Friday, February 3, 2023

Will the Chinese Banhammer Hit Bitcoin Miners Next?

Will the Chinese Banhammer Hit Bitcoin Miners Next?

China’s 2017 moves against Bitcoin use may go further than some in the community anticipated. A leaked document describes plans to block access to blockchain syncing for exchanges and even miners and mining pools. Some rumors also claim exchange executives are being told to remain in the country.

Also read: Indian Government Considers Creating ‘Lakshmi’ Blockchain Currency

Amid the almost-daily shocks it’s notable that bitcoin has mostly risen in value this week. It could be that after nearly four years of vague rules and unpredictable outcomes, Bitcoin has “priced in” Chinese regulatory uncertainty.

Past experience should see Bitcoin crashing on every new rumored action, with each more restrictive than the last. But the international Bitcoin community has now grown so used to China’s capricious attitude towards cryptocurrency, that recent crashes have been minor compared to 2013-14.

China May Block Blockchain Access and Overseas Exchanges

Chinese site 8BTC News showed pictures of a Chinese-language document that supposedly indicated the government’s upcoming plans for Bitcoin.

Bitcoin ban keep out signIt listed several popular exchanges in the U.S., Japan, South Korea, Hong Kong and Europe to which it would block access starting 30th September 2017.

It also added Bitcoin seeding nodes to its block list, including two belonging to Bitcoin Core developers Matt Corallo and Luke Dashjr. VPN access to these sites would also be blocked to China-based users — and most significantly, mining pools.

China’s infamous “Great Firewall” would perform deep packet inspection (DPI) to “discard Bitcoin blockchain synching data”. Additionally, local miners and mining pools could be denied internet access altogether.

OTC/P2P Trading, Miners Now Targeted Too

Notably, the list also included LocalBitcoins — a P2P matching service. This contradicted the initial report on financial news service Caixin that stated over-the-counter (OTC) trading would remain untouched. Locally-developed OTC app BitKan had already decided to suspend its platform.

That same Caixin report had said there would be no action against cryptocurrencies themselves. That’s now also uncertain.

OTC trading in China — via apps, LocalBitcoins or other channels — had boomed in China in 2017 as exchanges faced restrictions on fiat movements.

Needless to say, these latest developments are making large-scale Chinese mining operations nervous. There are no confirmed reports of the authorities moving to shut down physical mining centers themselves yet. But the industry remains on tenterhooks wondering who might be next.

Bitcoiners Should Expect More Regulation, Not Only in China

The Wall Street Journal described China’s latest moves as “the most draconian measures any government has taken to control Bitcoin”.

bitcoin minersHowever they’re also neither unexpected nor unprecedented. The Bitcoin world has long anticipated further crackdowns, should the currency become “too popular” and become a serious rival to government-approved currencies and investments.

Smart watchers should remain vigilant against anti-Bitcoin action from “friendly” governments outside China, as well.

The U.S. government in July moved swiftly to shut down exchange BTC-e after watching it grow for years. Regulators like the SEC have also done their best to keep institutional investors away from cryptocurrencies, like when it denied a rule change to allow the Bitcoin ETF a public listing.

Can Bitcoin still survive if major governments are hostile? Let’s hear your thoughts.

Images via Pixabay

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