Preparing for the world of cryptocurrency: an edition for China

In the last year, the cryptocurrency market has suffered a series of severe blows from the Chinese government. The market took the hit like a warrior, but the combinations affected many cryptocurrency investors. Poor market performance in 2018 pales in comparison to its stellar thousand-percent profits in 2017.

What happened?

Since 2013, the Chinese government has taken steps to regulate the cryptocurrency, but nothing compared to what was imposed in 2017 (See this article for a detailed analysis of the official notice issued by the Chinese government)

2017 was a significant year for the cryptocurrency market with all the attention and growth it achieved. Extreme price volatility has forced the Central Bank to take more extreme measures, including a ban on initial coin offering (ICO) and restrictions on domestic cryptocurrency exchanges. Shortly afterwards, mines in China were forced to close, citing excessive electricity consumption. Many stock exchanges and factories moved abroad to evade regulation, but remained accessible to Chinese investors. However, they still have not managed to escape the claws of the Chinese dragon.

In a recent series of government-led efforts to monitor and ban cryptocurrency trading among Chinese investors, China has expanded its Eagle Eye to monitor foreign cryptocurrency exchanges. Companies and bank accounts suspected of carrying out transactions with foreign cryptocurrencies and related activities are subject to measures ranging from limits on withdrawal limits to freezing accounts. There are even constant rumors among the Chinese community about more extreme measures that need to be imposed on foreign platforms that allow trade between Chinese investors.

“As for whether there will be further regulatory measures, we will have to wait for orders from the higher authorities. Excerpts from an interview with the team leader of the Chinese Public Information Network Security Oversight Agency at the Ministry of Public Security, February 28

WHY WHY WHY !?

Imagine that your child is investing their savings to invest in a digital product (in this case a cryptocurrency) that has no way to verify its authenticity and value. He or she may get lucky and get rich or lose everything when the crypto-bubble bursts. Now scale this up to millions of Chinese citizens and we are talking about billions of Chinese yuan.

The market is full of scams and pointless ICOs. (I’m sure you’ve heard news of people sending coins to random addresses with the promise of doubling their investment and ICOs that just don’t make sense). Many unaware investors are into this about 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 crypto boom in 2017, participate in any ICO with a well-known advisor on board, a promising team or decent advertising and you are guaranteed at least 3 times your investment.

The lack of understanding of the company and the technology behind it, combined with the spread of ICO, is a recipe for disaster. Central bank members report that almost 90% of ICOs are fraudulent or involve illegal fundraising. In my opinion, the Chinese government wants to ensure that the cryptocurrency remains “controllable” and is not too large to fail in the Chinese community. China is taking the right steps toward a safer, more regulated world of cryptocurrencies, albeit aggressive and controversial. In fact, this may be the best move the country has taken in decades.

Will China issue an ultimatum and make cryptocurrency illegal? I strongly doubt it, as it is quite pointless to do so. Financial institutions are currently prohibited from holding any crypto assets, while individuals are allowed but prohibited from engaging in any form of trading.

State 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), participate in a forum held in the first week of March, leaders gather to to discuss the latest issues and make the necessary changes to the law.

Wang Penji, a member of the NPCC, is working on the prospects of a state-owned digital asset trading platform, as well as initiating blockchain and cryptocurrency educational projects in China. However, the proposed platform will require a verified account to allow trading.

“With the establishment of related regulations and the cooperation of the People’s Bank of China (PBoC) and the China Securities Regulatory Commission (CSRC), a regulated and effective cryptocurrency exchange platform will serve as an official way for companies to raise funds (through ICO) and investors to hold their digital assets and achieve capital appreciation. ”Excerpts from Wang Pengjie’s presentation during the two sessions.

The march to the blockchain nation

Governments and central banks around the world are struggling to cope with the growing popularity of cryptocurrencies; but one thing is for sure, everyone has embraced the blockchain.

Despite the repression against cryptocurrencies, the blockchain is gaining popularity and acceptance at various levels. The Chinese government supports blockchain initiatives and embraces the technology. In fact, the People’s Bank of China (PBoC) is working on a digital currency and has made fraudulent transactions with 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 will not be a surprise if it turns out to be just a digital Chinese yuan, given that anonymity is the last thing China wants in its country. However, created as a close substitute for the Chinese yuan, the digital currency will be subject to existing monetary policies and laws.

Governor of the National Bank of China Zhou Xiaochuan. Source: CNBC

“Many cryptocurrencies have seen explosive growth that could have a significant negative impact on consumers and retail investors. Interview with Zhou Xiaochuan on Friday, March 9.

In a media appearance on Friday, March 9, the governor of the People’s Bank of China, Zhou Xiaochuan, criticized cryptocurrency projects that used the crypto-boom to profit and fuel market speculation. He also noted that the development of the digital currency is “technologically inevitable”

At the regional level, many Chinese cities are running blockchain initiatives to promote growth in their region. Hangzhou, known for being Alibaba’s headquarters, has announced blockchain technology as one of the city’s top priorities in 2018. The local government in Chengdu has also been asked to build an incubation center to encourage the adoption of blockchain technology in financial services. of the city.

Local conglomerates such as Tencent and Alibaba have also formed partnerships with blockchain companies or initiated projects themselves. Blockchain companies such as VeChain have also provided numerous partnerships with Chinese companies to improve the transparency of the supply chain in China.

All the evidence points to the fact that China works for a blockchain nation. China has always had an open mentality to emerging technologies such as mobile payments and artificial intelligence. From now on, there is no doubt that China will be the first country with an activated blockchain. 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.