Drew Wise
Roxe Inc.
Published in
4 min readJun 28, 2021

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Why China is Trying to Ban Crypto

Is it really about protecting the local landscape and environment?

As you may have heard in recent weeks, China has been blocking crypto exchange platforms from doing business. While local provincial governments (e.g., Qinghai and Sichuan) are now moving to inspect the use of their electricity and close any sites which are using its hydropower to fuel bitcoin output.

But why is China so intent on cracking down on bitcoin? And why now?

One of the reasons is the impact on the environment from mining Bitcoin. Bitcoin mining uses more than 100 million tons of electricity as of 2021. To put that into context, that’s about the same as a country like Argentina, which has just over 40 million citizens today. . As China has pledged to become carbon neutral by 2060, the Chinese government aims to cut down on excessive electricity use caused by Bitcoin mining.

However the real reason suspected by many people watching China is the unpredictable price of bitcoin and its wider effects on the economy, especially during this decade. Bitcoin prices have increased and crashed many times before and regardless of this recent crackdown, it’s likely that the value of bitcoin will increase and crash many times more in the future. Its value depends on the number of available Bitcoins in the market and the cost of producing bitcoin but in recent years, the value has become more reliant on speculation and therefore buyers and sellers simply trade it for its speculative value.

Whereas just a few years ago the value of 1 Bitcoin was approximately at 18,000 USD (late 2017) before falling to 6,500 USD (mid 2018) but now, though sharply falling, the value is at 35,517 USD (June 2021) from a previous value of 65,000 USD (May 2021). Presently, the market cap of BTC is at 600 billion USD. (This is worth more than the GDP of Belgium, a small, developed OECD country). Its significant yet volatile nature is one of the major reasons why China is cracking down on Bitcoin as its negative effect on the economy could be similar to the Chinese stock market crash in 2015–16.

Another major reason for the crackdown is due to capital outflow. Financial regulations only allow Chinese citizens to transfer $50,000 USD across borders per year, while Chinese citizens are not allowed to invest abroad in stock markets, etc. Such strict financial restrictions are due to China’s government’s high risk aversion and, with China’s GDP growth predicted to slow in the coming decade to 3 — 4%, it’s likely that such restrictions will stay in place. Hence, their crackdowns on cryptocurrency exchange platforms since many were used to transfer money abroad. (e.g., investing in stock overseas or buying property)

This is where decentralized finance (DeFi) protocols take center stage. Unlike centralized. exchange platforms,where transactions are run through a 3rd party business or. “middle man,”DeFi protocols run their. transactions through open, immutable blockchains thanks to features such as automated market making, liquidity pools, and yield farming.

In addition to transactions, DeFi protocols can even digitize traditional assets (e.g.,commodities and equity. shares). Also, sinceDeFi protocols are. relatively new, regulations are mostly non-existent, though that may change in the future. centralized finance (CeFi) transactions are more expensive due to various intermediary costs, including verifying both the sender and the receiver, and. taking a service fee for handling your transaction. These intermediate costs can be burdensome to both parties in any given. transaction.

Furthermore, CeFi servers collect your private information (e.g., name, email, password, etc.) Should there be a security vulnerability in the system, it is very possible that private information may be stolen. In contrast, DeFi systems aim to be an ecosystem of anonymity (or pseudo-anonymity) and outside the parameters of direct control. The main difference is that DeFi systems allow users to control their own assets, instead of a 3rd party who can act as a lender and have control over your funds.

Global blockchain payment networks like Roxe and its DeFi protocol, Roxe Payment Protocol, are a more secure and transparent way to make cross-border payments using the best available wholesale FX rates. Roxe provides banks, payment companies, remittance providers, and consumers with the best peer-to-peer payment route, making. real-time payments at much lower costs.

The Roxe network consists of more than 100 different fiat and crypto currencies and allows instant cross border payments through theRoxe Instant Settlement Network (RISN). Key features of RISN include tokenizing fiat currencies, which. allows financial institutions to utilize blockchain technology without the risk of directly transacting with any cryptocurrency. RISN does this by using a wide variety of currencies — by digitizing currency as “Smart Ownership” Records backed by actual fiat currency in a bank — to ensure low volatility and low risk of FX rate loss. Smart Ownership Records are digitized. currency with digital payment instructions (e.g., roUSD, roEUR, etc) for Roxe members to quickly transfer fiat currency, reducing the number of transactions and therefore, saving significant costs. In addition, banks and other financial institutions do not need to pre-fund accounts since funds are immediately available.

It should be noted that Roxe does not charge upfront fees and charges very low costs by introducing a flat fee of only $2, and a variable fee of 0.1% to 0.3% (in equivalent local currency). On blockchain payment networks such as Roxe, transactions and liquidity are more decentralized, providing better security, more transparency of pricing and counterparty identities, and much lower costs.

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