Bitcoin and China: The Battle Continues
In the fight against Bitcoin, perhaps no country comes close to taking the battle to the doorstep of cryptocurrencies than China. Last week, the nation made it to the top of the headlines in the world of cryptocurrencies.
Chinese regulator executed a comprehensive ban on platforms that allow buying and selling of the virtual currency. The crackdown on Bitcoin exchanges in China follows hot on the heels of the nation just a week before in September outlawing initial coin offerings or ICO’s.
China is important to the cryptocurrency world as it boasts of highest trading volumes. By some estimates, exchanges say that over 90% of global trading in cryptocurrency is attributed to China alone. As such, any moves from China have a significant impact on the global cryptocurrency market.
China’s ban on ICO’s
ICO’s, as the name suggests are similar to IPO’s. The only difference is that a company wants to issue an ICO can simply crowdfund via using cryptocurrencies. Investors can exchange their cryptocurrencies such as Bitcoin or Ethereum and thus buy a stake in a new project, idea or a company.
The concept of ICO quickly grew in reputation. Perhaps the most successful ICO has been Etherum which at one point in the early stages raised as much as $18 million in Bitcoin. Needless to say, Etherum’s market cap is now estimated to be close to $19 million.
The success of Ethereum saw many other initial coin offering initiatives being offered. However, ICO’s have been met with caution even within industry insiders. Charles Hoskinson, the co-founder of Etherum said that ICO’s are nothing but “ticking time bomb.”
In this context, China’s ban on ICO’s followed by a ban of Bitcoin exchanges might appear to be a step in the right direction. However, there is a lot more to the story.
Is it all about control?
China, as a country is well known for its tight control of currency. Monetary policies are often aligned to meet the main political party’s ideals and goals. In such a context, Bitcoin and the rise of other virtual currencies soon became a glaring threat to the powers that be.
In fact, with the help of virtual currencies, there are big risks that a new political establishment could quickly raise funds to directly oppose the regime.
Central banks and government authorities across the world are yet to figure out a way to control the cryptocurrency explosion. In the United States, the IRS cautioned the risks of Bitcoin noting that investors have been avoiding paying taxes on capital gains.
For the most part, the writing is very clear on the wall. The IRS also attempted to issue summons to Coinbase to obtain its list of investors and traders who had cryptocurrency transactions worth over $20,000.
The Future of Bitcoin: Will Cryptocurrencies Replace Fiat Money?
In this context, the move by China, although surprising, looks to be the way to curb the popularity of cryptos such as Bitcoin and Ethereum.
On its part, Chinese authorities have justified the action by stating that the cryptocurrency and ICO boom will lead to fraud, which is true to a certain extent.
While it is still too early to tell if or how long the blanket ban will exist, there have been instances from China where a ban on a certain service has always led to the public coming out with ingenious ways to overcome the hurdles.
Thus, cryptocurrency trading is also unlikely to be impacted for long. What needs to be seen is the inevitable regulation surrounding cryptocurrencies which play a big role in shaping the world of investing and speculating in cryptocurrencies.
