Fear Not, China Is Not Banning Cryptocurrency

In 2008 following the financial crisis, a paper entitled “Bitcoin: A Peer-to-Peer Electric Cash System” was posted, detailing the concepts of a payment system. Bitcoin was born. Bitcoin gained the interest of the world for its use of blockchain technology and as a substitute for fiat currencies and goods. Dubbed the next best technology after the internet, blockchain offered solutions to issues we have do not address, or overlooked within the last few decades. I actually will not look into the technical aspect of it but here are some articles and videos that I recommend: iota kurs

How Bitcoin Works Under the Engine

A gentle introduction to blockchain technology

Ever think about how Bitcoin (and other cryptocurrencies) actually work? 

Quickly forward to today, 6th February to be exact, authorities in China have just unveiled a new set of regulations to ban cryptocurrency. The China government have already done so a year ago, but many have circumvented through overseas exchanges. It has now enlisted the almighty ‘Great Firewall of China’ to dam access to overseas exchanges in a bet to stop its residents from carrying out any cryptocurrency transactions.

To know more about the China government stance, let’s backtrack a couple years returning to 2013 when Bitcoin was gaining popularity among the Chinese citizens and prices were soaring. Worried about 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 Protecting against Financial Risk of Bitcoin” (Link is in Mandarin). Several points were pointed out:

1. Because of various factors such as limited resource, anonymity and lack of a centralized issuer, Bitcoin is not an recognized currency but a digital commodity that cannot be employed in the open market.

installment payments on your All banks and financial organizations are not allowed to offer Bitcoin-related financial services or take part in trading activity related to Bitcoin.

3. All companies and websites offering Bitcoin-related services are to register with the necessary government ministries.

4. Due 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 dubious activity including fraud, gaming and money laundering should to be reported to the authorities.

5. Businesses providing Bitcoin-related services must educate the public about Bitcoin and the technology to 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 can be bought or sold in the original form and not to be exchanged with fiat currency. It are unable to be thought as money- something that is a medium of exchange, an product of accounting, and a store of value.

Regardless of the notice being dated in 2013, it is still relevant with regards to the Chinese government posture on Bitcoin and as mentioned, there is no indication of the banning Bitcoin and cryptocurrency. Alternatively, regulation and education about Bitcoin and blockchain will play a role in the Chinese crypto-market.

A similar notice was released on Jan 2017, again emphasizing that Bitcoin is a virtual commodity and not a currency. In September 2017, the increase of initial coin programs (ICOs) led to the publishing of a split notice titled “Notice on Preventing Financial Risk of Issued Tokens”. Soon after, ICOs were banned and Chinese exchanges were researched and eventually closed. (Hindsight is 20/20, they have made the right decision to ban ICOs and stop senseless gambling). One more blow was dealt to China’s cryptocurrency community in January 2018 when mining or prospecting businesses faced serious crackdowns, citing excessive electricity intake.

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