Over the past year, the cryptocurrency market has taken a number of heavy hits from the Chinese government. The market has taken hits as a warrior, but combos have taken their toll on many cryptocurrency investors. The market's market performance in 2018 is down from its stellar thousand percent profit in 2017.
Since 2013, the Chinese government has taken steps to regulate cryptocurrency, but nothing compared to the one applied in 2017 (See this article for a detailed analysis of the official announcement 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 has forced the Central Bank to take more extreme measures, including the ban on initial coin offering (ICO) and the restriction on domestic cryptocurrency exchanges. Shortly thereafter, China's mining factories were forced to close, citing excessive electricity consumption. Many exchanges and factories have moved abroad to evade regulation, but remain accessible to Chinese investors. Nevertheless, they still fail to escape the Chinese dragon's nails.
In the latest series of government-led efforts to monitor and ban cryptocurrency trading among Chinese investors, China expanded Eagle Eye to monitor foreign cryptocurrency exchanges. Businesses and bank accounts suspected of conducting transactions in foreign cryptocurrencies and related activities have been subject to measures ranging from limiting withdrawal limits to freezing accounts. There are even rumors in the Chinese community about imposing more extreme measures 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." Excerpts from an interview with the head of the Chinese Public Information Security Oversight Agency team at 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 of verifying its authenticity and value. He or she could be lucky and hit it rich, or lose it all when the cryptocurrency cracks. We are now scaling this to millions of Chinese citizens and 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 arbitrary addresses with the promise of double their investment and ICOs that just don't make sense). Many unscrupulous investors are in it for the money and would be less interested in the technology and innovation behind it. The value of many cryptocurrencies is derived from market speculation. During the 2017 cryptocurrency, participate in any ICO with a renowned on-board advisor, a promising team or a decent overkill, and will guarantee you at least 3X your investment.
The lack of understanding of the company and the technology behind it, coupled with the proliferation of ICOs, is a recipe for disasters. 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 cryptocurrency remains "controllable" and not too big to fail in the Chinese community. China is taking the right steps towards a safer, more regulated world of cryptocurrencies, albeit aggressive and controversial. In fact, this may be the best move in the country in decades.
Will China issue an ultimatum and make cryptocurrency illegal? I highly doubt it, because it's pretty pointless to do it. At the moment, financial institutions are prohibited from holding crypto assets while individuals are allowed, but they are not allowed to engage in any form of trading.
State Cryptocurrency Exchange?
In the annual "Two Sessions" (Named for the fact that two major parties – the National People's Congress (NPC) and the National Committee of the Chinese People's Political Consultative Conference (CPCC)) participate in the ï forum held in the first week of March, gather to discuss the latest issues and make necessary changes to the law.
Wang Pengjie, a NPCC member, tackled the prospects for a state-owned digital asset trading platform, and initiated blockchain and cryptocurrency education projects in China. However, the proposed platform will require a verified account to allow trading.
"With the establishment of appropriate regulations and the cooperation of the People's 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 ICO) and investors to hold their digital assets and achieve capital appreciation "Excerpts from Van Pengy's presentation at both sessions.
March to the Blockchain Nation
Governments and central banks around the world have struggled to combat the increasing popularity of cryptocurrencies; but one thing is for sure, everyone has a blockchain.
Despite the crisis, blockchain is gaining popularity and acceptance at various levels. The Chinese government supports blockchain initiatives and uses technology. In fact, the People's Bank of China (PBoC) is working on digital currency and mocking some of the country's commercial banks. It has not yet been confirmed whether the digital currency will be decentralized and will offer cryptocurrency features such as anonymity and immutability. It would be no surprise if it turned out to be just a digital Chinese yuan, given that anonymity is the last thing China wants in its country. However, set up as a close substitute for the Chinese yuan, the digital currency will be subject to existing monetary policies and laws.
People's Bank of China Governor Zhou Xiaochuan. Source: CNBC
"Many cryptocurrencies have seen explosive growth, which can have a significant negative impact on consumers and retail investors. We do not like (cryptocurrency) products that use the huge opportunity for speculation that give people the illusion of getting rich overnight. ”Excerpts from Zhou Xiaochuan Interview on Friday, March 9th.
During a media statement on Friday, March 9, the People's Bank of China Governor Zhou Xiaochuan criticized cryptocurrency projects that take advantage of the crypto boom to gain speculation in the market and fuels. He also noted that the development of the digital currency is "technologically inevitable"
At the regional level, many Chinese cities are leading blockchain initiatives to promote growth in their region. Hangzhou, known for being Alibaba's headquarters, said blockchain technology is one of the city's top priorities in 2018. The local government in Chengdu has also proposed the establishment of an incubation center to promote blockchain technology in financial services of the city.
Local conglomerates such as Tencent and Alibaba also partner with blockchain companies or start projects on their own. Blockchain companies such as VeChain have also secured numerous partnerships with Chinese companies to improve the transparency of the supply chain in China.
All clues point to the fact that China is working for a blockchain nation. China has always had an open mindset about emerging technologies such as mobile payment and artificial intelligence. From now on, China will no doubt be the first blockchain-enabled country. Will we see the Chinese government back down and allow its citizens to trade again? Probably when the market is mature and less volatile, but definitely not in 2018.