In the last year, the cryptocurrency market took some heavy punches from the Chinese government. The market took the hits just like a warrior, however the combos have taken its toll in many cryptocurrency investors. The market lackluster performance in 2018 pales when compared with its stellar thousand-percent gains in 2017.
Since 2013, the Chinese government have taken measures to regulate cryptocurrency, but nothing compared from what was enforced in 2017. (Check out this informative article for reveal analysis of the official notice issued by the Chinese government)
2017 was a banner year for the cryptocurrency market with all the attention and growth it has achieved. The extreme price volatility forced the Central bank to adopt more extreme measures, like the ban of initial coin offerings (ICOs) and clampdowns bsc airdrops on domestic cryptocurrency exchanges. Right after, mining factories in China were forced to close down, citing excessive electricity consumption. Many exchanges and factories have relocated overseas to avoid regulations but remained accessible to Chinese investors. Nonetheless, they still fail to escape the claws of the Chinese Dragon.
In the most recent number of government-led efforts to monitor and ban cryptocurrency trading among Chinese investors, China extended its “Eagle Eye” to monitor foreign cryptocurrency exchanges. Companies and bank accounts suspected of carrying out transactions with foreign crypto-exchanges and related activities are afflicted by measures from limiting withdrawal limits to freezing of accounts. There have even been ongoing rumors one of the Chinese community of more extreme measures to be enforced on foreign platforms that enable trading among Chinese investors.
“In terms of whether there will be further regulatory measures, we will have to wait for orders from the higher authorities.” Excerpts from an interview with team leader of the China’s Public Information Network Security Supervision agency under the Ministry of Public Security, 28th February
WHY WHY WHY!?
Imagine your child investing their savings to invest in a digital product (in this case, cryptocurrency) he or she doesn’t have means of verifying its authenticity and value. He or she could get lucky and strike it rich, or lose it all once the crypto-bubble burst. Now scale that to millions of Chinese citizens and we are discussing billions of Chinese Yuan.
The market is filled with scams and pointless ICOs. (I’m sure you have heard news of people sending coins to random addresses with the promise of doubling their investments and ICOs that only don’t make sense). Many unsavvy investors are in it for the money and would care less about the technology and innovation behind it. The value of many cryptocurrencies comes from market speculation. Through the crypto-boom in 2017, take part in any ICO with either a famous advisor onboard, a promising team or a decent hype and you are guaranteed at least 3X your investments.
Too little understanding of the firm and the technology behind it, with the proliferation of ICOs, is really a recipe for disaster. Members of the Central bank reports that almost 90% of the ICOs are fraudulent or involves illegal fundraising. I think, the Chinese government wants to ensure cryptocurrency remains ‘controllable’ and not too big to fail within the Chinese community. China is taking the proper steps towards a better, more regulated cryptocurrency world, albeit aggressive and controversial. In reality, it may be the very best move the country has taken in decades.
Will China issue an ultimatum and make cryptocurrency illegal? I highly doubt so since it is pretty pointless to accomplish so. Currently, financial institutions are banned from holding any crypto assets while individuals are permitted to but are barred from carrying out any forms of trading.
A State-run Cryptocurrency Exchange?
At the annual “Two Sessions” (Named because two major parties- National People’s Congress (NPC) and the National Committee of the Chinese People’s Political Consultative Conference (CPCC) both take part in the forumï¼held on the initial week of March, leaders congregate to discuss about the most recent issues and make necessary law amendments.
Wang Pengjie, a member of the NPCC dabbled to the prospects of a state-run digital asset trading platform along with initiate educational projects on blockchain and cryptocurrency in China. However, the proposed platform would require a authenticated account allowing trading.
“With the establishment of related regulations and the co-operation of the People’s Bank of China (PBoC) and China Securities Regulatory Commission(CSRC), a controlled and efficient cryptocurrency exchange platform would serve as a conventional method for companies to improve funds (through ICOs) and investors to keep their digital assets and achieve capital appreciation” Excerpts of Wang Pengjie presentation at the Two Sessions.
The March towards a Blockchain Nation
Governments and central banks worldwide have struggled to grapple with the increasing popularity of cryptocurrencies; but a very important factor is sure, all have embraced blockchain.
Despite the cryptocurrency crackdown, blockchain has been gaining popularity and adoption in various levels. The Chinese government have already been supporting blockchain initiatives and embracing the technology. In reality, the People’s Bank of China (PBoC) have already been taking care of a digital currency and have conducted mock transactions with some of the country’s commercial banks. It’s still unconfirmed if the digital currency will undoubtedly be decentralized and offer features of cryptocurrency like anonymity and immutability. It wouldn’t come as a shock if as it happens to be only a digital Chinese Yuan considering that anonymity is the final thing that China wants within their country. However, created as a close substitute of the Chinese Yuan, the digital currency will undoubtedly be afflicted by existing monetary policies and laws.
People’s Bank of China Governor, Zhou Xiaochuan. Source: CNBC
“Plenty of cryptocurrencies have observed explosive growth which brings significant negative affect consumers and retail investors. We don’t like (cryptocurrency) products that make use of the huge chance for speculation that gives people the illusion to getting rich overnight” Excerpts from Zhou Xiaochuan interview on Friday, 9th March.
On a media appearance on Friday, 9th March, Governor of People’s Bank of China, Zhou Xiaochuan criticized cryptocurrency projects that leveraged on the crypto-boom to cash in and fuel market speculation. He also noted that development of the digital currency is ‘technologically inevitable’
On a regional level, many Chinese cities have are driving blockchain initiatives to advertise growth within their region. Hangzhou, renown if you are the headquarters of Alibaba, have stated blockchain technology to be among the city’s top priorities in 2018. The local government in Chengdu city have also been proposed the building of an incubation center to foster the adoption of blockchain technology in the city’s financial services.