Beijing, on the other hand, is facing the challenge of rising electricity prices

China seeks to boost its own digital currency

photo_camera atalayar_criptomonedas China

Last May China took the decision to ban cryptocurrencies such as bitcoin after launching its own digital currency "Xia", with the aim of replacing physical money. Beijing had already begun to address the digitisation of its currency in 2014, and in 2017 approved a programme to develop the cryptocurrency.

In addition to its own digital currency, as of May China was home to the majority of bitcoin's virtual currency operations and data centres. The Asian giant produced 75% of bitcoin globally, according to the Cambridge Centre for Alternative Finance. However, its aspiration to dominate this rising market clashed with one of China's main challenges: the environmental issue. Multiple experts warned about the risks of using electricity for cryptocurrencies, as the energy used in the mining process of these currencies is equivalent to the needs of a house for millions of years. 

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Bitcoin is one of the most energy-intensive cryptocurrencies, which is why China decided to ban it in its territory to address the climate challenge. The Chinese central bank also asked major banks to tighten measures on other digital currencies. As a result, the price of virtual currencies fell. Their value fell from USD 2.53 trillion to USD 1.7 trillion. Bitcoin, one of the most popular currencies, plummeted to $35,000 after China's decision in May, when in April its value per unit was $63,000. The currency has not since risen above $42,000, demonstrating China's heavy weight in the digital market.

However, China is not only interested in reducing energy use, but is also looking to promote its own virtual currency. Xia is currently being tested in several major commercial cities such as Shanghai, Shenzhen and the capital, Beijing, although an official implementation date has not yet been set. For the time being, the digital yuan has been well received by the markets. In mid-July, Xia transactions rose to 34.5 billion yuan ($5.3 billion). 

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"The digital yuan is not an alternative to the monetary yuan and is not analogous to cryptocurrencies, as the official digital yuan is issued by the Central Bank of China as a complementary payment method, not as an alternative to the monetary currency," Chinese central bank deputy governor Fao Yi told the national Xinhua news agency.

With China focusing on its own virtual currency, other countries have increased their participation in cryptocurrencies. In the United States, the bitcoin market reached 16.8 per cent in April, up from 4.1 per cent in September 2019. Kazakhstan has also increased its bitcoin market to 8.2%, while Russia and Iran rank fourth and fifth in this sector. 

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The value of cryptocurrencies globally is more than $2.275 trillion, with bitcoin leading the currencies with 46% of the total and worth $1.05 trillion. These digital currencies are not under the control of governments, so their value is constantly updated through a global network of computers. 

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