Fear Not, China Happens to be Not Banning Cryptocurrency

In 2008 after financial problems, a cardboard named “Bitcoin: A Peer-to-Peer Electronic Cash System” was published, detailing the ideas of a payment system. Bitcoin came into this world. Bitcoin received the interest of the entire world because of its usage of blockchain engineering and as a substitute to fiat currencies as well as commodities. Dubbed the next very best engineering after the online world, blockchain offered options to problems we have didn’t address, or ignored during the last several decades. I won’t delve into the technical aspect of it but here are a few video clips and articles that I recommend:

How Bitcoin Works Under the Hood

An easy introduction to blockchain technology

Ever wonder how Bitcoin (and various other cryptocurrencies) really work?

Fast forward to today, 5th February to be precise, authorities in China have just unveiled a different set of regulations to ban cryptocurrency. The Chinese federal government have accomplished so last year, most have circumvented through foreign exchanges. It has now enlisted the almighty’ Great Firewall of China’ to block access to overseas interchanges in a bid to stop its citizens from working on any cryptocurrency transactions.

To understand more about the Chinese government stance, let’s backtrack a few years back to 2013 when Bitcoin was becoming more popular among the Chinese people and rates have been soaring. Concerned with the cost volatility and speculations, the People’s Bank of China and five additional government ministries posted an official notice on December 2013 titled “Notice on Preventing Financial Risk of Bitcoin” (Link is in Mandarin). Several areas were highlighted:

1. Due to different factors like limited supply, anonymity and lack of a centralized issuer, Bitcoin isn’t a official currency although a virtual commodity which can’t be utilized within the open market.

2. all banks and Financial businesses are certainly not allowed to give Bitcoin related financial services or perhaps engage in trading activity related to Bitcoin.

3. All sites and businesses that offer Bitcoin related solutions are to register with the mandatory government ministries.

4. As a result of the anonymity and cross border features of Bitcoin, businesses providing Bitcoin-related services should carry out preventive measures along the lines of KYC to stop money laundering. Any suspicious activity which includes fraud, gambling and money laundering should being reported to the authorities.

5. Organizations providing Bitcoin-related services ought to condition the public about Bitcoin and the technology behind it and never mislead everyone with misinformation.

In layman’s term, Bitcoin is classified as a virtual commodity (e.g in-game credits,) that will be obtained or available in its original form without to be changed with fiat currency. It can’t be defined as money- one thing that can serve as a medium of exchange, a product of accounting, along with a market of value.

Despite the notice actually being dated in 2013, it’s nonetheless pertinent with respect to the Chinese government stance on Bitcoin and as mentioned, there’s no indication on the banning Bitcoin and Cryptocurrency. Rather, regulation and education about Bitcoin and Blockchain will be involved during the Chinese crypto-market.

A similar notice was released on Jan 2017, again emphasizing that Bitcoin is a virtual commodity and not a currency. In September 2017, the boom of initial coin offerings (ICOs) resulted in the publishing of a separate notice titled “Notice on Preventing Financial Risk of Issued Tokens”. Shortly after, ICOs have been banned and Chinese exchanges were investigated and sooner or later closed. (Hindsight is 20/20, they have made the correct decision to ban ICOs and also stop senseless gambling). Another blow was dealt to China’s cryptocurrency community in January 2018 when mining operations faced considerable crackdowns, citing excessive electricity consumption.

While there is no official explanation on the crackdown of cryptocurrencies, capital controls, against the law activities and protection of its residents from financial risk are some of the main reasons cited by professionals. In fact, Chinese regulators have implemented stricter controls for example overseas withdrawal cap and regulating foreign direct investment to minimize capital outflow and also ensure domestic investments. The easiness and anonymity of cross border transactions have likewise created cryptocurrency a favorite methods for money laundering and fraudulent activities.

Since 2011, China has had a crucial part in the meteoric rise and fall of Bitcoin. At the peak of its, China accounted for more than 95 % of the global Bitcoin trading volume and three quarters of the mining operations. With regulators stepping in to control trading and mining operations, China’s dominance has shrunk substantially in exchange for stability.

With countries as Korea and India following suit in the crackdown, a shadow is today casted over the potential future of cryptocurrency. (I shall reiterate the point of mine here: countries are regulating cryptocurrency, not banning it). Without having a doubt, we will see a lot more nations join in in the coming months to rein in the tumultuous crypto-market. Indeed, some order type was long overdue. Over the past 12 months, cryptocurrencies are encountering price volatility unheard of and ICOs are going on literally every other day. In 2017, the total market capitalization rose from eighteen billion USD in January to an all time high of 828 billion USD.

Nevertheless, the Chinese community are in amazingly very good spirits despite crackdowns. Online and offline communities are flourishing (I actually have attended quite a few events and visited some of the firms) & blockchain startups are sprouting all over China.

Major blockchain companies including NEO, QTUM and VeChain will get huge awareness within the land. Startups as Nebulas, High Performance Blockchain (Bibox and hpb) are likewise getting a major degree of traction. Even giants such as Tencent and Alibaba are also exploring the capabilities of blockchain to enhance the platform of theirs. The list goes on as well as on however, you get me; it is likely to be HUGGEE!

The Chinese authorities have also been embracing blockchain technology and also have stepped up work in the past few years to help support the generation of a blockchain ecosystem.

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In China’s 13th Five-Year Plan (2016 2020), it called for the development of promising technologies like artificial intelligence and blockchain. In addition, it plans to fortify researching on the use of fintech in regulation, big data and cloud computing. Sometimes the People’s Bank of China is in addition testing a prototype blockchain-based digital currency; however, with it more likely a centralized digital currency slapped with some encryption technology, its adoption by the Chinese citizens remains for being found.

The launch of the Trusted Blockchain Open Lab also the China Blockchain Technology and Industry Development Forum by the Ministry of Industry and Information Technology are some of another initiatives from the Chinese government to help support the advancement of blockchain in China.

A recently available report titled ” China Blockchain Development Report 2018″ (English variation in the link) by China Blockchain Research Center detailed the improvement of the blockchain sector in China in 2017 including the various actions taken to regulate cryptocurrency inside the mainland. In a separate section, the article highlighted the optimistic view of the blockchain sector along with the significant attention it has accumulated from VCs and also the Chinese government in 2017.

To sum up, the Chinese authorities show a positive attitude towards blockchain technology despite its enforcement on cryptocurrency and mining activities. China really wants to control cryptocurrency, and China is certain to get control. The repeated enforcements by the regulators were meant to secure its people with the monetary risk of cryptocurrencies and also control capital outflow. As of today, it is authorized for Chinese citizens to hold cryptocurrencies though they’re not permitted to handle any form of transaction; hence the ban of exchanges. As the market place stabilizes in the coming several weeks (or years), we will see undoubtedly see a revival of the Chinese crypto-market. Blockchain and cryptocurrency come hand-in-hand (with the exception of individual chain when a token is unnecessary). Countries thus can’t ban cryptocurrency without banning blockchain the amazing technology!

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