Over the past year, the cryptocurrency market has taken a series of heavy blows from the Chinese government. The market has taken hits like warriors, but combos have taken a toll on many cryptocurrency investors. Poor performance in the market in 2018 is fading from its stellar thousands of percentage points in 2017.
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That what happened?
The Chinese government has taken steps to regulate cryptocurrency since 2013, but nothing compared to what was imposed in 2017 (See this article for a detailed analysis of the official announcement published by the Chinese government)
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2017 was the wrong year for the cryptocurrency market with all the attention and growth it has achieved. Extreme price volatility has forced the Central Bank to take more extreme measures, including a ban on initial coin offer (ICO) and curb domestic cryptocurrency exchanges.
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Shortly after, mining factories in China were forced to close, citing excessive electricity consumption. Many stock exchanges and factories have moved abroad to evade regulations, but others are available to Chinese investors. Yet they still fail to escape the clutches of the Chinese Dragon.
In a recent series of government efforts to monitor and ban cryptocurrency trading among Chinese investors, China expanded its Eagle Eye to track foreign cryptocurrency exchanges.
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Businesses and bank accounts suspected of conducting transactions with foreign crypto exchanges and related activities are subject to measures ranging from limit withdrawal to account freezing. There are even rumors in the Chinese community about more extreme measures that will be implemented on foreign platforms that allow trading among Chinese investors.
“As for further regulatory measures, we will have to wait for orders from higher authorities.” Excerpted from an interview with the head of a team by the Chinese Public Information Security Control Agency at the Ministry of Public Security, February 28
WHY WHY !?
Imagine your child investing his or her savings to invest in a digital product (in this case cryptocurrency) for which there is no way to verify its authenticity and value. He could get lucky and hit it rich, or lose it all when the crypto-bubble bursts. Now this is increasing to millions of Chinese citizens and we are talking about billions of Chinese Yuan.
The market is full of scams and meaningless ICOs. (I’m sure you’ve heard the news about people sending coins to random addresses with the promise of double their investments and ICOs that just don’t make sense). Many unscrupulous investors are investing in this money because of this, and they would care less about the technology and innovation behind it. The value of many cryptocurrencies stems from market speculation. During the 2017 crypto boom, participate in any ICO with either a knowledgeable on-board advisor, a prospective team or a decent hyphen and you are guaranteed at least 3X your investment.
Misunderstanding the company and the technology behind it, combined with the spread of ICOs, is a recipe for disasters. Central Bank members report that almost 90% of ICOs are fraudulent or involve illegal fundraising.
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In my view, the Chinese government wants to ensure that cryptocurrency remains “under control” and not too large to be corrupted in the Chinese community. China is taking the right steps towards a more secure, regulated cryptocurrency world, albeit aggressive and controversial. In fact, it could be this country’s best move in decades.
Will China issue an ultimatum and make cryptocurrency illegal? I highly doubt it, since it’s pretty pointless to do that. Currently, financial institutions are prohibited from holding any crypto assets, and individuals are allowed, but they are prohibited from engaging in any form of trading.
State Cryptocurrency Exchange?
At the annual “Two Sessions” (named because the two main parties – the National People’s Congress (NPC)) and the National Committee of the Chinese People’s Political Consultative Conference (CPCC) participate in a forum se held the first week of March. to meet to discuss the latest issues and make necessary changes to the law.
Wang Pengjie, a NPCC member, addressed the prospect of a state-owned digital asset trading platform as well as launched educational projects on blockchain and cryptocurrency in China. However, the proposed platform requires an authentic account to enable trading.
“With the establishment of related regulations and the collaboration of the National Bank of China (PBoC) and the Chinese Securities Regulatory Commission (CSRC), a regulated and effective cryptocurrency exchange platform would serve as a formal way of raising funds (through ICOs) and investors owning their digital assets and exercise capital appreciation “Clips of Wang Pengjie’s presentation at Two Sessions.
March to the Blockchain Nation
Governments and central banks around the world have struggled to tackle the growing popularity of cryptocurrencies; but one thing is for sure, everyone has accepted the blockchain.
Despite the cryptocurrency crisis, blockchain has been gaining in popularity and adoption at various levels. The Chinese government supports blockchain initiatives and embraces technology. In fact, the National Bank of China (PBoC) has been working on digital currency and performing ridiculous transactions with some of the country’s commercial banks. It has not yet been confirmed whether digital currency will be decentralized and will offer cryptocurrency features like anonymity and immutability. It would not be a surprise if it turns out that it is only digital Chinese Yuan given that anonymity is the last thing China wants in its country. However, created as a close replacement for Chinese Yuan, the digital currency will be subject to existing monetary policies and laws.
National Bank of China Governor, Zhou Xiaochuan. Source: CNBC
“A lot of cryptocurrency has experienced explosive growth that can have a significant negative impact on consumers and small investors. We don’t like (cryptocurrency) products that use a huge opportunity for speculation that give people the illusion of overnight enrichment,” Excerpts from Zhou Xiaochuan Interview on Friday. March 9th.
In a media appearance on Friday, March 9, National Bank of China Governor Zhou Xiaochuan criticized cryptocurrency projects that have influenced the crypto boom to monetize and speculate on the fuel market. He also noted that the development of digital currency is “technologically inevitable”
At the regional level, many Chinese cities are launching blockchain initiatives to promote growth in their region. Hangzhou, known for being the headquarters of Alibaba, said blockchain technology is one of the city’s top priorities in 2018. The local government in Chengdu has also been suggested to build an incubation center to encourage the adoption of blockchain technology in the city’s financial services.
Local conglomerates like Tencent and Alibaba have either partnered with blockchain firms or launched projects themselves. Blockchain firms such as VeChain have also secured multiple partnerships with Chinese firms to improve supply chain transparency in China.
All clues point to the fact that China is working towards a nation of blockchain. China has always had an open attitude towards new technologies such as mobile payment and artificial intelligence. From now on, it is undoubted that China will be the first country to allow blockchain. Will we see the Chinese government give up and let our citizens trade again? Probably, when the market is more mature and less volatile, but it’s definitely not in 2018.