Despite their current popularity, cryptocurrencies are yet to be officially recognized by many countries, and this general notion affects their impact on the global markets. If a country decided to ban cryptocurrencies, it could lead to a drop in prices, even more substantially if the country has a large economy. This could also have a trickle-down effect as Blockchain-reliant companies may be affected.
Among the economic superpowers, it was previously reported here on Frontera that the US Securities and Exchange Commission has been relatively quiet on the issue. On the other side of the world, however, China recently made its views clear.
China, currently the second-biggest economy in the world, proposed a ban on Bitcoin mining companies. “Chinese authorities outlined proposals this week to discourage Bitcoin mining. Officials plan to limit the industry’s power use and have asked local governments to guide miners toward an “orderly” exit from the business,” reported Bloomberg. The country has long attracted mining companies because of their affordable electricity, chip-making factories, and cheap labor. But in light of this development, they might have to start finding other territories to operate in.
As a response, Coinwire specified that Chinese miners are looking towards neighboring Asian nations like Vietnam, Laos and Thailand, as well as other superpower countries such as the US and Russia for their transfer of operations. A miner named Akira Cui stated that he and a lot of his contemporaries are already planning ahead to work abroad, even noting that it will only take three months for the transition.
Chinese miners take up over 70% of the world’s total Bitcoin mining power, because they mine approximately 75% of all Bitcoins, according to Liao Xiang of Lightningasic, a Bitcoin mining firm operating in Shenzhen. If miners were left jobless, even temporarily, market performance might be impacted. There’s also the possibility of Bitcoin dropping to its lowest price point if the miners are unable to resume operations within a few months.
Among the proposed alternative countries, Russia appears to be the least favorable option. While the country may seem attractive to Bitcoin miners because of their state-wide use of Blockchain, it hasn’t formed a strong opinion on cryptocurrencies. Russia might also ban cryptocurrency use and transactions from their financing.
Meanwhile, South Korea went ahead and now prohibits using anonymous bank accounts for transactions of Bitcoin and other cryptocurrencies. Across to the west, Israel has included Bitcoin trading under the new regulations imposed by the Israel Tax Authority, which classify cryptocurrencies as assets. This means that Bitcoin investors will be subject to taxes such as 25% Capital Gains Tax and 17% Value Added Tax.
Clearly, many countries are minimizing cryptocurrency activities in their economies. However, some investors claim that these nations will soon see the significance of the digital currencies. Bobby Lee, CEO of the oldest Bitcoin exchange in China – BTCC, went on record to state that the country will soon lift the ban on Bitcoins. He reasoned that the more a country goes against Bitcoin, the more resilient it proves to be. Although he has no inkling when this lift will take effect, he’s convinced that it will happen.