In 2008 after financial crisis, a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” was published, detailing the ideas of a payment system. Bitcoin came into this world. Bitcoin received the eye of the entire world because of its use of blockchain technological innovation and as a substitute to fiat currencies and commodities. Dubbed the next very best engineering after the word wide web, blockchain offered alternatives to issues we’ve failed to address, or even neglected during the last several years. I won’t delve into the technical element of it but below are a few video clips and articles that I recommend:
How Bitcoin Works Under the Hood
A gentle introduction to blockchain technology
Ever wonder how Bitcoin (and various other cryptocurrencies) actually work?
Fast forward to today, 5th February to be actual, authorities in China have just unveiled a completely new set of laws to ban cryptocurrency. The Chinese federal government have already done so last year, but many have circumvented through foreign exchanges. It’s nowadays enlisted the almighty’ Great Firewall of China’ to block access to foreign interchanges in a bid to stop its citizens from implementing any cryptocurrency transactions.
To learn considerably more about the Chinese government stance, let’s backtrack a couple years back to 2013 when Bitcoin was gaining popularity among the Chinese people and costs have been soaring. Concerned with the price volatility and speculations, the People’s Bank of China and five other government ministries posted an official notice on December 2013 titled “Notice on Preventing Financial Risk of Bitcoin” (Link is in Mandarin). Many spots were highlighted:
1. Due to a variety of factors like restricted supply, anonymity and lack of a centralized issuer, Bitcoin isn’t a recognized currency although a virtual commodity which can’t be worn in the open market.
2. Financial businesses and all banks are certainly not allowed to offer Bitcoin related financial services or even engage in trading activity related to Bitcoin.
3. All websites and companies that offer Bitcoin-related services are registering with the mandatory government ministries.
4. Due to the anonymity and cross border features of Bitcoin, organizations providing Bitcoin-related services should apply preventive actions along the lines of KYC to prevent money laundering. Almost any suspicious activity which includes fraud, gambling and money laundering must to become reported to the authorities.
5. Organizations providing Bitcoin-related services should condition the public about Bitcoin as well as the technology behind it and not mislead everyone with misinformation.
In layman’s term, Bitcoin is categorized as a virtual commodity (e.g in game credits,) that could be purchased or available in its original form and not to be changed with fiat currency. It can’t be described as money- one thing that is a place of exchange, a model of accounting, in addition to a store of value.
Despite the notice actually being dated in 2013, it is nonetheless useful with regards to the Chinese government stance on Bitcoin and as mentioned, there is no indication on the banning Cryptocurrency and Bitcoin. Rather, education and regulation about Bitcoin and Blockchain will play a role during the Chinese crypto-market.
A comparable notice was released on Jan 2017, again emphasizing that Bitcoin is a virtual commodity and not a currency. In September 2017, the boom of first coin offerings (ICOs) led to the posting of a separate notice titled “Notice on Preventing Financial Risk of Issued Tokens”. Shortly after, ICOs happened to be banned and Chinese exchanges happen to be examined and sooner or later 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’s no official explanation on the crackdown of cryptocurrencies, capital controls, unlawful activities and safety of its residents from financial risk are some of the principal reasons cited by experts. In fact, Chinese regulators have implemented stricter controls like overseas withdrawal cap and regulating foreign direct investment to minimize capital outflow along with guarantee domestic investments. The anonymity and simplicity of cross-border transactions have likewise created cryptocurrency a well liked ways for money laundering and fraudulent activities.
Since 2011, China has played 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 three quarters of the mining activities. With regulators stepping in to control trading and mining operations, China’s dominance has shrunk significantly in return for stability.
With countries as India and Korea following suit in the crackdown, a shadow is currently casted over the potential future of cryptocurrency. (I shall reiterate my point here: countries are regulating cryptocurrency, not banning it). Without a doubt, we will see a lot more nations join in in the coming months to rein in the tumultuous crypto-market. Really, some type of order was long overdue. Over the past year, cryptocurrencies are going through price volatility unheard of and ICOs are happening pretty much every additional day. In 2017, the total market capitalization rose from eighteen billion USD in January to an all-time high of 828 billion USD.
However, the Chinese group are in amazingly very good spirits despite crackdowns. Online and not online communities are prospering (I myself have gone to many events and also gone to several of the firms) and blockchain startups are sprouting all over China.
Major blockchain firms including NEO, QTUM and VeChain are getting substantial awareness within the nation. Startups like Nebulas, High Performance Blockchain (Bibox and hpb) are also getting a fair amount of traction. Even giants such as Tencent and Alibaba are also exploring the capabilities of blockchain to boost the platform of theirs. The list passes and on however, you get me; it’s likely to be HUGGEE!
The Chinese federal government have also been embracing blockchain technology and also have stepped up hard work in the recent past to help support the design of a blockchain ecosystem.
In China’s 13th Five-Year Plan (2016-2020), it called for the development of promising technologies like blockchain and artificial intelligence. What’s more, it plans to beef up exploration on the use of fintech in regulation, cloud computing and big data. Actually the People’s Bank of China is additionally testing a prototype blockchain-based digital currency; however, with it likely to end up a centralized digital currency slapped with several encryption technology, its adoption by the Chinese people remains to become seen.
The launch of the Trusted Blockchain Open Lab as well as the China Blockchain Technology and Industry Development Forum by the Ministry of Industry and Information Technology are several of another initiatives by way of the Chinese government to support the continuing growth of blockchain in China.
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A recent article titled ” China Blockchain Development Report 2018″ (English option in the link) by China Blockchain Research Center detailed the development of the blockchain industry in China in 2017 including the various measures taken to regulate cryptocurrency in the mainland. In a separate section, the article highlighted the optimistic outlook of the blockchain sector and the considerable attention it has received from VCs and the Chinese government in 2017.
In summary, the Chinese authorities show a positive attitude towards blockchain technology despite the enforcement of its on cryptocurrency & mining business. China would like to control cryptocurrency, along with China will get control. The repeated enforcements by the regulators were intended to safeguard its citizens with the financial risk of cryptocurrencies and also minimize capital outflow. As of now, it is authorized for Chinese citizens to hold cryptocurrencies although they are not permitted to handle any type of transaction; hence the ban of exchanges. As the marketplace stabilizes in the coming several weeks (or years), we will see undoubtedly see a revival of the Chinese crypto-market. Blockchain as well as cryptocurrency come hand-in-hand (with the exception of individual chain where a token is unnecessary). Countries thus cannot ban cryptocurrency without banning blockchain the awesome technology!