Why is China cracking down on Bitcoin?

Bitcoin, as a virtual digital currency, has attracted widespread attention globally in recent years, but China has adopted a harsh crackdown attitude. There are three main reasons behind this.

Firstly, the energy consumption of Bitcoin mining is astonishing. Among various digital currencies, Bitcoin mining machines are known as the 'electricity hogs' of the industry. According to statistics, it consumes approximately 145,400 megawatts, while Ethereum consumes 46,900 megawatts. Each Bitcoin transaction consumes as much as 163 kilowatt-hours of electricity, which is enough to supply a mainstream American household for 5.5 days. Research from Oxford University shows that as of May 10, 2021, the global annual electricity consumption for mining was about 149.37 terawatt-hours (1 terawatt-hour equals one billion kilowatt-hours). Such enormous energy consumption puts heavy pressure on energy supply and is detrimental to sustainable development.

Secondly, Bitcoin provides a breeding ground for illegal financial activities. Due to its anonymity and convenience in transactions, Bitcoin has become an ideal tool for money laundering, fraud, and other illegal activities. In recent years, our country has vigorously promoted anti-money laundering actions, with anti-fraud and anti-money laundering promotional information posted in every corner—from hospital entrances to vegetable markets, from community entrances to elevator lobbies. Illegal activities such as micro-business order brushing have also been severely cracked down upon. The existence of Bitcoin undoubtedly provides convenient cover for these criminal activities, severely threatening our financial order and social stability, which goes against the rule of law construction in our country.

Finally, Bitcoin poses a potential threat to the sovereignty of the Renminbi. With the spread of Bitcoin globally, if allowed to develop unchecked, it may challenge the status of fiat currency and consequently affect the dominant position of the Renminbi in both international and domestic markets, undermining the foundation of our economy.

China's crackdown on Bitcoin speculation aims to reduce domestic financial risks and build a strong defense against international financial challenges. The future of Bitcoin is filled with uncertainty, and its sharp decline could trigger a market liquidity crisis, dragging down other markets. Therefore, investors must stay away from Bitcoin speculation to avoid falling into high-risk investment traps.

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