Over the past year, the cryptocurrency market has grabbed a series of heavy punches from the Chinese government. The market took strikes like a warrior, but groups have influenced many investors of cryptocurrencies. Poor market performance weakened in 2018 compared to a thousand percent profit in 2017.
Since 2013, the Chinese government has taken measures to regulate cryptocurrency, but nothing compared to what was implemented in 2017. (See this article for a detailed analysis of the official notice issued by the Chinese government)
2017 was a great year for the cryptocurrency market with all the attention and growth it achieved. Severe price volatility forced the central bank to adopt tougher measures, including a ban on initial currency offerings (ICOs) and restrictions on local currency exchanges. Soon after, China's mining factories were forced to shut down, citing excessive electricity consumption. Many stock exchanges and factories have moved abroad to avoid regulations but have remained available to Chinese investors. However, they still fail to escape the claws of the Chinese dragon.
In the latest series of government-led efforts to monitor and ban cryptocurrency trading among Chinese investors, China has expanded the "Eagle Eye" to monitor foreign exchange transactions. Companies and bank accounts suspected of transactions with foreign exchanges and related activities are subject to measures from limiting withdrawal limits to freezing accounts. There have been persistent rumors among the Chinese community about the imposition of more extreme measures on foreign platforms that allow trading among Chinese investors.
"As to whether there are other regulatory measures, we will have to wait for orders from the higher authorities." Excerpts from an interview with the team leader of the China Public Information Network Security Surveillance Agency of the Ministry of Public Security, February 28
Why why why?
Imagine your child investing his / her savings to invest in a digital product (in this case, cryptocurrency) that he has no way to verify its authenticity and value. He or she can be lucky and hit him rich, or lose everything when the crypto bubble bursts. Now expand it to millions of Chinese citizens and talk about billions of RMB.
The market is full of fraud and futile ICOs. (I'm sure you've heard news that people are sending coins to random addresses with the promise of doubling their investment and simply stale ICO.) Many investors are not interested in them for the money, and will care less about the technology and innovation behind it. The value of many cryptocurrencies is derived from market speculation. During the encryption boom in 2017, take part in any ICO either with a famous onboard consultant, or a promising team or decent noise and guarantee you at least 3x your investments.
The lack of understanding of the company and the technology behind it, as well as the proliferation of NGOs, is a recipe for disaster. Central Bank members reported that nearly 90% of ICOs are fraudulent or involve illegal fundraising. In my opinion, the Chinese government wants to ensure that the cryptocurrency remains 'manageable' and not too big to fail within Chinese society. China is taking the right steps towards a more encrypted and more organized world, though aggressive and controversial. In fact, this may be the best move the country has taken in decades.
Will China issue an ultimatum and make the cryptocurrency illegal? I strongly doubt this because it is pointless to do so. Currently, financial institutions are prohibited from retaining any encryption assets while individuals are allowed to perform any form of trading.
Exchange Cryptocurrency managed by the state?
In the annual "two sessions" (named because two major parties – the National People's Congress (NPC) and the National Committee of the Chinese People's Political Consultative Conference (CPCC)) participate in the forum held in the first week of March, leaders gather to discuss the latest issues and make necessary legal amendments.
Wang Pengji, a member of the NPCC, participated in the prospects of establishing a state-run digital asset trading platform as well as launching educational projects on blockchain and cryptocurrency in China. However, the proposed system requires a certified account to allow trading.
"Through the development of relevant regulations and the cooperation of the People's Bank of China (PBoC) and the China Securities Regulatory Commission (CSRC), an orderly and efficient cryptocurrency exchange system will serve as an official way for companies to do fundraising (through ICOs) and investors to retain their digital assets and achieve increased In the Capital "excerpt from Wang Pengjie's presentation in the two sessions.
The march towards the Blockchain nation
Governments and central banks around the world are struggling to cope with the growing popularity of cryptocurrencies. But one thing is certain, all blockchain has embraced.
Despite the cryptocurrency campaign, the blockchain is gaining popularity and building on different levels. The Chinese government has supported blockchain initiatives and embraced technology. In fact, the People's Bank of China (PBoC) is working on a cryptocurrency and has conducted fake transactions with some of the country's commercial banks. It remains uncertain whether digital currency will become decentralized and offer features of cryptocurrency such as anonymity and instability. It wouldn't come as a surprise if it turns out to be just a digital Chinese yuan given that anonymity is the last thing China wants in their country. However, the digital currency was created as a close alternative to the Chinese yuan and will be subject to current monetary policies and laws.
Governor of the Bank of China, Zhou Xiaochuan. Source: CNBC
"Many cryptocurrencies have seen tremendous growth that can have a big negative impact on consumers and individual investors. We don't like cryptocurrency products that use the huge speculative opportunity that gives people the illusion of getting rich overnight," excerpts from an interview with Zhou Xiaochuan on Friday. , March 9.
On his media appearance on Friday, March 9, Bank of China Governor Zhou Xiaochuan criticized cryptocurrency projects that benefited from the crypto boom to take advantage of market speculation and fuel. He also noted that the development of cryptocurrency is technologically inevitable.
At the regional level, many Chinese cities are leading blockchain initiatives to promote growth in their region. Hangzhou, renowned as the headquarters of Alibaba, announced that Block Sixty technology is one of the city's top priorities in 2018. The Chengdu local government has also proposed building a nursery center to promote the adoption of blockchain technology in the city's financial services.
Local conglomerates such as Tencent and Alibaba have also partnered with blockchain companies or started projects on their own. Blockchain companies such as VeChain have secured multiple partnerships with Chinese companies to improve the transparency of China's supply chain.
All signs point to the fact that China is working for a blockchain state. China has always had an open mindset for emerging technologies such as mobile payment and artificial intelligence. From now on, China will no doubt be the first country to enable the key chain. Will we see the Chinese government back down and let its citizens trade again? Maybe when the market has matured and is less volatile but certainly not in 2018.