A Peer-to-Peer Electronic Cash System” was published, detailing the concepts of a payment system. Bitcoin was created. Bitcoin gained the eye of the world because of its use of blockchain technology and as an alternative to fiat currencies and commodities. Dubbed another best technology after the internet, blockchain offered solutions to issues we have failed to address, or ignored over the past few decades. I’ll not delve into the technical facet of it but below are a few articles and videos that I would recommend:
How Bitcoin Works Under the Hood
A gentle introduction to blockchain technology
Ever wonder how Bitcoin (along with other cryptocurrencies) actually work?
Fast forward to today, 5th February to be exact, authorities in China have just unveiled a fresh set of regulations to ban cryptocurrency. The Chinese government have previously done so this past year, but many have circumvented through foreign exchanges. It has enlisted the almighty ‘Great Firewall of China’ to block usage of foreign exchanges in a bid to stop its citizens from carrying out any cryptocurrency transactions.
To know more about the Chinese government stance, let’s backtrack a couple years back again to 2013 when Bitcoin was gaining popularity among the Chinese citizens and prices were soaring. Concerned with the price volatility and speculations, the People’s Bank of China and five other government ministries published the official notice on December 2013 titled “Notice on Preventing Financial Risk of Bitcoin” (Link is in Mandarin). Several points were highlighted:
1. Due to various factors such as for example limited supply, anonymity and lack of a centralized issuer, Bitcoin isn’t a official currency but a virtual commodity that can’t be found in the open market.
2. All banks and financial organizations are not allowed to offer Bitcoin-related financial services or take part in trading activity linked to Bitcoin.
3. All companies and websites offering Bitcoin-related services are to join up with the required government ministries.
4. cryptocurrency to the anonymity and cross-border features of Bitcoin, organizations providing Bitcoin-related services ought to implement preventive measures such as KYC to prevent money laundering. Any suspicious activity including fraud, gambling and money laundering should to be reported to the authorities.
5. Organizations providing Bitcoin-related services ought to educate the general public about Bitcoin and the technology behind it and not mislead the public with misinformation.
In layman’s term, Bitcoin is categorized as a virtual commodity (e.g in-game credits,) that are being sold or sold in its original form rather than to be exchanged with fiat currency. It can’t be defined as money- a thing that serves as a medium of exchange, a unit of accounting, and a store of value.
Despite the notice being dated in 2013, it really is still relevant with regards to the Chinese government stance on Bitcoin so when mentioned, there is absolutely no indication of the banning Bitcoin and cryptocurrency. Rather, regulation and education about Bitcoin and blockchain will play a role in the Chinese crypto-market.
A similar notice was issued on Jan 2017, again emphasizing that Bitcoin is really a virtual commodity and not a currency. In September 2017, the boom of initial coin offerings (ICOs) resulted in the publishing of another notice titled “Notice on Preventing Financial Risk of Issued Tokens”. Soon after, ICOs were banned and Chinese exchanges were investigated and finally closed. (Hindsight is 20/20, they will have made the proper decision to ban ICOs and prevent senseless gambling). Another blow was dealt to China’s cryptocurrency community in January 2018 when mining operations faced serious crackdowns, citing excessive electricity consumption.
While there is no official explanation on the crackdown of cryptocurrencies, capital controls, illegal activities and protection of its citizens from financial risk are some of the main reasons 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 anonymity and ease of cross-border transactions have also made cryptocurrency a favorite means for money laundering and fraudulent activities.
Since 2011, China has played 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 three quarters of the mining operations. With regulators stepping directly into control trading and mining operations, China’s dominance has shrunk significantly in exchange for stability.
With countries like Korea and India following suit in the crackdown, a shadow is now casted over the future of cryptocurrency. (I shall reiterate my point here: countries are regulating cryptocurrency, not banning it). Certainly, we will see more nations join in in the coming months to rein in the tumultuous crypto-market. Indeed, some kind of order was long overdue. In the last year, cryptocurrencies are experiencing price volatility unusual and ICOs are happening literally every other day. In 2017, the total market capitalization rose from 18 billion USD in January to an all-time most of 828 billion USD.
Nonetheless, the Chinese community are in surprisingly good spirits despite crackdowns. Online and offline communities are flourishing (Personally, i have attended several events and visited a few of the firms) and blockchain startups are sprouting around China.
Major blockchain firms such as NEO, QTUM and VeChain are getting huge attention in the united kingdom. Startups like Nebulas, High Performance Blockchain (HPB) and Bibox are also gaining a fair amount of traction. Even giants such as Alibaba and Tencent may also be exploring the capabilities of blockchain to enhance their platform. The list continues on and on but you get me; it will likely be HUGGEE!
The Chinese government have also been embracing blockchain technology and have stepped up efforts recently to support the creation of a blockchain ecosystem.