Prepping for a Cryptocurrency World

The Chinese government has repeatedly hit the cryptocurrency market hard over the past year. The market weathered the blows like a trooper, but many cryptocurrency investors have felt the effects of the punches. The market's disappointing performance in 2018 is nothing compared to its spectacular 1,000% gains in the previous year.

What took place?

The Chinese government has attempted to control cryptocurrencies since 2013, but these efforts pale in comparison to those that were put into effect in 2017. (For a thorough study of the official notice released by the Chinese government, see this article.)

With all the attention and expansion the bitcoin market saw in 2017, it was a wonderful year. Helios The Central Bank has to take more drastic action because to the severe price volatility, including banning initial coin offers (ICOs) and cracking down on domestic cryptocurrency exchanges. Soon after, China's mining factories were compelled to shut down due to high electricity use. To circumvent laws, many exchanges and industries have moved abroad, although they are still open to Chinese investors. They still fall victim to the Chinese Dragon's talons, though.

China extended its "Eagle Eye" to monitor overseas cryptocurrency exchanges as part of the most recent round of government-led attempts to monitor and outlaw cryptocurrency trading by Chinese investors. Measures range from limiting withdrawal limits to suspending accounts for businesses and bank accounts accused of engaging in transactions with overseas crypto exchanges and similar activities. Even now, there are persistent speculations in the Chinese community that further drastic actions will be taken against overseas trading platforms that accept Chinese investors.

Excerpts from an interview with a team leader of China's Public Information Network Security Supervision agency under the Ministry of Public Security, conducted on February 28, regarding whether or not there will be additional regulatory measures.

WHY, OH WHY?

Imagine your youngster using their funds to buy a digital asset (in this case, bitcoin) without knowing how to confirm its legitimacy or value. He or she might get lucky and become wealthy, or they might lose everything if the crypto-bubble bursts. We are now talking about billions of Chinese Yuan when we multiply it by millions of Chinese nationals.

Scams and useless ICOs abound in the market. (I'm sure you've heard about people promising to double their investments by transferring coins to random addresses and ICOs that are illogical.) Many unsophisticated investors are only interested in making money and could care less about the innovation and technology involved. Many cryptocurrencies derive their value from market speculation. Participate in any ICO during the 2017 crypto-boom that has a renowned advisor on board, a promising team, or a respectable amount of excitement, and you are guaranteed to receive at least a 3X return on your investment.

The proliferation of ICOs paired with a lack of understanding of the company and the technology underlying it is a formula for disaster. Nearly 90% of ICOs, according to central bank members, are bogus or involve illicit fundraising. In my perspective, the Chinese government wants to make sure that cryptocurrencies in Chinese society stay "controllable" and not too big to fail. Despite being tough and divisive, China is moving in the right direction toward a world where cryptocurrencies are safer and better regulated. In fact, it might be the wisest action the nation has done in a long time.

Will China issue a deadline and outlaw cryptocurrency? Given how useless it would be to do so, I sincerely doubt it. Financial institutions are now prohibited from owning any cryptocurrency assets, whilst individuals are permitted to do so but cannot engage in any trade.

A crypto exchange managed by the government?

Leaders gather annually for the "Two Sessions" (nicknamed "Two Sessions" because two major parties, the National People's Congress (NPC) and the National Committee of the Chinese People's Political Consultative Conference (CPCC), both participate in the forum) held during the first week of March to discuss current events and make necessary legislative changes.

A member of the NPCC named Wang Pengjie experimented with the idea of establishing blockchain and cryptocurrency teaching initiatives in China, as well as a state-run digital asset trading platform. To enable trade, the suggested platform would need an authenticated account.

Excerpts from Wang Pengjie's presentation at the Two Sessions: "With the establishment of relevant regulations and the cooperation of the People's Bank of China (PBoC) and China Securities Regulatory Commission(CSRC), a regulated and efficient cryptocurrency exchange platform would serve as a formal way for companies to raise funds (through ICOs) and investors to hold their digital assets and achieve capital appreciation.

Toward a Blockchain Nation: The March

The rising popularity of cryptocurrencies has been a challenge for governments and central banks all over the world, but one thing is certain: they have all embraced blockchain.

Despite the crackdown on cryptocurrencies, blockchain has been increasing in acceptance and appeal on different levels. Blockchain efforts have received support from and adoption from the Chinese government. In fact, the People's Bank of China (PBoC) has been developing a virtual currency and has tested it out with a few of the nation's commercial banks. If the digital money will be decentralised and offer characteristics of cryptocurrencies like anonymity and immutability is still up in the air. Given that anonymity is the very last thing that China wants in their nation, it wouldn't be surprising if it turned out to be just a digital Chinese Yuan. The digital currency, however, designed as a close equivalent for the Chinese Yuan, will be governed by current monetary regulations and laws.

Zhou Xiaochuan, governor of the People's Bank of China. Citation: CNBC

Excerpts from Zhou Xiaochuan's interview on Friday, March 9th: "Lots of cryptocurrencies have seen explosive growth, which can bring significant negative impact on consumers and retail investors. We don't like (cryptocurrency) products that make use of the huge opportunity for speculation that gives people the illusion of getting rich overnight.

Zhou Xiaochuan, governor of the People's Bank of China, slammed cryptocurrency enterprises that capitalised on the crypto-boom to profit and stoke market speculation at a media appearance on Friday, March 9. Additionally, he stated that the growth of digital currency is "technologically inevitable."

Regionally, many Chinese cities are spearheading blockchain projects to encourage development in their area. Blockchain technology has been identified as one of the top objectives for the city of Hangzhou in 2018. Hangzhou is famous for being the home of Alibaba. The construction of an incubator facility has also been suggested by the local government of Chengdu City in order to promote the use of blockchain technology in the city's financial services.

Local giants like Tencent and Alibaba have also started projects independently or in conjunction with blockchain companies. In order to increase supply chain transparency in China, blockchain companies like VeChain have established numerous collaborations with Chinese businesses.

All signs point to China's efforts to become a blockchain nation. Emerging technologies like mobile payment and artificial intelligence have long been welcomed in China. China will undoubtedly be the first nation to use blockchain technology going forward. Will the Chinese government concede and permit its citizens to resume trading? Probably, but definitely not in 2018, when the market will have stabilised and become less volatile.