Over the past year, the cryptocurrency market took a series of heavy punches from the Chinese government. The market took the hits like a knight, but the mixtures have taken its toll in many cryptocurrency investors. The market poor performance in 2018 pales in comparison to its stellar thousand-percent gains in 2017.
What has happened?
Since 2013, the Chinese government have taken measures to manage cryptocurrency, but nothing compared to what was forced in 2017. (Check out this article for a detailed 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 take more extreme measures, including how to earn bitcoins on android the ban of initial coin offerings (ICOs) and clampdowns on domestic cryptocurrency transactions. Right after, mining industrial facilities in China were forced to close down, citing excessive electricity consumption. Many transactions and industrial facilities have relocated overseas to avoid regulations but always been accessible to Chinese investors. Nonetheless, 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 extended its “Eagle Eye” to monitor foreign cryptocurrency transactions. Companies and bank accounts alleged of carrying out transactions with foreign crypto-exchanges and related activities are subjected to measures from constraining revulsion limits to freezing of accounts. There have even been ongoing rumours among the Chinese community of more extreme measures to be forced on foreign platforms that allow trading among Chinese investors.
“As for whether there will be further regulatory measures, we will have to wait for orders from the higher authorities. inch Excerpts from an interview with team leader of the China’s Public Information Network Security Direction agency under the Ministry of Public Security, 28th February
WHY WHY WHY!?
Imagine your child investing his or her savings to buy be sure you product (in this case, cryptocurrency) that he or she has no way of making sure its authenticity and value. He or she can get lucky and strike it rich, or lose it all when the crypto-bubble burst. Now scale that to millions of Chinese citizens and we are talking about billions of Chinese Yuan.
The market is full of scams and unnecessary ICOs. (I’m sure you have heard news of men and women sending coins to random addresses with the promise of doubling their investments and ICOs that simply 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 hails from market questions. During the crypto-boom in 2017, participate in any ICO with the famous expert onboard, a promising team or a decent hype and you are guaranteed at least 3X your investments.
A lack of understanding of the firm and the technology behind it, with the growth of ICOs, is a recipke for disaster. Members of the Central bank reports that almost 90% of the ICOs are deceptive or involves illegal fundraising. In my opinion, the Chinese government wants to ensure that cryptocurrency remains ‘controllable’ and not too big to fail within the Chinese community. China is taking the right steps towards a safer, more regulated cryptocurrency world, albeit aggressive and suspect. In fact, it might be the best move the country has had in decades.
Will China issue an ultimatum and make cryptocurrency illegal? I highly doubt so since it is pretty unnecessary to do so. Currently, financial institutions are banned from holding any crypto assets while individuals are allowed to but are prohibited 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 first week of 03, leaders congregate to discuss about the latest issues and make necessary law changes.
Wang Pengjie, a member of the NPCC dabbled into the prospects of a state-run digital asset trading platform as well as start educational projects on blockchain and cryptocurrency in China. However, the planned platform would require a authenticated account to allow trading.
“With the establishment of related regulations and the co-operation of the People’s Bank of China (PBoC) and China Sec Regulatory Commission(CSRC), a regulated and efficient cryptocurrency exchange platform would serve as a formal path for companies to increase funds (through ICOs) and investors to hold their digital assets and achieve capital appreciation” Excerpts of Wang Pengjie presentation at the Two Sessions.
The 03 towards a Blockchain Nation
Governments and central banks worldwide have struggled to grapple with the increasing popularity of cryptocurrencies; but one thing is sure, all have appreciated blockchain.
Despite the cryptocurrency crackdown, blockchain has been gathering popularity and adopting in several levels. The Chinese government have been supporting blockchain initiatives and taking on the technology. In fact, the People’s Bank of China (PBoC) have been working on be sure you currency and have conducted model transactions with some of the place’s commercial banks. It is still unconfirmed if the digital currency will be decentralized and offer features of cryptocurrency like anonymity and immutability. It wouldn’t come as a surprise if it happens to be just a digital Chinese Yuan given that anonymity is the final thing that China wants in their country. However, created as a close substitute of the Chinese Yuan, the digital currency will go through existing monetary policies and laws.
People’s Bank of China Governor, Zhou Xiaochuan. Source: CNBC
“Lots of cryptocurrencies have witnessed forceful growth which can bring significant negative affect consumers and retail investors. We don’t like (cryptocurrency) products that makes use of the huge chance of questions giving people the illusion of getting rich overnight” Excerpts from Zhou Xiaochuan interview on Friday, 9th 03.
On a media appearance on Friday, 9th 03, Governor of People’s Bank of China, Zhou Xiaochuan criticized cryptocurrency projects that leveraged on the crypto-boom to take advantage and fuel market questions. 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 promote growth in their region. Hangzhou, well known for being the headquarters of Alibaba, have stated blockchain technology to be one of the city’s top priorities in 2018. The local government in Chengdu city have also been planned the building of an incubation center to foster the adopting of blockchain technology in the city’s financial services.