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China declares all crypto-currency transactions illegal

The Central Bank Of China central has officially announced that all transactions of crypto-currencies are illegal, effectively banning digital tokens such as Bitcoin.

Posted  4,548 Views updated 5 months ago

The country consists of 23 provinces,

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Five Autonomous Regions, Four Municipalities And Two Special Administrative Regions,

China, officially known as the People’s Republic of China, is a country in Eastern Asia with a population of more than one point four billion people. It is the world’s fourth largest country. The country consists of 23 provinces, five autonomous regions, four municipalities and two Special Administrative Regions, Hong Kong and Macau. The national capital is Beijing, alongside the most populous city and financial center, Shanghai. Shanghai is currently governed as a unitary one-party socialist republic by the CCP. China is a permanent member of the United Nations Security Council and a founding member of several multilateral and regional cooperative organizations, such as the Asian Infrastructure Investment Bank, the Silk Road Fund, the New Development Bank, the Shanghai Cooperation Organization, and the RCEP. The People’s Bank of China (PBOC) banned all crypto currency transactions. The Bank cited the role of crypto currencies as a major facilitator of financial crime and a growing risk to their financial system, due to its highly speculative nature. According to Chainalysis, one other possible reason behind the crypto currency ban is an honest attempt to combat capital flight. Between 2019 and 2020, Chain analysis, estimated that the flight of capital lost could be as high as $50 billion. China made news headline last year when it banned crypto currencies and immediately became a target, yet they are not the only ones. According to a 2021 summary report by the Law Library of Congress published in November, the number of countries and jurisdictions that have banned crypto either completely or implicitly has more than doubled dating as far back as 2018. Egypt, Iraq, Qatar, Oman, Morocco, Algeria, Tunisia, Bangladesh, and China have all banned crypto currency. Forty-two other countries, such as Algeria, Bahrain, Bangladesh, and Bolivia, have implicitly banned digital currencies by putting restrictions on the ability for banks to deal with crypto, or prohibiting crypto currency exchanges, which play a vital role within the industry.

Forty-Two Other Countries

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Money, Meaning Fiat Currency Has No Real Value On Its Own.

 

Inflation occurs when the money supply grow more rapidly than the economic output.  According to the quantity theory, the value of money and inflation can be caused by the supply and demand of that particular currency but not in all cases. In some cases hyperinflation or deflation can occur however this still requires some form of capital control so as to maintain how fast money moves through the economy. The main purpose of capital control is to reduce the volatility of any nation’s currency rates  and provide support and stability by shielding it from  fluctuations. Major disturbances in the flow happen from capital outflows, which lead to a rapid depreciation of the domestic currency. I think imposing capital control through the total or partial ban on Crypto was the responsible thing to do to protect its citizens and the integrity of their fiat. Even though I am not a strong supporter of communism and at times I consider China’s actions on humanitarian and environmental issues to be a tasteful, I would hate to wake up one morning as a Chinese citizen, go to work,  get my paycheck and realize I can’t afford  to live.

Capital Control

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What China's Main Concern Should Be

I believe that China’s main concern is and if it isn’t then it should be is capital control. The name is very distasteful.  Using the word control and capital in the same sentence automatically give off the impression that some authoritative figure of force is infringing it’s right on your money and the free market system.  Every successful nation has some form of Capital control. Capital control can take the form of taxes, restrictions, tariffs even legislation. Think about it. What happens  if there was a shortage of Yuan within the Chinese economy. The government would have to print more money to replace the lost capital which causes inflation. Money, meaning fiat currency has no real value on its own. It has to be backed by a much needed resource or by manual labor. So for example, the average everyday consumer goes to work, make a product. That product would then get shipped to the docks, exported and sold to another neighboring nation that has a trade deal agreement, meaning they signed a contract, made a payment and agreed to buy my goods for the next few years. Trade deals should create jobs and make nations rich. So let’s say that China sold fifty billion dollars in good at one yuan per good they should have fifty billion yuan. So here comes crypto currency, something that is not backed by a good or service but by computer algorithms. 

Let’s inject fifty billion of that into the Chinese Economy it would zero out China’s real money earned from their trade deal through inflation. That basically means that you would have millions of people walking around spending money without having to work for it or give up a desirable resource, consuming resources and demanding more, forcing manufacturers to increase the pricing of their goods and/or services, in an attempt to maximize their earning potential, with the end result being inflation or a scarcity of that particular resource.

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