In the last couple of months, many advancements were made regarding cryptocurrency legislation and regulation. Many countries like Canada, China, United States and South Korea issued bans on ICO crowdfunding. Not only that but the Popular Bank of China also decided to ban cryptocurrency exchanges, shutting down the biggest cryptocurrency market in the world.
The crackdown of exchanges occurred in mid September, nine months after warnings made by financial authorities demanding cryptocurrency exchanges to comply with “relevant laws and regulations”. Although the price of Bitcoin has since bounced back, breaking all-time highs recently, the ban of China’s cryptocurrency exchanges had drastic effects on the prices of the whole crypto market. It also had a negative impact on many Chinese Bitcoin investors, who are now forced to trade Bitcoin over-the-counter, which takes more time and is not immediate, in offline trading platforms like Taobao.
BTCChina, China’s oldest running exchange, was the first major exchanges to close, followed by OkCoin, Huobi and ViaBTC. All major and minor exchanges have already closed down their services, or are in the process of doing so, and are legally obliged to report to authorities on daily bases. Bitcoin insiders such as shareholders and managers of exchanges were also forbidden to leave Beijing in order to also co-operate and share information about operations.
Cryptocurrencies gave rise to a whole new financial market, a market that has the potential to disrupt the banking and traditional financial world as well as replace national currencies. As more and more money is being poured into this new alternative market, most of it unregulated, world government see this as a threat and are looking for ways in which they can control and tax this new concept of money.
Some say that cryptocurrency regulation, if done correctly, is a good method to prevent illegal activities such as scams and money laundering schemes. Others say that regulation goes against the very nature of decentralized cryptocurrencies, but of course the Chinese government doesn’t begs to differ.
Future of Cryptocurrencies in China
It is important to note that this ban is, most likely, temporarily. The fact is that China had already banned Bitcoin trading in 2013 and this year imposed a 4 month freeze on exchanges due to security issues.
Regardless of the events, the Public Bank of China is very interested in distributed ledger technology, having devised a five-year development plan that focus on researching and developing blockchain technology. Not only that but according to some reports the Chinese government is also developing and testing their own state cryptocurrency.
In a closing note, there are now rumors that Bitcoin exchanges might be reopening. This speculation was felt in the market, with Bitcoin prices surpassing the previous all-time high of $6300. Reports indicate that the policies forbidding crypto trading were examined in the 19th National Congress of the Communist Party of China and that they might be lifted. It was also speculated that a new Chinese cryptocurrency platform, speculated to be controlled by the Chinese government, might be up and running by the 1st of November.