In 2008 following the financial crisis, a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” was published, detailing the ideas of a payment system. Bitcoin was born. Bitcoin acquired the attention of the earth because of its utilization of blockchain technology and as a substitute to fiat currencies as well as commodities. Dubbed the next very best technological innovation after the online world, options were offered by blockchain to issues we have failed to address, or even dismissed over the past few years. I will not delve into the technical component of it but here are some video clips 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) actually work?
Fast forward to today, 5th February to be precise, authorities in China have just unveiled a different group of regulations to ban cryptocurrency. The Chinese federal government have previously accomplished so last year, most have circumvented through foreign exchanges. It’s today enlisted the almighty’ Great Firewall of China’ to block access to foreign exchanges in a bid to counteract its citizens from working on any cryptocurrency transactions.
To learn much more about the Chinese government stance, let’s backtrack one or two years back to 2013 when Bitcoin was becoming more popular among the Chinese citizens and costs were soaring. Concerned with the price volatility and speculations, the People’s Bank of China and five different government ministries published 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 different factors like limited supply, anonymity and lack of a centralized issuer, Bitcoin is not a official currency but a virtual commodity that can’t be utilized within the open market.
2. all banks and Financial businesses are certainly not allowed to provide Bitcoin related financial services or engage in trading activity related to Bitcoin.
3. All sites and corporations that provide Bitcoin-related services are to register with the necessary government ministries.
4. Thanks to the anonymity and cross-border features of Bitcoin, businesses providing Bitcoin related services should employ preventive measures including KYC to stop money laundering. Any suspicious activity such as fraud, gambling and money laundering must to be reported to the authorities.
5. Organizations providing Bitcoin-related services ought to condition the public about Bitcoin and also the technology behind it and not mislead everyone with misinformation.
In layman’s term, Bitcoin is classified as a virtual commodity (e.g in game credits,) which will be purchased or even available in its original form and not to be changed with fiat currency. It cannot be defined as money- something that is a platform of exchange, a product of accounting, in addition to a market of value.
Despite the notice actually being dated in 2013, it’s nevertheless pertinent with regards to the Chinese government stance on Bitcoin and as mentioned, there’s no indication on the banning Cryptocurrency and Bitcoin. Rather, education and regulation about Bitcoin and Blockchain will be involved in the Chinese crypto market.
An equivalent notice was released 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) resulted in the publishing of a separate notice titled “Notice on Preventing Financial Risk of Issued Tokens”. Soon after, ICOs happened to be banned and Chinese exchanges were studied and ultimately closed. (Hindsight is 20/20, they have made the best 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 reason on the crackdown of cryptocurrencies, capital controls, against the law activities and protection of its residents from financial risk are several of the primary causes cited by professionals. In fact, Chinese regulators have implemented stricter controls such as for example overseas withdrawal cap and regulating foreign direct investment to reduce capital outflow as well as guarantee domestic investments. The easiness and anonymity of cross-border transactions have also created cryptocurrency a favorite methods for fraudulent activities and money laundering.
Since 2011, China has played an important part in the meteoric rise and fall of Bitcoin. At its peak, China accounted for over 95 % 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 drastically in return for stability.
With countries as Korea and India following suit in the crackdown, a shadow is now casted over the potential future of cryptocurrency. (I shall reiterate the point of mine 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. Indeed, some sort of order was long overdue. Over the past year, cryptocurrencies are experiencing price volatility unheard of and ICOs are going on basically 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, Halong Mining DragonMint T1 are in amazingly excellent spirits despite crackdowns. Online and not online communities are flourishing (I myself have been to many events and also gone to some of the firms) and blockchain startups are sprouting all over China.
Major blockchain firms for example NEO, QTUM and VeChain are receiving enormous attention within the united states. Startups like Nebulas, High Performance Blockchain (Bibox and hpb) also are receiving a major level of traction. Even giants such as Alibaba and Tencent are also checking out the capabilities of blockchain to improve their platform. The list goes on and also on however, you get me; it’s gon na be HUGGEE!
The Chinese federal government have been embracing blockchain technology and in addition have stepped up efforts in the past few years to help support the generation of a blockchain ecosystem.
In China’s 13th Five Year Plan (2016-2020), it called for the development of promising technologies such as blockchain and artificial intelligence. What’s more, it plans to strengthen researching on the application of fintech in regulation, cloud computing and big data. Even the People’s Bank of China is evaluate a prototype blockchain-based digital currency; however, with it likely to be a centralized digital currency slapped with some encryption technology, its adoption by the Chinese citizens remains 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 another initiatives from the Chinese government to help support the development of blockchain in China.
A the latest report titled ” China Blockchain Development Report 2018″ (English option in the link) by China Blockchain Research Center detailed the improvement of the blockchain sector in China in 2017 such as various actions taken to regulate cryptocurrency within the mainland. In a separate section, the article highlighted the optimistic view of the blockchain sector along with the considerable attention it has gotten from VCs and the Chinese government in 2017.
To sum things up, the Chinese authorities show a confident attitude towards blockchain technology despite its enforcement on cryptocurrency and mining business. China desires to control cryptocurrency, along with China will get control. The repeated enforcements by the regulators were intended to secure its people with the financial risk of cryptocurrencies as well as limit capital outflow. As of today, it’s legal for Chinese people to keep cryptocurrencies but they’re not allowed to carry out any kind of transaction; thus the ban of exchanges. As the market place stabilizes in the coming several weeks (or maybe years), we will see undoubtedly see a revival of the Chinese crypto-market. Blockchain and cryptocurrency come hand-in-hand (with the exception of private chain where a token is unnecessary). Countries thus cannot ban cryptocurrency without banning blockchain the great technology!