Last year, the cryptocurrency market took a series of heavy blows from the Chinese government. The market takes hits like a warrior, but the combinations have had a huge impact on many cryptocurrency investors. The market is useless to make 2018 pales compared to the more than a thousand percent obtained in 2017.
Since 2013, the Chinese government has taken steps to curb cryptocurrency, but not compared to what was implemented in 2017. (Check out this article for a detailed analysis of the official announcement issued by the government in China)
2017 is a banner year for the cryptocurrency market with all the attention and growth it has achieved. Severe price fluctuations have forced the Central Bank to adopt more serious measures, including banning initial coin offerings (ICOs) and stopping the exchange of domestic cryptocurrency. Shortly afterwards, Chinese mining factories were forced to close, citing excessive electricity consumption. Many exchanges and factories have moved abroad to avoid regulations but remain accessible to Chinese investors. However, they still failed to escape the Chinese Dragon’s claws.
In the latest series of government-led efforts to monitor and ban the sale of cryptocurrency to Chinese investors, China has expanded its “Eagle Eye” to monitor foreign cryptocurrency exchanges . Companies and bank accounts suspected of carrying out transactions on foreign crypto-exchanges and related activities are subject to measures ranging from limiting withdrawal limits to freezing accounts. There are also ongoing rumors among the Chinese community that more serious measures will be implemented on foreign platforms that allow trade among Chinese investors.
“As if there are still regulatory measures, we will wait for orders from higher authorities.” Excerpts from an interview with a team leader of China’s Public Information Network Security Supervision agency under the Ministry of Public Security, February 28
Imagine that your child invests in his savings to invest in a digital product (in this case, cryptocurrency) that he has no way of proving its authenticity and value. He may be lucky and get rich, or lose everything in the crypto-bubble explosion. Now that measures millions of Chinese citizens and we talk about billions of Chinese Yuan.
The market is full of scams and useless ICOs. (I’m sure you’ve heard the news that coins are being sent to random addresses with the promise of doubling their investment and meaningless ICOs). Many unscrupulous investors are here for money and do not care about the technology and innovation behind it. The value of many cryptocurrencies is derived from market speculation. During the crypto-boom of 2017, join any ICO with either a reputable boat advisor, a promising team or a decent hype and you are guaranteed at least 3X your investments.
The company’s lack of understanding and the technology behind it, coupled with the proliferation of ICOs, is a recipe for disaster. Central Bank members report that almost 90% of ICOs are fraudulent or involved in illegal fundraising. In my opinion, the Chinese government wants to ensure that cryptocurrency continues to be ‘restrained’ and not too big to fail within the Chinese community. China is taking the right steps towards a safer, more controlled cryptocurrency world, albeit aggressive and controversial. In fact, it may be the best move the country has made in decades.
Will China issue an ultimatum and make cryptocurrency illegal? I have a lot of suspicion because it is useless to do this. Currently, financial institutions are prohibited from holding any crypto assets while individuals are allowed but prohibited from carrying out any form of trading.
A State-run Cryptocurrency Exchange?
In the annual “Two Sessions” (Named for two main parties- National People’s Congress (NPC) and the National Committee of the Chinese People’s Political Consultative Conference (CPCC) both participated in the forumï¼ ‰ held earlier week in March, leaders will meet to discuss the latest issues and make necessary changes to the law.
Wang Pengjie, a member of the NPCC has been touting the prospects of a state-run digital asset trading platform as well as promoting blockchain and cryptocurrency education projects in China. However, the proposed platform will require an authentication account to allow marketing.
“In establishing relevant regulations and cooperation with the People’s Bank of China (PBoC) and China Securities Regulatory Commission (CSRC), a regulated and efficient cryptocurrency exchange platform will serve as a formal way for companies to raise funds (through The ICOs) and investors who hold their digital assets and achieve capital appreciation “Quotes from Wang Pengjie’s presentation in Two Sessions.
March leads to a Blockchain Nation
Governments and central banks around the world have struggled to fight the increasing popularity of cryptocurrencies; but one thing is for sure, everyone received a blockchain.
Despite the suppression of cryptocurrency, the blockchain has gained popularity and adoption at various levels. The Chinese government supports block initiatives and embraces technology. In fact, the People’s Bank of China (PBoC) works in a digital currency and conducts mock transactions with some of the country’s commercial banks. It has not yet been confirmed whether digital currency can be decentralized and provide cryptocurrency features such as identification and non-transferability. It would not be surprising if it became a digital Chinese Yuan given that anonymity is the last thing China wants in their country. However, created as a close substitute for the Chinese Yuan, digital currency will be subject to current monetary policies and laws.
Governor of the Bank of China, Zhou Xiaochuan. Gigikanan: CNBC
“Many cryptocurrencies have seen rapid growth that could have a negative impact on consumers and investors. We do not want (cryptocurrency) products being used too often for speculation that gives people the illusion which will be rich in one night “Quotes from The Talk of Zhou Xiaochuan on Friday, March 9th.
In a press release on Friday, March 9, the Governor of the People’s Bank of China, Zhou Xiaochuan criticized the crypto-boom-exploited cryptocurrency projects to find fuel market speculation. He also pointed out that the development of digital currency is ‘inevitable with technology’
At a regional level, many Chinese cities are taking the initiative to block the growth of their region. Hangzhou, renowned for being Alibaba’s headquarters, said blockchain technology could be one of the city’s top priorities in 2018. The local government of Chengdu town has also proposed building an incubation center to strengthen the adoption of blockchain technology in the city’s financial services.
Local conglomerates such as Tencent and Alibaba also form partnerships with firm firms or promote projects on their own. Firms such as VeChain have also secured extensive partnerships with Chinese companies to improve China’s supply chain transparency.
All indications point to the fact that China is working towards a blockchain nation. China has always had an open mind on emerging technologies such as mobile payment and Artificial Intelligence. So far, there is no doubt that China is the first country to build a blockchain. Will we see the Chinese government withdraw and allow its citizens to buy as well? Probably, if the market is mature and not very easy to change but certainly not in 2018.