Possible Impact of Stricter Chinese Digital Lending Restrictions on Bitcoin Mining

News / 11.05.2020

China is still strengthening the regulatory space in its economy as it has just suggested new restrictions on online lending.

Banking regulator in the country asked for public opinion on another guideline for banks’ Internet loans, towards tightening scrutiny of the banking domain through the improvement of risk management and enhancement of consumer protection.

This new guideline stipulates issues which include the maximum loan amount, repayment period, and the purpose of the loan. According to the China Banking and Insurance Regulatory Commission, the maximum consumer loan credit should be 200,000 Yuan ($28,272) for each borrower. Likewise, loans which are repaid in a single lump sum must be capped at a term of one year.

Part of the stipulation of the new guidelines is the restriction on the use of internet loans for home purchases, mortgage repayments, or investing. Stocks, bonds, futures, financial derivatives, and others are investments which are restricted.

Not all institutions will be able to lend; only qualified ones will be able to do so and banks will not be allowed to use some third-party collection methods.

The government of China has been doing more in controlling its citizens recently and one of them is the introduction of facial recognition methods which has met widespread concern and many people in the country are largely against it.

Further, the government likewise clamped down on the use of Twitter by its citizens abroad. The government’s infamous banning of cryptocurrencies in Sep. 2017 led to more government control over the country’s financial industry.

The government banned Bitcoin use, but Bitcoin mining is still ongoing in the country with 65 percent of the global hash rate. Nevertheless, there could be more scrutiny over mining activities as the country goes deeper into totalitarianism.

Besides, it may be difficult for miners in need of capital from banks to obtain loans. The suggested restrictions might bring difficulty in obtaining the necessary capital for hardware upgrades by miners. The imminent halving could mean Chinese miners’ need for capital which they may not be able to obtain.

Source: Crytopress.

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Sudarshan M is a long time crypto-enthusiast. Pulled in by bitcoin early on, it did not take long for Sudarshan to divert all of his academic attention from business studies to blockchain by doing his Masters and eventually pursuing his PhD in the subject.