“This is great news for bitcoin,” Gerber said. “The last thing we want is China [to be] involved in a currency of the world.”
The price of bitcoin fell as much as 6% after China announced the decision Friday morning. The world’s most populous country is responsible for much of bitcoin’s mining activity, according to a University of Cambridge study.
“The real issue is about control, and what governments don’t like is [that] bitcoin takes control of people’s monetary futures away from governments and [places it] in the hands of individuals,” Gerber said. “And that’s exactly what’s happening... globally, right now.”
In recent history, China has had a contentious relationship with cryptocurrencies and other new financial technologies. In 2017, after bitcoin’s first meteoric rise into the financial mainstream, China banned initial coin offerings (ICOs) as a way to prevent the “[serious disruption of] the economic and financial order.”
In 2021, China intensified the crackdown on cryptocurrency mining, banning the practice outright in some provinces and restricting it heavily in others. Over the summer, China banned completely the act of mining within Sichuan, the biggest hub of mining activity in the country. In July, the Chinese government mandated that a company shut down after it was alleged to have engaged in the facilitation of digital currency transactions.
Meanwhile, the Communist Party of China has led the world in the digitization of its economy. The country’s state-run digital payment and processing network, the Digital Currency Electronic Payment (DCEP) was launched gradually over the past year. The DCEP uses blockchain technology similar to cryptocurrency but is centrally controlled and operated. Additionally, user data is collected and kept by the state.
'A big opportunity for the US'
Previously, China held more crypto activity than any other nation in the world. The sheer size of the population, coupled with cheap and available electricity made the East Asian country a hotspot for bitcoin mining and transactions.
It remains to be seen how much of a sustained hit Bitcoin will take once the regulations have had time to be enforced. China’s exit from the crypto picture could help open pathways for other countries to take advantage of opportunities.
Senator Pat Toomey (R-PA) tweeted that the U.S. would have significantly more room to make developments in the establishment of an infrastructure for cryptocurrency with China’s new ban taking effect.
“China’s authoritarian crackdown on crypto, including Bitcoin, is a big opportunity for the U.S.,” Senator Toomey wrote in a tweet. “It’s also a reminder of our huge structural advantage over China.”
With much of the US environment surrounding cryptocurrencies undefined, the potential for growing crypto business and technology domestically has excited Bitcoin supporters. Talks regarding a central bank digital currency have been in the works for some time, though no official direction from the government.
For private investors, bitcoin still represents a relatively small asset class. As it further develops, it could become a greater force in the global financial system, CEO Gerber said.
“Even a 1% allocation to bitcoin for the average investor would bring bitcoin up probably 5x or 10x,” Gerber said. China’s decision effectively “[isolates] themselves from what will be the future monetary system,” he added.
Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.