turn On Bitcoin Mining Might Fuel Competition

Not Accidental China's U-Turn On Bitcoin Mining Might Fuel Competition

Source: iStock/xijian

Changes in China’s Bitcoin (BTC) mining policy are not accidental, and competition in the global mining sector might become more intense, says an analyst at Beijing-based token data and rating agency TokenInsight. Moreover, the recent major crypto move by Hong Kong might also increase competition in the local cryptocurrency trading market, he added.

It’s a well-known thing in the Cryptoworld by now that China – though interested in blockchain, with even President Xi Jinping advocating for a faster development of blockchain technology – has taken and is maintaining a tough stance on cryptocurrency industry, particularly exchanges and mining. We’ve written about the country’s discussions on mining ban for a while now, but just two days ago, the National Development and Reform Commission (NDRC) reportedly removed Bitcoin mining from the list of industries that might be eliminated. Besides that, we know that China is thinking about their own digital fiat, and it was recently revealed that people in the country use WeChat and AliPay apps to buy crypto with cash.

Jack Yang, chief analyst at TokenInsight, finds that it’s not a coincidence that the new catalog for Guiding Industry Restructuring, which excluded Bitcoin mining, was finalized by the NDRC after the President’s speech on blockchain. Yang told Cryptonews.com:

“It is not accidental, there is a causal relationship. After Xi’s statement on supporting the development of the blockchain, all levels of government have drafted laws and regulations related to blockchains and digital fire coins before the inventory. This revision is also the result of responding to national policies.”

Commenting on the meaning behind the NDRC’s recent move, Yang summarized it into three relevant points:

  • the country’s value for the Bitcoin mining industry is gradually recognized;
  • the mining industry’s compliance risk is gradually reduced;
  • mining-related companies can carry out normal operations.

“Mining competition is expected to become more intense,” says Yang, while more investments will be coming to China. He explains that this country has always been the center of mining: 70% of Bitcoin’s computing power is in China, while major companies in the design and manufacturing of mining machines, such as Bitmain and Canaan, are situated there. “This change in policy will promote the compliance of China’s digital currency mining industry,” he said, adding how more compliant, technically stronger companies that have greater capital advantages will wait for an opportunity to enter the industry and promote its further development towards transparency and compliance.

A financial port

Also, as reported, cryptocurrency exchanges can already apply to be regulated by Hong Kong’s Securities and Futures Commission (SFC), as it published a framework for crypto exchanges this past Wednesday.

The chief analyst finds that this “further demonstrates the Hong Kong government’s encouragement, support, and at the same time, the decision to simultaneously supervise and promote industry development,” adding that it’s expected for Hong Kong to become “the regional digital currency financial port.”

Competition in the industry will be seen here too, according to the analyst, but it will enter a new pattern, with more capital attempting to make its way to the Hong Kong cryptocurrency market. “The addition of giants may accelerate the concentration of this industry,” he says.

“The dividend of financial innovation will ultimately belong to companies that dare to actively embrace supervision, and belong to enterprises that can give up short-term benefits and continue to self-compliance.”

Additionally, Yang finds that Hong Kong’s securities regulatory system has always been ahead of that of the mainland, and that, for the development of the industry to be guided on the mainland, it’s expected that the internal regulatory agencies will move faster with the introduction of the supervision plans for virtual asset exchanges. “There is currently no trading platform licensed by the SFC, and the impact on the world is not obvious,” he concludes.

Nonetheless, Yang finds that the recent development indicates greater acceptance of digital assets as new financial instruments, but also a new course for the supervision of the cryptocurrency sector: from restricted to guided. STO (security token offering) “is the trend of the times,” says Yang, but the regulatory authorities of both Hong Kong and mainland China “should also cater to the development of society and supervise at an appropriate time so as to safeguard the interests of investors.”

As to how the industry will progress from here on in both places, Yang said that in the short-term, the regulators are expected to limit the high-leverage transactions such as futures. They will also focus on the regulation of the cryptocurrency trading platforms, regulating the secondary market transactions first, then establishing “risk prevention and control mechanisms through various means, and gradually expand[ing] the scope of supervision,” concludes Yang.

As reported, the SFC has also published a warning this week, as they’re “extremely concerned” about platforms which offer virtual asset futures contracts to the public, especially contracts which are highly leveraged.

Related posts

Blockchain Grew by 4 Million Wallets in Two Months

Marion Smith

FATF Decides to Tighten Crypto Regulation (UPDATED)

Marion Smith

India to Consider Imprisonment for Holding Crypto

Marion Smith