In 2008 after fiscal 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 gained the attention of the earth because of its usage of blockchain technology and as an alternative to fiat currencies along with commodities. Dubbed the next best technological innovation after the online world, blockchain offered answers to issues we have failed to address, or even dismissed over the past several decades. I won’t delve into the technical aspect of it but the following are a couple of video clips and articles that I recommend:
How Bitcoin Works Under the Hood
A short 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 a different range of laws to ban cryptocurrency. The Chinese authorities have accomplished so last year, most have circumvented through foreign exchanges. It’s now enlisted the almighty’ Great Firewall of China’ to block access to overseas switches in a bid to prevent its citizens from working on any cryptocurrency transactions.
To learn a lot more about the Chinese government stance, we need to backtrack a few years back to 2013 when Bitcoin was gaining popularity among the Chinese citizens and prices happened to be soaring. Concerned with the cost volatility and speculations, the People’s Bank of China and 5 additional government ministries posted an official notice on December 2013 titled “Notice on Preventing Financial Risk of Bitcoin” (Link is in Mandarin). Several areas were highlighted:
1. Due to numerous factors for example restricted supply, anonymity and lack of a centralized issuer, Bitcoin is not a official currency although a virtual commodity that cannot be used inside the open market.
2. all banks and Financial companies are not allowed to give Bitcoin-related financial services or perhaps engage in trading activity regarding Bitcoin.
3. All businesses and websites that provide Bitcoin-related solutions 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 carry out preventive actions like KYC to avoid money laundering. Just about any suspicious activity including fraud, gambling and money laundering should for being reported to the authorities.
5. Organizations providing Bitcoin-related services ought to educate the public about Bitcoin and the technology behind it and never mislead the general public with misinformation.
In layman’s term, Bitcoin is grouped as a virtual commodity (e.g in game credits,) that will be obtained or perhaps offered in its original form and not to be changed with fiat currency. It can’t be described as money- something that can serve as a place of exchange, a unit of accounting, in addition to a market of value.
Despite the notice actually being dated in 2013, it’s nevertheless useful with respect 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 play a role inside the Chinese crypto-market.
An equivalent notice was issued on Jan 2017, again emphasizing that Bitcoin is a virtual commodity instead of a currency. In September 2017, the boom of original coin offerings (ICOs) resulted in the publishing of a separate notice titled “Notice on Preventing Financial Risk of Issued Tokens”. Shortly after, ICOs were banned and Chinese exchanges were investigated and ultimately closed. (Hindsight is 20/20, they’ve made the correct decision to ban ICOs and also stop senseless gambling). Another blow was dealt to China’s cryptocurrency community in January 2018 when mining operations faced considerable crackdowns, citing too much electricity consumption.
While there is no official explanation on the crackdown of cryptocurrencies, capital controls, against the law activities and protection of its residents from monetary risk are several of the primary factors cited by industry experts. In fact, Chinese regulators have implemented stricter controls such as for instance overseas withdrawal cap and regulating foreign direct investment to limit capital outflow and also ensure domestic investments. The anonymity and simplicity of cross border transactions have likewise made cryptocurrency a well liked ways for fraudulent activities and money laundering.
Since 2011, China has had a critical part in the meteoric rise & fall of Bitcoin. At its peak, China accounted for over ninety five % of the global Bitcoin trading volume and three quarters of the mining business. With regulators stepping in to control trading and mining operations, China’s dominance has shrunk considerably in exchange for stability.
With countries like Korea and India following suit in the crackdown, a shadow is currently casted over the long term future of cryptocurrency. (I shall reiterate my point here: countries are regulating cryptocurrency, not banning it). Without a doubt, we are going to see far more nations join in in the coming months to rein in the tumultuous crypto market. Indeed, some kind of order was long overdue. Over the past year, cryptocurrencies are encountering price volatility unheard of and also ICOs are going on basically 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.
Nonetheless, the Chinese group are in surprisingly good spirits despite crackdowns. Online and offline communities are prospering (I myself have been to many events and also gone to several of the firms) and blockchain startups are sprouting all over China.
Major blockchain firms for example NEO, QTUM and VeChain are getting enormous attention in the nation. Startups like Nebulas, High Performance Blockchain (Bibox and hpb) are also gaining a fair amount of traction. Even Innosilicon A10 ETHmaster (500mh) like Tencent and Alibaba will also be exploring the effectiveness of blockchain to boost the platform of theirs. The list goes on and also on however, you get me; it is likely to be HUGGEE!
The Chinese government have also been embracing blockchain technology and in addition have stepped up efforts in the past few years to help support the design 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. It also plans to fortify exploration on the application of fintech in regulation, cloud computing and big data. Even the People’s Bank of China is in addition evaluate a prototype blockchain based digital currency; however, with it more likely a centralized digital currency slapped with some encryption technology, its adoption by the Chinese citizens remains to become spotted.
The launch of the Trusted Blockchain Open Lab and the China Blockchain Technology and Industry Development Forum by the Ministry of Industry and Information Technology are some of another initiatives from the Chinese authorities to support the development of blockchain in China.
A recently available report titled ” China Blockchain Development Report 2018″ (English variation in the link) by China Blockchain Research Center detailed the enhancement of the blockchain sector in China in 2017 like the different actions taken to regulate cryptocurrency in the mainland. In a separate section, the article highlighted the optimistic outlook of the blockchain sector and also the significant attention it has received from VCs and also the Chinese government in 2017.
To sum up, the Chinese authorities show a positive attitude towards blockchain technology despite the enforcement of its on cryptocurrency and mining business. China desires to control cryptocurrency, along with China are certain to get control. The repeated enforcements by the regulators were recommended to secure its people through the financial risk of cryptocurrencies as well as limit capital outflow. As of today, it’s authorized for Chinese citizens to keep cryptocurrencies though they are not authorized to handle any type of transaction; hence the ban of exchanges. As the market stabilizes in the coming months (or perhaps years), we will 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 cannot ban cryptocurrency without banning blockchain the great technology!