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Why does the central bank ban the issuance of Bitcoin (why does China ban Bitcoin)?

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Why does the central bank ban the issuance of Bitcoin? Editor\’s note: This arti

Why does the central bank ban the issuance of Bitcoin (why does China ban Bitcoin)?

Why does the central bank ban the issuance of Bitcoin? Editor’s note: This article is from HiveEcon (ID: HiveEcon), author: Yuanshang, authorized reprint by Odaily Planet Daily.

What is the reason for the central bank’s ban on issuing Bitcoin? Why does the central bank ban the issuance of currency? Let’s take a look at its impact on our country and the international monetary system. What is Bitcoin? Why does China ban the issuance of Bitcoin? Bitcoin is a type of encrypted asset, a type of digital currency. Its value mainly comes from its usage and the network effects it generates. Bitcoin’s total supply is limited and cannot be counterfeited. As a globally distributed ledger technology, Bitcoin has extensive use cases worldwide, and due to its decentralization and high scalability, it has gained popularity among regulatory agencies and investors worldwide. However, it cannot meet the needs of daily transactions.

After the birth of Bitcoin, its development has undergone multiple ups and downs and gradually evolved into a “financial freedom,” “financial stability,” and even a challenge to traditional economies. However, without government intervention, it can still be used as a widely-used payment tool and commodity.

On November 24, 2013, Wang Xiaochuan, a professor at Renmin University of China, published an article titled “Will the RMB Become the Second Legal Digital Currency in the World” (referred to as banknotes). The article stated that China has three basic principles: the first is not to support cash for investment. The second is to prevent the risks caused by the price fluctuations of Bitcoin, and the third is to guard against illegal fundraising and other illegal activities. The fourth is to prohibit any company from participating in Bitcoin mining activities, such as restricting individuals from transferring funds to the outside world through the internet. The fifth and final point that must be made clear is not to use Bitcoin as a currency for purchasing goods and services. If commercial operations are carried out using fiat currency or digital gold and other modern technologies, the price of Bitcoin will plummet by more than 50%.

However, from a historical perspective, the reason why Bitcoin has been able to achieve such huge returns is because people have realized that Bitcoin is no longer as secure and reliable as it is now. And because Bitcoin cannot replace all goods or services in real life, many people believe this is impossible, especially in China. This has led to concerns about the existence of this problem. For example, Bitcoin is still in the early stages of development, and in the future, it may become more important as various governments take more policy measures to promote market economic development. But Bitcoin is not suitable for ordinary investors unless they want to purchase these things in their preferred way, including high service fees, etc., otherwise, it may not bring substantial benefits to consumers. This is a big obstacle for those who want to invest in digital assets. In addition, although most countries recognize the superiority of blockchain technology, it is difficult for it to achieve the expected results due to its high speed and low cost, let alone to make it enter the public’s view.

At the same time, virtual currencies represented by Bitcoin have always been a speculative hotspot, but in recent years, news of the continuous creation of new highs has been repeatedly screens on mass media platforms. Among them, the most popular news is the series of reports after the release of the Libra white paper by Facebook.

Why does China ban Bitcoin?

Recently, the Chinese government issued the “Notice on Preventing the Risks of Bitcoin”, which prohibits the trading of Bitcoin and other cryptocurrencies within the country. This is the second country to impose strict regulation on virtual assets after the United States and Canada. China has also officially begun to crack down on the regulation of digital currencies, which is undoubtedly good news for domestic investors. So why ban Bitcoin? Let’s analyze the reasons.

First, China has clearly stated that it will not issue or circulate any form of Bitcoin based on “national credit”. Secondly, China will gradually eliminate illegal public financing models based on blockchain technology applications, such as Initial Coin Offerings (ICOs) and pyramid schemes (online gambling). At the same time, in the long run, no unit or individual is allowed to buy, sell, transfer, or hold digital assets and various types of derivative products and services. Finally, the development of the Bitcoin mining industry needs to be led by the central bank. However, at present, the central bank of China is still not directly involved in this process. Therefore, the Chinese government has decided to completely shut down any company or organization engaged in illegal activities using Bitcoin. However, if these companies cease operations and continue to operate, they will definitely face significant problems because no country can effectively regulate Bitcoin-related business activities. Moreover, the Bitcoin trading market itself is not sufficiently sound and standardized, so legal measures must be taken to protect consumer interests and prevent money laundering, terrorist financing, and other criminal activities. In addition, in the case of large fluctuations in the price of Bitcoin, there may be security vulnerabilities, systemic loopholes, and other problems, leading to the theft of user funds. If not completely eliminated, it will cause great economic losses.

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