September 4th in 2017 is a crucial date in the history of China’s cryptocurrency industry. It was on this date the Chinese authorities issued a document to ban all Initial Coin Offerings (ICOs) and ordered all domestic cryptocurrency exchanges to close. As we approach the first anniversary of this crucial date, China has dropped another bombshell on crypto enthusiasts in the country by funneling access points to the crypto industry.
Chinese regulators trimming access points to cryptos
A day after China banned all commercial events including related to cryptocurrencies, it has gone ahead and now plans to block more than 124 overseas crypto exchanges that are offering trading services to Chinese residents. A tweet realized by the Korean Cryptocurrency and Blockchain News that mentioned, also mentions Fiat payment channels will be highly monitored apart from Communication channels and Exchange blocks.
🇨🇳 – 🤦♂️ F that Coin.
Hint above for the word scramble below. pic.twitter.com/RnAzZgJVGm
— Korean Cryptocurrency & Blockchain News (@BlockchainROK) August 22, 2018
It was further reported that the agency will permanently shut down domestic websites and official accounts on the WeChat messaging app if they are found to be providing crypto trading and ICO services.
Tencent, the operator of WeChat, said in a statement that it has shut down these accounts permanently as they are,
“suspected of publishing information related to ICOs [initial coin offerings] and speculations on cryptocurrency trading.” The blocked accounts on WeChat come from some of the most popular blockchain news platforms including Jinse Caijing and Huobi News, whose apps and sites are still in operation. It cited regulations enacted earlier this month by the Cyberspace Administration of China, which, among other things, demand content providers within chat apps comply with “national interests” and “public orders.”
This ban comes as a shock to meaning local analyst and experts as the countries stance towards cryptocurrencies as the start of 2018 was fairly positive.
Activities around cryptocurrencies recognized as high-risk activities for the economy by the Chinese regulators
Like many regulators around the globe, China too is considering working around cryptocurrencies keeping investors protection in mind. According to Cai Kailong, former chief strategy officer (CSO) of Huobi exchange the Chinese government currently has a few motivations that can be listed behind this ban. He demonstrated his point of view on the crypto venues ban in an interview with Tencent Financial.
According to him, footloose capital is pouring into the crypto market and with building pressure of RMB depreciation. Due to the current downturn, the high-net-worth individuals (HNWI) in China desire to transfer their assets and cryptocurrency is favored by HNWI due to its efficiency in cross-border transactions and its anonymity. As thus, Chinese financial authorities are more concerned about digital assets.
Secondly, there are too many schemes-liked crypto promotions. As Chinese government crackdowns domestic irregular P2P internet financial platforms, many practitioners, and investors have pulled out from those P2P platforms and enter the relatively promising cryptocurrency market.
Experienced crypto investors with a large number of digital assets are able to withstand the risk of price fluctuations. However, those former P2P investors are less likely to take such a risk. Cai also believes that many of the promotion activities and marketing methods adopted from the P2P industry are identified as high-risk activities that similar to pyramid schemes, which brings significant risks to the crypto industry.
The third motivation for Chinese regulator would be to revisit the effectiveness of specific policies. It a common practice with regulators in China to revisit decisions and policies on their first anniversary to determine whether any change is required as thus the clampdown on crypto promotion activities could be a portent of further strict government regulations.
Whatever may be the reason the clampdown by the Chinese is not a good especially the magnitude and the promise the country can offer to the crypto community. Next few days should give us a clearer indication of governments stance in the country.
What do you think is the actual reason behind this clampdown on activities? Do let us know your views on the same.
Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on Twitter at @KoinKing1 or connect with me on linkedin.