Without wasting time, crypto bulls are already seeing the Chinese government’s bans on crypto trading last week as a boon for the emerging sector. In his speech at Yahoo Finance’s Crypto Investing Summit this week, investor and podcaster Anthony Pompliano reiterated the sentiment of many longtime asset-class investors.
The Chinese government banned cryptocurrency activity at least five times before last week. (Here’s the official statement from Chinese regulators.) Since the announcement, reports suggest that an exodus like the one that happened to the country’s crypto mining companies in May is underway for crypto companies in violation of the law .
Two of the world’s largest cryptocurrency exchanges, Binance and Huobi, both suspended registrations for new China-based customers over the weekend.
However, Pompliano sees the crackdown as a positive development, not only for the crypto sector, but also for the US economy.
“This is the most American technology we have today, similar to the Internet,” Pompliano told Yahoo Finance. “China is making a massive geopolitical mistake here. Now it’s up to the United States … If anyone benefits from this technology, we’d better make sure we are.”
After Bitcoin fell from $ 45,000 to just under $ 41,000 in the news, Bitcoin – which is now hovering above $ 42,000 – and other major cryptocurrencies are showing signs of recovery. Bitcoin (BTC-USD), Ethereum (ETH-USD), Binance’s exchange coin BNB and Solana (SOL1-USD) all show improvement over the past 24 hours, while Cardano (ADA-USD) and Ripple remain in the red.
Of course, all of these assets were sold earlier in the week. It is wrong to assume that the crypto sector will not experience price reflections from the loss of Chinese customers.
East Asia crypto trading in decline
Given these concerns, however, geographic data from blockchain analytics firm Chainalysis suggests that East Asia, a region dominated by China, has already seen a decline in the growth of its crypto trade compared to other parts of the world.
Last year, global crypto transaction volume in North America and part of Europe exceeded East Asia, a region that generated the majority of crypto volume the previous year. Between January 2020 and July 2021, East Asia’s share of the global transaction volume fell from 31% to 14%. Although the raw volume of this region was still growing, it happened much lower than last year compared to other parts of the world.
Despite China’s previous regulatory bans, many investors were concerned about how the country could use crypto to its advantage. For example, China previously dominated both operations and production for the crypto mining industry to such an extent that some feared the nation might one day take majority control of the Bitcoin network.
In April of this year, billionaire PayPal co-founder Peter Thiel also expressed concern about how the government could use Bitcoin to manipulate global monetary policy. “I wonder if Bitcoin should also be partially viewed as a Chinese financial weapon against the US at this point,” he said.
For investors who might have shared Thiel’s opinion, this latest move, which followed a similar crackdown on crypto mining in China, could be interpreted as a good thing. Despite the short-term price volatility, the total criminalization of crypto in China could allay those fears, at least for cryptocurrency proponents.
By restricting cryptocurrency to make way for the country’s digital yuan, a central bank digital cryptocurrency (CBDC), the country appears poised to enforce monetary policy through the digital yuan. Crypto investors like Pompliano believe these efforts could add value to decentralized cryptocurrencies like Bitcoin.
“We should thank China for this action,” said Pompliano, referring to how China’s crypto mining sector had dominated the industry. “The United States can now speed up and catch up where China has been.”
Regulation is coming
Nonetheless, Pompliano’s bullish view holds great optimism about how cryptocurrencies will be treated by US regulators. After a month of testimony in front of Congress and heated Twitter debates, U.S. regulators are showing little sign that they will change the still tougher stance on crypto assets than the country has previously shown. Some crypto natives are even dramatizing it as a “war on crypto”.
Although there was no talk of total criminalization of the asset class, the US Treasury Department, the Federal Reserve, the Securities Exchange Commission and Congress have signaled a desire to regulate parts of the asset class more closely. Many U.S. officials, crypto advocates and non-proponents agree that regulation remains opaque by relying on much older laws that are inefficient for the fastest moving segment of the financial sector.
On September 28, the Commodities and Futures Trading Commission (CFTC) announced a $ 1.25 million fine on the Kraken crypto exchange for illegally offering US investors to trade commodities in digital assets. The exchange paid the fine to regulators and agreed to work with regulators, although a Coindesk report indicated that there may have been doubts as to whether the exchange could comply with applicable registration law.
David Hollerith is a senior reporter for cryptocurrency and stock markets.