Over the past year, the cryptocurrency market has taken a series of heavy blows from the Chinese government. The market took hits as a warrior, but the combinations have taken its toll on many cryptocurrency investors. The market's smooth performance in 2018 bleached in comparison to its outstanding thousand-percent gains in 2017.
What has happened?
Since 2013, the Chinese government has taken measures to regulate cryptocurrency, but nothing compared to what was enforced in 2017. (Check out this article for a detailed analysis of the official announcement by the Chinese government)
2017 was a banner year for the cryptocurrency market with all the attention and growth it has gained. The extreme price volatility forced the central bank to adopt more extreme measures, including the ban on initial coin offerings (ICOs) and shutdowns on domestic cryptocurrency exchanges. Shortly after, mining factories in China were forced to close, citing excessive electricity consumption. Many exchanges and factories have moved overseas to avoid regulations, but remained accessible to Chinese investors. Nevertheless, they still fail to escape the claws of the Chinese dragon.
In the latest series of government-led efforts to monitor and prohibit cryptocurrency trading among Chinese investors, China expanded its "Eagle Eye" to oversee foreign cryptocurrency exchanges. Companies and bank accounts suspected of having made transactions with foreign crypto exchanges and related activities are subject to measures from limiting withdrawal limits to freezing accounts. There have even been ongoing rumors among Chinese society about more extreme measures to be enforced on foreign platforms that allow trade between Chinese investors.
"As for whether there will be additional regulatory measures, we will have to wait for orders from the higher authorities." Excerpt from an interview with the team leader of China's Public Information Network Security Supervisory Agency under the Ministry of Public Security, February 28
WHY WHY WHY !?
Imagine your child investing his or her savings to invest in a digital product (in this case, cryptocurrency) that he or she has no way to verify its authenticity and value. He or she could be lucky and hit it rich or lose it all when cryptobubble burst. Now scale it 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 news of people sending coins to random addresses with the promise of doubling their investments and ICOs that simply don't make sense). Many unconscious investors are in it for the money and will be less interested in the technology and innovation behind it. The value of many cryptocurrencies is derived from market speculation. During the 2017 crypto boom, join any ICO with either a famous on-board advisor, a promising team, or a decent hype, and you are guaranteed at least 3X your investments.
Lack of understanding of the company and the technology behind it, combined 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 & # 39; controllable & # 39; and not too big to fail in Chinese society. China is taking the right steps towards a safer, more regulated cryptocurrency world, albeit aggressive and controversial. In fact, it is perhaps the best move the country has taken in decades.
Will China issue an ultimatum and make cryptocurrency illegal? I highly doubt it, as it is pretty pointless to do so. Currently, it is forbidden for financial institutions to hold crypto assets while individuals are allowed, but it is barred from conducting any kind of trading.
A state-run Cryptocurrency Exchange?
At 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 attend the forumï¼ ‰ held the first week By March, leaders will gather to discuss the latest issues and make the necessary law changes.
Wang Pengjie, a member of the NPCC, disappeared with the prospect of a state-controlled digital asset trading platform as well as launching blockchain and cryptocurrency education projects in China. However, the proposed platform requires an approved account to allow trading.
"With the creation of related rules and the cooperation between the People's Bank of China (PBoC) and the China Securities Regulatory Commission (CSRC), a regulated and effective cryptocurrency exchange platform would serve as a formal way for businesses to raise money (through ICOs and investors to keep their digital assets and capital appreciation ”Excerpt from the presentation by Wang Pengjie at the two sessions.
Marching against a Blockchain Nation
Governments and central banks all over the world have struggled to fight the rising popularity of cryptocurrencies; But one thing is certain, everyone has embraced the blockchain.
Despite the crash of cryptocurrency, blockchain has gained popularity and adoption at various levels. The Chinese government has supported blockchain initiatives and embraced the technology. In fact, People's Bank of China (PBoC) has been working on a digital currency and has conducted spot transactions with some of the country's commercial banks. It is still not confirmed whether the digital currency will be decentralized and offer features of cryptocurrency such as anonymity and immutability. It wouldn't come as a surprise if it turns out to be a digital Chinese yuan, since anonymity is the last thing China wants in their country. Created as a close substitute for the Chinese Yuan, however, the digital currency will be subject to existing monetary policies and laws.
People's Bank of China Governor Zhou Xiaochuan. Source: CNBC
"Lots of cryptocurrencies have seen explosive growth that can have a significant negative impact on consumers and retail investors. We don't like (cryptocurrency) products that use the huge opportunity for speculation that gives people the illusion of getting rich overnight" Excerpt from Zhou Xiaochuan interview on Friday, March 9.
In a media release on Friday, March 9, Governor of People's Bank of China Zhou Xiaochuan criticized cryptocurrency projects that leveraged the crypto boom for cash and fuel market speculation. He also noted that digital currency development is & # 39; technologically unavoidable & # 39;
At the regional level, many Chinese cities are running blockchain initiatives to promote growth in their region. Hangzhou, known to be the headquarters of Alibaba, has declared blockchain technology to be one of the city's top priorities in 2018. The local government in Chengdu city has also been proposed to build an incubation center to promote blockchain adoption technology in the city's financial services.
Local conglomerates such as Tencent and Alibaba have also formed partnerships with blockchain companies or launched projects on their own. Blockchain companies like VeChain have also secured several partnerships with Chinese companies to improve supply chain transparency in China.
All clues point to the fact that China is working towards a blockchain nation. China has always had an open mentality for new technologies such as mobile payment and artificial intelligence. Going forward, it is without a doubt that China will be the first blockchain-enabled country. Do we want to see the Chinese government back up and allow its citizens to act again? Probably when the market has matured and is less volatile, but certainly not in 2018.