The Chinese paradox: virtual currencies vs ledger technologies
The Chinese government has increased its pressure on those engaging with cryptocurrency related activity within the country.
Whilst it is clear that Beijing supports blockchain, the technology that underpins crypto, it is also trying to limit speculation in digital currencies, almost one year since they banned ICOs.
Blockchain technology works by creating a permanent and secure record of transactions between two individuals. By facilitating this direct link between parties, it is possible to eliminate the need for third-party intermediaries such as banks. Bitcoin was the first cryptocurrency that used blockchain technology, and since then hundreds of other crypto coins have been launched into the market. Last year, prices of Bitcoin reached record highs as investors speculated that blockchain was set to change the world as the internet did. Whilst it is being used around the world by companies, individuals, and governments, it is still yet to fully prove itself on a larger scale.
Banned the sale of cryptocurrencies
China was once the world leader when it came to Bitcoin trading and it is still responsible for the majority of the world’s BTC mining output. But, due to increased regulatory scrutiny as well as the value of Bitcoin climbing quickly, the country’s bank and other financial authorities banned the sales of new cryptocurrencies through ICOs as well as Bitcoin-Yuan trading.
Around the same time, investors in Japan, South Korea, and the US became extremely interested Bitcoin which resulted in an all-time high value of $19,000 by the end of December. Then on August 24th 2018, five Chinese government bodies; People’s Bank of China, the Banking Regulatory Commission, the Central Cyberspace Affairs Commission, the Ministry of Public Security and the State Administration for Market Regulation published a warning about the risks of fundraising via ICOs.
Prohibition of cryptocurrency transactions
Then, tech giant Tencent announced that they would prohibit any cryptocurrency related transactions made through WeChat pay as well as blocking some accounts associated with ICOs and crypto trading. Also in August, the business district of Beijing, the Chaoyang District placed a ban on all hotels, offices, and shopping areas holding any cryptocurrency related events. A special economic development zone in Guangzhou swiftly followed suit.
Whilst it is clear that the Chinese government wants to maintain a level of financial stability and regulation, this has not stopped several local governments investing heavily in blockchain projects. It seems that whilst blockchain is actively encouraging, cryptocurrency will remain outlawed.