As China clamps down on the use of bitcoin, other nations and businesses are also seeking to more heavily regulate cryptocurencies and blockchain-based networks.
While the hype around bitcoin and other cryptocurrencies has sent their prices skyrocketing, some governments and companies are restricting activity to head off potential money laundering and protect consumers from a credit meltdown.
Cryptocurrencies have begun to exit once-friendly China for more open nations and other regions and businesses are beginning to impose restrictions on how – or even whether – they can be used.
Open blockchains, such as bitcoin, are only the first to be affected by increased regulatory oversight. Depending on how they’re used, permissioned blockchains, or those that are centrally administered and used for general transactions, could also be affected by the push to reign in the cryptocurrency technology.
ith cheap electricity, China was once a haven for vast, power-hungry server complexes that perform the algorithmic processing for bitcoin and other blockchain-based virtual currency networks. In recent years, however, China has gradually clamped down.
China moves to clamp down
Last year, China outright banned initial coin offerings, a form of crowdfunding for cryptocurrencies, and later put the kibosh on trading in electronic currencies. More recently, the government began shutting off the power faucet for bitcoin mining pools, or large server farms that perform cryptocurrency processing.
“The market is very entrepreneurial and we’ll see the bitcoin transaction processing move elsewhere pretty quickly,” said Paul Brody, Global Innovation Leader for Blockchain at EY (formerly Ernst & Young). “It may well boost other cryptocurrencies, especially those with a lower carbon footprint in the transaction processing work and more business and IT applications like Ethereum.”
The company running two of China’s biggest bitcoin mining pools, Bitmain and BTC.Top, the third largest mining pool, have set up mining operations in the U.S. and Canada. And ViaBTC, the fourth largest mining pool operation, has opened facilities in Iceland and the U.S., according to Bloomberg News.
There are various “good” reasons China and other countries hope to take a more hands-on regulatory approach to cryptocurrencies, which to date have existed in an oversight Wild West, according to Martha Bennett, a principal analyst at Forrester Research.
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