Chinese regulatory authorities will push for inspections of cryptocurrency mining companies.

The regulatory authority in Inner Mongolia Autonomous Region of China will strengthen supervision over the mining industry in the province and rectify mining companies in the region.

Regulations Still Unclear

According to reports, in September, the government in Inner Mongolia deemed it necessary to rectify the mining industry in the province and called for the cleanup of cryptocurrency mining companies. This action targets crypto companies that are unrelated to the "real economy" for inspection. The regulatory stance is:

The virtual currency "mining industry" is considered pseudo-financial innovation unrelated to the real economy and should not be supported.

The impact of this enforcement action on miners in Inner Mongolia is not yet clear. However, it appears that many local miners have already moved to other countries. Yang Wang, a senior researcher at Renmin University of China, pointed out:

Most people I know who work in the domestic crypto industry have already moved their operations to Southeast Asian countries like Singapore. They feel that the cryptocurrency market in China has reached its limit.

However, according to a previous ABM report, by 2023, China's spending on blockchain solutions will exceed $2 billion. The report claims that from 2018 to 2023, the development of blockchain in China will expand at a compound annual growth rate of 65.7%.

The report further notes that in 2019, most of China's blockchain spending was related to the banking industry. Other high-spending industries include manufacturing, retail, professional services, and process manufacturing.

Paving the Way for Digital Yuan

In addition, the People's Bank of China (PBOC) announced plans to pilot restrictions on large-scale cash transactions in three different regions nationwide, which may pave the way for the upcoming digital yuan. A staff member from the People's Bank of China stated:

Under the requirement of large-scale cash management, banks need to deepen their understanding of existing customers, strengthen risk warnings and information exchange for customers who are prone to large cash transactions, and guide them to use non-cash payment tools.

Binance CEO Changpeng Zhao also mentioned at the BlockShow Asia 2019 summit that the digital yuan will be based on blockchain technology. He stated:

The Chinese government hopes to promote the influence of the yuan globally and compete with the U.S. dollar. To achieve this, they do need to promote a currency that has more freedom.

In response, a senior official from the People's Bank of China explained that China will not launch a cash war by issuing its digital currency. Mu Changchun, the director of the Digital Currency Research Institute of the People's Bank of China, reiterated that the Beijing government only plans to use this new currency to complement the shortage of paper money.

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