Over the past year, the cryptocurrency market has taken a series of heavy blows from the Chinese government. The market took a beating like a warrior, but the combinations affected many cryptocurrency investors. The lackluster market performance in 2018 pales in comparison to its stellar 1,000 percent gains in 2017.
Since 2013, the Chinese government has taken measures to regulate the cryptocurrency, but nothing compared to what was imposed in 2017. (See this article for a detailed analysis of the official notice issued by the Chinese government)
2017 was a remarkable year for the cryptocurrency market with all the interest and growth it has achieved. Extreme price volatility has forced the central bank to take more extreme measures, including a ban on Initial Currency Offerings (ICOs) and a crackdown on local cryptocurrency exchanges. Soon after, mining factories in China were forced to shut down, citing excessive electricity consumption. Many exchanges and factories moved abroad to avoid the regulations, but they remained within the reach of Chinese investors. However, they still failed to escape from the Chinese dragon’s claws.
In the latest in a series of government-led efforts to monitor and ban the circulation of cryptocurrencies among Chinese investors, China has expanded “Eagle Eye” to monitor foreign exchange operations. Companies and bank accounts suspected of transacting with foreign exchange exchanges and related activities are subject to measures from restricting withdrawal limits to account freezing. There have even been persistent rumors among the Chinese community of more extreme measures being imposed on foreign platforms that allow trading among Chinese investors.
As for whether there will be more regulatory measures, we will have to wait for orders from higher authorities. Excerpts from an interview with a team leader of the Chinese Public Information Network Security Monitoring Agency of the Ministry of Public Security, February 28
Why why why?
Imagine that your child is investing his or her savings investing in a digital product (in this case, the cryptocurrency) that he has no means of verifying its authenticity and value. He could get lucky and get rich, or lose it all when the crypto bubble bursts. Now expand that to millions of Chinese citizens and we are talking about billions of Chinese yuan.
The market is full of scams and pointless ICOs. (I’m sure you’ve heard news of people sending coins to random addresses with a promise to double their investments and simply meaningless ICOs.) Many investors unfamiliar with it for the money and will not care much about the technology and innovation behind it. The value of many cryptocurrencies is derived from speculation in the market. During the cryptocurrency boom in 2017, participate in any ICO with a popular onboard advisor, promising team or decent hype and it will guarantee you at least 3 times your investment.
A lack of understanding of the company and the technology behind it, along with the proliferation of ICOs, is a recipe for disaster. Central bank members report that nearly 90% of ICOs are fraudulent or involve illegal fundraising. In my opinion, the Chinese government wants to ensure that the cryptocurrency remains “controllable” and not too large to fail within Chinese society. China is taking the right steps towards a safer, more regulated, albeit offensive and controversial world of cryptocurrencies. In fact, it may be the best move the country has taken in decades.
Will China issue an alert and make the cryptocurrency illegal? I seriously doubt it because it is pointless to do so. Currently, financial institutions are prohibited from holding any crypto assets while individuals are permitted to undertake any form of trading, but they are prohibited from doing so.
State-run cryptocurrency exchange?
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) both participate in the forum held in the first week of March, they come together to discuss the latest issues and make legal amendments. Necessary.
Wang Pingjie, a member of NPCC, has immersed himself in the prospects of a state-run digital asset trading platform as well as initiating educational projects on blockchain and cryptocurrency in China. However, the proposed platform requires a verified account to allow trading.
“ By establishing relevant regulations and cooperation between the People’s Bank of China (PBoC) and the China Securities Regulatory Commission (CSRC), a regulated and efficient cryptocurrency exchange platform will act as an official way for companies to raise funds (through ICOs) and investors to hold their digital assets and achieve an increase in Capital ‘is an excerpt from Wang Pengjie’s two-session presentation.
The march towards the Blockchain Nation
Governments and central banks around the world have struggled to cope with the growing popularity of cryptocurrencies; But one thing is for sure, they have all embraced blockchain.
Despite the crackdown on cryptocurrencies, blockchain is gaining popularity and reliance on various levels. The Chinese government supports blockchain initiatives and technology adoption. In fact, the People’s Bank of China (PBoC) was working on a digital currency and had fictitious transactions with some of the country’s commercial banks. It remains uncertain whether the digital currency will decentralize and offer cryptocurrency features such as anonymity and stability. It wouldn’t be surprising if it turned out to be just a digital RMB given that anonymity is the last thing China wants in their country. However, it has been created as a close alternative to the Chinese yuan, and the digital currency will be subject to current monetary policies and laws.
Governor of the People’s Bank of China, Zhou Xiaochuan. Source: CNBC
“Lots of cryptocurrencies have experienced explosive growth that can have a huge negative impact on consumers and retail investors. We don’t like (cryptocurrency) products that take advantage of the tremendous opportunity for speculation that gives people the illusion of getting rich overnight” excerpts from Zhou Xiaochuan’s interview Friday March.
In a media appearance on Friday, March 9, Governor of the People’s Bank of China, Zhou Xiaochuan, criticized cryptocurrency projects that took advantage of the cryptocurrency boom to capitalize on and fuel speculation in the market. He also noted that the development of digital currency is “technologically inevitable.”
Regionally, several Chinese cities are leading blockchain initiatives to boost growth in their region. Hangzhou, famous for being the headquarters of Alibaba, declared blockchain technology one of the city’s top priorities in 2018. The local government in Chengdu has also proposed to build a nursery center to boost the adoption of blockchain technology in the city’s financial services.
Local conglomerates like Tencent and Alibaba have also partnered with blockchain companies or started ventures on their own. Blockchain companies like VeChain have also secured multiple partnerships with Chinese companies to improve supply chain transparency in China.
All clues point to the fact that China is working for a blockchain nation. China has always had an open mindset on emerging technologies such as mobile payment and artificial intelligence. Going forward, China will undoubtedly be the first country to support blockchain technology. Will we see the Chinese government hold back and let its citizens trade again? Most likely, when the market matures and is less volatile but definitely not in 2018.