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China Tells Its Banks to Not Settle Bitcoin Transactions, Shuts Down Mining

A crackdown on Bitcoin is underway. And the stage is set for further actions.
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Price of One Bitcoin 2021-06-22

Mining Shutdown

Last Friday, China clamped down Bitcoin mining operations. By Sunday, Over 90% of China's Bitcoin Mining Capacity Was Off.

Many Bitcoin mines in Southwest China's Sichuan Province - one of China's largest cryptocurrency mining bases - were closed as of Sunday, according to after local authorities ordered a halt to mining in the region on Friday amid an intensified nationwide crackdown against cryptocurrency mining.

The ban also means that more than 90 percent of China's Bitcoin mining capacity is estimated to be shut down, at least for the short term, as regulators in other key mining hubs in China's north and southwest regions have taken similar harsh steps.

Some industry players had hoped that regulators in Sichuan, where hydropower is abundant, could take a softer approach. But the latest ban underscores Chinese regulators' determination to curb speculative crypto trading to control financial risks, despite certain benefits to local economies, observers said.Bitcoin hit a two-week low following news 

The Sichuan Provincial Development and Reform Commission and the Sichuan Energy Bureau issued a joint notice on Friday, ordering local electricity companies to "screen, clean up and terminate" mining operations by Sunday.

In May, senior Chinese officials said that it is necessary to crack down on Bitcoin mining and trading, and resolutely prevent the transmission of individual risks to the wider society.

Trading Shutdown

China just followed up on its mining clampdown with a Bank Transaction Ban On Cryptos

On Monday, China's central bank, the People's Bank of China (PBOC), said it had recently summoned several major banks and payments companies to call on them to take tougher action over the trading of cryptocurrencies.

Banks were told to not provide products or services such as trading, clearing and settlement for cryptocurrency transactions, the PBOC said in a statement.

China's third-largest lender by assets, the Agricultural Bank of China, said it was following the PBOC's guidance and would conduct due diligence on clients to root out illegal activities involving cryptocurrency mining and transactions. China's Postal Savings Bank also said it would not facilitate any cryptocurrency transactions.

Chinese mobile and online payments platform Alipay, which is owned by financial technology giant Ant Group, said it would set up a monitoring system to detect illegal cryptocurrency transactions.

Just a Start

This is just a start of what I long ago suggested would happen. 

For now, the implied effect may be limited. Chinese citizens can create bank accounts outside China to settle transactions. 

And mining is still happening in the rest of the world. 

However, the psychological impact could be greater than what we see on the surface.

Big Questions

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  • How long will the rest of the world will put up with massive amounts of energy devoted to mining cryptos?
  • How long before another major country acts to halt Bitcoin transactions. 

If the US were ever to crack down on Bitcoin transactions, it would be an immediate lights out for valuation. 

A very steep tax on Bitcoin mining could also have a steep impact. 

China is only the opening salvo. 

Technically Speaking

With an eye on the present, the 1-month chart of Bitcoin looks ominous. 

For the third time in a month, Bitcoin is testing the $30,000 level. I do not expect triple bottoms to hold. 

Dogecoin 

On Monday, I commented Dogecoin Blasted Another 38% to $0.16. When Does Musk Try a Tweet Rescue?

Since then Dogecoin has staged a big rally (percentage-wise) to nearly $0.22. As of this report, 1:23 AM central, it's  back down to about $0.20. 

At $0.20, Dogecoin is down about 73% from its high following Elon Musk's pump on Saturday Night Live. 

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