China is getting tough on cryptocurrency, reason is quiet obvious

Bitcoin, the world's largest digital currency, and other cryptos cannot be traced by a country's central bank, making them difficult to regulate. Chinese authorities have outlawed trading this month to "prevent and control financial risks".

Cryptocurrency prices have fluctuated wildly in recent weeks as China intensifies crackdown on trading and mining operations. Bitcoin has slumped more than 10 per cent after Beijing pulled the plug on the massive mines of Sichuan province.

Analysts say China fears the proliferation of illicit investments and fundraising -- it also has strict rules around the outflow of capital.

Crypto transactions threaten these controls. Secondly, the crypto crackdown also opens the gates for China to introduce its own digital currency, already in the pipeline.

Crypto transactions threaten these controls. China's electricity-guzzling bitcoin data centres power nearly 80 percent of the global cryptocurrency trade. Access to cheap power and hardware has allowed Chinese companies to process the vast majority of crypto transactions and generate the tedious hexadecimal numbers needed to mint new currency.

Crypto-mining is expected to use 0.6 per cent of the world's total electricity production in 2021 - more than the annual consumption of Norway - according to Cambridge University's Bitcoin Electricity Consumption Index.

Chinese restrictions may in part be triggered by the fact that crypto's enormous power demands have led to a surge in illicit coal extraction, posing a serious risk to Beijing's ambitious climate goals. Several provinces have ordered mines to close as the central government plays whack-a-mole with the shadowy sector.

Authorities in the province of Sichuan ordered the closure of 26 mines last week and told power companies not to supply electricity to the energy-guzzling facilities.