In 2008 after financial crisis, a cardboard titled “Bitcoin: A Peer-to-Peer Electronic Cash System” was published, detailing the principles of a payment system. Bitcoin came into this world. Bitcoin gained the eye of the earth because of its usage of blockchain technological innovation and as an alternative to fiat currencies as well as commodities. Dubbed the next best technologies after the internet, alternatives were offered by blockchain to problems we have failed to address, or dismissed in the last few decades. I will not delve into the technical part of it but here are some movies 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 precise, authorities in China have just unveiled an innovative range of polices to ban cryptocurrency. The Chinese federal government have previously accomplished so last season, but many have circumvented through international exchanges. It’s nowadays enlisted the almighty’ Great Firewall of China’ to block access to overseas interchanges in a bid to prevent its citizens from working on any cryptocurrency transactions.
To know much more about the Chinese government stance, we need to backtrack a couple years back to 2013 when Bitcoin was gaining popularity among the Chinese people and prices were soaring. Concerned with the cost volatility and speculations, the People’s Bank of China and 5 other government ministries published an official notice on December 2013 titled “Notice on Preventing Financial Risk of Bitcoin” (Link is in Mandarin). Many points were highlighted:
1. Due to various factors for instance limited supply, lack and anonymity of a centralized issuer, Bitcoin isn’t a official currency but a virtual commodity which cannot be worn within the open market.
2. all banks and Financial businesses are certainly not permitted to offer Bitcoin-related financial services or even engage in trading activity related to Bitcoin.
3. All internet sites and corporations that provide Bitcoin-related services are registering with the mandatory government ministries.
4. Because of the anonymity and cross-border features of Bitcoin, businesses providing Bitcoin-related services should carry out preventive measures such as KYC to stop money laundering. Almost any suspicious activity such as fraud, gambling and money laundering must to become reported to the authorities.
5. Organizations providing Bitcoin-related services ought to prepare the public about Bitcoin and also the technology behind it and not mislead the general public with misinformation.
In layman’s term, Bitcoin is classified as a virtual commodity (e.g in game credits,) that will be bought or sold in its original form without to be replaced with fiat currency. It cannot be defined as money- something that is a place of exchange, a unit of accounting, and a market of value.
Despite the notice getting dated in 2013, it is nonetheless pertinent with respect to the Chinese government stance on Bitcoin and as mentioned, there is no indication on the banning Bitcoin and Cryptocurrency. Rather, regulation and education about Blockchain and Bitcoin will play a role within the Chinese crypto-market.
An equivalent notice was released on Jan 2017, again emphasizing that Bitcoin is a virtual commodity rather than a currency. In September 2017, the boom of original coin offerings (ICOs) resulted in the posting of its own notice titled “Notice on Preventing Financial Risk of Issued Tokens”. Soon after, ICOs were banned and Chinese exchanges happen to be studied and eventually closed. (Hindsight is 20/20, they have made the right decision to ban ICOs and stop senseless gambling). Another blow was dealt to China’s cryptocurrency community in January 2018 when mining operations faced considerable crackdowns, citing too much energy consumption.
While there’s MineMuse on the crackdown of cryptocurrencies, capital controls, illegal activities and security of its residents from financial risk are several of the main causes cited by experts. Indeed, Chinese regulators have implemented stricter controls such as overseas withdrawal cap and regulating foreign direct investment to limit capital outflow and ensure domestic investments. The easiness and anonymity of cross border transactions have likewise produced cryptocurrency a favorite ways for fraudulent activities and money laundering.
Since 2011, China has had a crucial role 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 activities. With regulators stepping in to control trading and mining operations, China’s dominance has shrunk considerably in return for stability.
With countries like India and Korea following suit in the crackdown, a shadow is today 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 more nations join in in the coming months to rein in the tumultuous crypto market. In fact, some kind of order was long overdue. Over the past 12 months, cryptocurrencies are experiencing price volatility unheard of and also ICOs are going on practically 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.
But, the Chinese community are in amazingly good spirits despite crackdowns. Online and not online communities are flourishing (I actually have been to a number of events and also gone to several of the firms) and blockchain startups are sprouting all over China.
Major blockchain firms such as NEO, VeChain and QTUM are getting enormous awareness in the united states. Startups like Nebulas, High Performance Blockchain (hpb) and Bibox are also gaining a considerable amount of traction. Even giants like Alibaba and Tencent are also checking out the functionality of blockchain to improve their platform. The list goes on and on although you get me; it is gon na be HUGGEE!
The Chinese authorities have been embracing blockchain technology and have stepped up hard work in the past few years to help support the development of a blockchain ecosystem.
In China’s 13th Five-Year Plan (2016-2020), it called for the enhancement of promising technologies such as artificial intelligence and blockchain. What’s more, it plans to fortify research on the application of fintech in regulation, cloud computing and big data. Sometimes the People’s Bank of China is in addition test 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 people remains being found.
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 advancement of blockchain in China.
A recent article titled ” China Blockchain Development Report 2018″ (English variation in the link) by China Blockchain Research Center detailed the development of the blockchain industry in China in 2017 like the numerous measures taken to regulate cryptocurrency inside the mainland. In a separate section, the report highlighted the optimistic outlook of the blockchain market and the significant attention it has received from VCs and also the Chinese government in 2017.
To sum up, the Chinese government show an optimistic attitude towards blockchain technology despite the enforcement of its on cryptocurrency & mining operations. China would like to control cryptocurrency, and China is certain to get control. The repeated enforcements by the regulators were supposed to secure its people through the monetary risk of cryptocurrencies and control capital outflow. As of now, it’s legal for Chinese people to keep cryptocurrencies although they’re not permitted to carry out any form of transaction; hence the ban of exchanges. As the market place stabilizes in the coming weeks (or maybe years), we are going to see undoubtedly see a revival of the Chinese crypto market. Blockchain and also cryptocurrency come hand-in-hand (with the exception of individual chain where a token is unnecessary). Countries thus can’t ban cryptocurrency without banning blockchain the great technology!