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Why does China want to limit the development of cryptocurrencies on its territory?

Closure of specialized businesses, power cut, ban on mining in certain areas, etc. China has shifted into high gear in recent weeks to limit the development of cryptocurrencies on its territory. Officially, it is a question of the environmental impact of cryptocurrencies, which use a lot of energy.

Behind the scenes, it is more a question of economic and political issues, in a country where the surveillance of citizens by the authorities is becoming more and more powerful, driven by technological development.

Gilles Quoistiaux, Trends-Tendances journalist, expert on the issue of cryptocurrencies, answers our questions on this subject.

Before getting to the heart of the matter, a short explanation of how cryptocurrencies work.

“A cryptocurrency is a virtual currency, therefore dematerialized, which has the particularity of being a currency that operates in a decentralized manner, which means thatshe is not submissive has a IT’Sstate, central banks or regulators. EIt is owned and managed entirely by its users. It is on the basis of this isince bitcoin, which is the first cryptocurrency, was created. Ukind of monetary utopia d” have a virtual currency that can be usede by a community, and managede by this community without having to depend on state or regulatory institutions.

AAt the technical level, one of the characteristics of cryptocurrencies is that they are based on this blockchain technology, which precisely allows this functioning in a decentralized manner. The blockchain is this kind of online register on which we will register all the transactions, and which is also there managed by the user community “.

When we talk about cryptocurrencies, we often talk about mining. What is it, and what is it for?

“The minage is used to of them things : one thing is to secure the network, and the second thing is to create new cryptocashs, new cryptocurrency unitss. This minage, those are peti setsts calculations computer systems that will solve the kinds of equations for secure the network. The users who will make their computing capacity available to the network to solve this set of smalls equations. Donc it is precisely through this computer communitys which are made available to the network that we will be able to rsolve all those little calculations. Without the resolution of these calculations, on born cannot secure every transaction.

Lminors who make their IT capacity available to the network will get a reward. PEach quelque part, thes paidnt by providing their computers, their servers, they will receive rewards in the form of cryptocurrency units. Par example in the case of bitcoin, fractions of bitcoin go as we go s‘add to network up towhat we atringworm barre of 21,000,000 bitcoins which will be the limit that was set in the computer code initially of bitcoin “.

►►► What is bitcoin exactly? Is it a currency? Is it interesting as an investment?

The majority of cryptocurrency mining takes place in China, why has the country been so attractive so far?

“What you need to know is that most of the time, these are not not individuals who do this mining: these are companies that are called farms of mining. Those are huge warehouses that look like data centers, où there are servers that are constantly working to mine cryptocurrency.

Pour have a certain mining capacity requires a lot of computer capacity. Lit is closeds mining have developed a lot in China because it is over there that energy est less chera, compared to other parts du globe.

In fact tous then servers that turnnt, those maps graphics that turnnt only to solve these famous equations to create news of new cryptocurrencies, it consumes a lot of energy. Donc if you do that here at home with your computer, or if you put 23 computers at your house, they will run constantly to do this and it will have an impact on your electricity bill. Clike here in Belgium, the energy is rather Dear comparede in other places in the world, it’s not necessarily here that it will be the most profitable, since it is obviously necessary to deduct what you pays in energy costs plus the cost of infrastructure computer science.

The fact of pooling, to buy a gigantic amount of servers and placing them in a place where energy is cheaper, such as in China, for example, makes it possible to be more profitable in this activity, so that’s why it happened strongly developed there. Jusqu‘now the CChinese had rather leftIt’s do, they considered that it was an economic activity like any other but obviously now they want a little tighteris the opinion”.

Because China, like other companies or countries, wants to launch its own cryptocurrency.

“This is really a new development in recent years. Obviously it’s quite advanced, the creation of what is called a ‘crypto Yuan’, qui would therefore be a cryptostate currency. Lto obviously it is quite another thing compared toux other cryptocurrencies. THEa main characteristic of a cryptocurrency is that it is managed and detainede by its users, therefore without dependence on a IT’Sstate where To authorities or institutions. Et here obviously the Yuan crypto will be managed by theIT’Schinese state. Donc the only crypto feature it will have is to be basede on blockchain technology but on the other hand it will be a closed blockchainée, because it will be theIT’Stat himself who will who will manage it.

For a state like China, having your own cryptocurrency also means having control over all the transactions of all of its citizens. If it becomes the basic state currency, and it is the state that manages the cryptocurrency blockchain, authorities can trace all of the purchasing behavior from citizens and companies. This is a sort of ultimate dream also for a state like China which is a state which closely monitors its population “.

We would therefore be faced with a technology that is thought of as decentralized, precisely to free oneself dand some checks, but who from the time or it becomes centralized, va be even more powerful than what currently exists ?

“Pfor the advocates of cryptocurrencies, compared to the basic philosophy of cryptocurrency, a state cryptocurrency, it is a real deviance. But it’s true that it’s a powerful tool din the sense that it really allows full control over all transactions ofs citizens and businesses.

It is often said that the Bitcoin used by traffickers because‘is untraceable, in fact it is not true because que precisely, this blockchain technology is an online register qui, by nature, is in fact falsesreliable, puisque everything is engraved on the blockchain. CThis is how we secure all transactions. Because you will be able to go and check how the transactions are carried out and or moved money from one account to another, To such and such a moment. Tu can trace all this on the Bitcoin blockchain for example, which is online, accessible to all. What n‘is not why you can identify each of the recipients, cdo issuers, each of the people involved in the transaction. But you can still go up the chain and so obviously, if c ‘is the state who controls that, he can reassemble the whole of all these transactions “.

If China is using strong means to prevent mining, what about regulatory projects in other countries?

“For the moment, there are still not enough regulations, whether in Belgium or at the level European. They are in the process of preparing a directive at European level which should arrive within two years. IThey will instead try to regulate the platforms or we can buy it oyou and sell, to ensure that the consumer is a little bit better protectIt’s. Ithere are many scams, of platforms who are being hacked, all players in the cryptomonnaies don’t soundt not overly serious.

Pour l’instant cis rather from the angle pconsumer protection, and then will undoubtedly happen, little by little, the regulation of all these actorss en Y calas to a little regulation from conventional financial services. Corn pfor the moment, it still necessarily remains ofregulated, so that’s why all the authorities, in particular, in Belgium, the FFMA, which is the markets authority, cconsidered that cryptocurrencies it’s off the market, he must be wary of it and thatbasically it n’there is nothing good in there.

For the traditional banks are the same, they say it’s not worth anything, that it is not investmentss serious, qu’he … not absolutely not to invest in these products there. THEbig institutions in Belgium ne proposesnt no cryptocurrencys. MBut we see thatat the international level it is still starting to move because there are some banks like Goldman Sachs Where JPMorgan startingnt to create departments specializing in cryptocashs because some customers their requestnt also the possibility of investingthese years actives-is”.

Gilles Quoistiaux is the author of the book Bitcoin & Cryptocurrency: A Practical Guide for the Beginner Investor ”, and co-author of the“ One Coin ”podcast with Marie Vancutsem.

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