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 for its use of blockchain technology and as an alternative solution to fiat currencies and commodities. Dubbed another best technology following the internet, blockchain offered answers to issues we have didn’t address, or ignored over the past few decades. I will not delve into the technical aspect of it but here are some articles and videos that I recommend:

How Bitcoin Works Beneath the Hood

A gentle introduction to blockchain technology

Ever wonder how Bitcoin (and other cryptocurrencies) actually work?

Fast forward to today, 5th February to be exact, authorities in China have just unveiled a fresh group of regulations to ban cryptocurrency. The Chinese government have previously done so last 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 avoid its citizens from undertaking any cryptocurrency transactions.

To know more about the Chinese government stance, let’s backtrack a couple years back again to 2013 when Bitcoin was gathering popularity on the list of Chinese citizens and prices were soaring. Worried about the purchase 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 limited supply, anonymity and lack of a centralized issuer, Bitcoin isn’t a official currency but a virtual commodity that can’t be used 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 related to Bitcoin.

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

4. Because of the anonymity and cross-border features of Bitcoin, organizations providing Bitcoin-related services must implement preventive measures such as for example 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 rather than mislead the general 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 its original form rather than to be exchanged with fiat currency. It cannot 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 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.

An identical 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) led to the publishing of another notice titled “Notice on Preventing Financial Risk of Issued Tokens”. Immediately after, ICOs were banned and Chinese exchanges were investigated and finally closed. (Hindsight is 20/20, they will have made the right 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 significant reasons cited by experts. Indeed, Chinese regulators have implemented stricter controls such as for example overseas withdrawal cap and regulating foreign direct investment to limit capital outflow and ensure domestic investments. The anonymity and simple cross-border transactions have also made cryptocurrency a favorite opportinity for money laundering and fraudulent activities.

Since 2011, China has played an essential 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 trade for stability.

With countries like Korea and India following suit in the crackdown, a shadow is currently casted over the future of cryptocurrency. (I shall reiterate my point here: countries are regulating cryptocurrency, not banning it). Without a doubt, we will have more nations interact in the coming months to rein in the tumultuous crypto-market. Indeed, some type 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 full 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 (I personally 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 country. Startups like Nebulas, POWERFUL Blockchain (HPB) and Bibox are also gaining a fair level of traction. Even giants such as Alibaba and Tencent are also exploring the capabilities of blockchain to enhance their platform. The list goes on and on but you get me; it will likely be HUGGEE!

equipment are also embracing blockchain technology and also have stepped up efforts in recent years to support the creation of a blockchain ecosystem.