Here's How To Play China's Crypto FUD

Hundreds of years before the turn of the 20th century, Chinese emperors banned international trade and cut the country from the rest of the world. The so-called "closed door" policy (闭关锁国) was partly a response to the Opium Wars with the British, who had ruthlessly spread drugs in the past century and enslaved 12 million people in the country. While crypto is not as addictive as opium, the current regime in China seems to treat it with the same disdain. Chinese Bitcoin miners look abroad due to government pressure Last week, Deputy Prime Minister Liu He, who is also president of the State Council, openly denounced crypto mining and trading as a financial risk that would destabilize the country's economy. As a result, major crypto miners stopped their operations and started looking for new homes abroad. Huobi and OKEx, two of the largest exchanges serving investors in China, suspended pool mining and removed trading activities there. Is this the beginning of the "Crypto Wars" in China? Or is it another example of FUD that tends to target every crypto bull run? This week's work examines both Liu's statement and the response from the local crypto community, and suggests three plausible scenarios for how all will turn out. Scenario 1: Ban Crypto Completely The destruction of China's 'official' crypto industry (except for private investors and others using VPNs to avoid the Great Firewall) is certainly possible. The central government could impose a nationwide ban on mining and trade. Later, policies will be enacted that will remove mining companies from their licenses and punish those currently operating under the guise of 'cloud computing centers'. In such a case, we expect pressure on Huobi and OKEx, as both exchanges are headquartered in Beijing, less than an hour's drive from where President Xi lives. Undoubtedly, crypto is still a small player in China's fintech scene.

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