Why China is Clamping Down on Cryptocurrency Again

Last week, China’s central bank declared crypto transactions illegal. Bitcoin investors should have expected this announcement.

Besides, China introduced strict regulations many times before over the years. Crypto prices plunged in each of those times, only to rise at higher prices.

Why is China restricting crypto-related transactions?

China must have control of the crypto activity in the region. It needs to know who is transacting with crypto and the amounts. Before the latest decision, the country outlawed cryptocurrency mining. It cited environmental reasons at the time.

Digital Yuan

Expect China to continue developing and supporting the digital yuan. This will enable the government to track every financial transaction. The country does not want digital transactions supporting business outside of the system. The whole point of crypto is to support that.

Risks increase after China regulates its domestic crypto. The U.S. may follow, hurting the evolution of digital currency. Even though China may want to control and monitor digital currency, the U.S. may let this market thrive.

Crypto investors may bet that China cannot restrict the movement of digital currency. Furthermore, if the country eases restrictions, bitcoin would resume its strong uptrend. Investors could buy companies that have big platforms, such as Coinbase (NASDAQ:COIN) or Voyager Digital. Mining firms like Marathon Digital and Riot Blockchain offer upside if crypto prices rebound.