In 2008 following the financial issues, a newspaper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” was published, detailing the basics of a payment system. Bitcoin came into this world. Bitcoin gained the attention of the entire world for its use of blockchain technology and as a substitute to fiat currencies and commodities. Dubbed the next very best technologies after the word wide web, blockchain offered options to issues we’ve failed to address, or even ignored during the last several decades. I won’t delve into the technical component of it but the following are a few movies and articles that I recommend:
How Bitcoin Works Under the Hood
An easy introduction to blockchain technology
Ever wonder how Bitcoin (and some other cryptocurrencies) basically work?
Fast forward to today, 5th February to be actual, authorities in China have just unveiled an interesting set of regulations to ban cryptocurrency. The Chinese federal government have already done so last season, most have circumvented through international exchanges. It’s nowadays enlisted the almighty’ Great Firewall of China’ to block access to overseas exchanges in a bid to counteract its citizens from carrying out any cryptocurrency transactions.
To understand much more about the Chinese government stance, let’s backtrack a couple years back to 2013 when Bitcoin was becoming more popular among the Chinese people and rates happened to be soaring. Concerned with the cost volatility and speculations, the People’s Bank of China and five alternative 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, lack and anonymity of a centralized issuer, Bitcoin is not a recognized currency however, a virtual commodity that cannot be applied inside the open market.
2. all banks and Financial businesses usually are not allowed to provide Bitcoin related financial services as well as engage in trading activity related to Bitcoin.
3. All organizations and sites that offer Bitcoin related services are to register with the mandatory government ministries.
4. Due to the anonymity and cross border features of Bitcoin, organizations providing Bitcoin-related services ought to employ preventive measures such as KYC to stop money laundering. Any suspicious activity including fraud, gambling and money laundering must to be reported to the authorities.
5. Organizations providing Bitcoin-related services should educate the public about Bitcoin as well as the technology behind it and not mislead the public with misinformation.
In layman’s term, Bitcoin is classified as a virtual commodity (e.g in-game credits,) which will be bought or available in its original form and not to be changed with fiat currency. It can’t be described as money- one thing that functions as a platform of exchange, a unit of accounting, in addition to a store of value.
Despite the notice actually being dated in 2013, it is still pertinent with respect to the Chinese government stance on Bitcoin and as mentioned, there is no indication belonging to the banning Cryptocurrency and Bitcoin. Rather, regulation and education about Blockchain and Bitcoin will play a role within the Chinese crypto-market.
A similar notice was given on Jan 2017, again emphasizing that Bitcoin is a virtual commodity instead of a currency. In September 2017, the boom of first coin offerings (ICOs) led to the posting of its own notice titled “Notice on Preventing Financial Risk of Issued Tokens”. Soon after, ICOs were banned and Chinese exchanges happened to be investigated and eventually closed. (Hindsight is 20/20, they’ve made the correct decision to ban ICOs and stop senseless gambling). Another blow was dealt to China’s cryptocurrency community in January 2018 when mining operations faced severe crackdowns, citing excessive energy consumption.
While there is no official explanation on the crackdown of cryptocurrencies, capital controls, against the law activities and protection of its people from financial risk are several of the principal causes cited by experts. Certainly, Chinese regulators have implemented stricter controls such as for example overseas withdrawal cap and regulating foreign direct investment to minimize capital outflow and guarantee domestic investments. The ease and anonymity of cross-border transactions have also created cryptocurrency a favorite methods for fraudulent activities and money laundering.
Since 2011, China has had a crucial role in the meteoric rise & fall of Bitcoin. At the peak of its, China accounted for over ninety five % of the global Bitcoin trading volume and 3 quarters of the mining business. With regulators stepping in to control trading and mining operations, China’s dominance has shrunk significantly in exchange for stability.
With countries as India and Korea following suit in the crackdown, a shadow is now casted over the future of cryptocurrency. (I shall reiterate the point of mine here: countries are regulating cryptocurrency, not banning it). Without a doubt, we will see far more nations join in in the coming months to rein in the tumultuous crypto market. Certainly, some sort of order was long overdue. Over the past 12 months, cryptocurrencies are encountering price volatility unheard of and also ICOs are going on practically every other day. In 2017, the total market capitalization rose from 18 billion USD in January to an all-time high of 828 billion USD.
But, the Chinese community are in amazingly excellent spirits despite crackdowns. Online and not online communities are thriving (I actually have attended a number of events and also visited some of the firms) and blockchain startups are sprouting all over China.
Major blockchain firms for example NEO, VeChain and QTUM will get substantial interest in the country. Startups like Nebulas, High Performance Blockchain (hpb) and Bibox are likewise receiving a fair level of traction. Even giants such as Alibaba and Tencent will also be exploring the effectiveness of blockchain to enhance the platform of theirs. tornado cash goes on as well as on though you get me; it is going to be HUGGEE!
The Chinese authorities have also been embracing blockchain technology and in addition have stepped up efforts in the past few years to support the development of a blockchain ecosystem.
In China’s 13th Five Year Plan (2016-2020), it called for the enhancement of promising technologies including blockchain and artificial intelligence. In addition, it plans to fortify research on the application of fintech in regulation, big data and cloud computing. Actually the People’s Bank of China is also test a prototype blockchain based digital currency; however, with it more likely a centralized digital currency slapped with several encryption technology, its adoption by the Chinese people remains for being noticed.
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 the other initiatives from the Chinese government to support the development of blockchain in China.
A recently available report titled ” China Blockchain Development Report 2018″ (English option in the link) by China Blockchain Research Center detailed the improvement of the blockchain market in China in 2017 such as numerous actions taken to regulate cryptocurrency inside the mainland. In its own section, the article highlighted the optimistic view of the blockchain industry as well as the massive attention it’s received from VCs and also the Chinese government in 2017.
In summary, the Chinese government show a confident attitude towards blockchain technology despite the enforcement of its on cryptocurrency & mining operations. China really wants to control cryptocurrency, along with China will get control. The repeated enforcements by the regulators were meant to protect its people from the monetary risk of cryptocurrencies and limit capital outflow. As of today, it is legitimate for Chinese people to keep cryptocurrencies however, they’re not authorized to handle any type of transaction; thus the ban of exchanges. As the market place stabilizes in the coming several weeks (or perhaps years), we will see undoubtedly see a revival of the Chinese crypto-market. Blockchain and also cryptocurrency come hand-in-hand (with the exception of private chain when a token is unnecessary). Countries thus can’t ban cryptocurrency without banning blockchain the awesome technology!