Why does China want to forbid cryptocurrency trade?
If you are into the subject of cryptocurrencies, you must have noticed that recently the topic of China’s attempt to ban the Bitcoin had gone literally viral. China’s quite conservative point of view when it comes to numerous subjects, has become famous worldwide. Is the ban the right thing to do? What pushed this giant to consider such moves? Let’s have a deeper look at the facts.
The official document issued by the government states:
- Before 20 September 6pm, exchanges shall come up with a detailed risk-free clearing plan, and send this plan to the office. Exchanges shall deal with their claims and liabilities properly, and insure that investors’ funds and virtual currencies are safe.
- Before 20 September 6pm, exchanges shall determine a bank account, which will be used for depositing user funds. All other accounts in banks and other non-bank payment service providers shall be canceled and reported to the Business Management Department of People’s Bank of China.
- Before 15 September midnight, exchanges shall publish closing announcements, and announce a schedule to stop the trading of all virtual currencies. New user registration shall be stopped immediately after the announcement.
- Shareholders, controllers, executives, and core financial and technical staff of exchanges shall cooperate fully with authorities during the clearing, while staying in Beijing.
- Exchanges shall report their developments daily to local authorities before the clearing is completed.
- Exchanges shall save all user trading and holding data, and send it to local authorities immediately in DVDs.
The document is signed: The office of the Leading Group of Beijing Internet Financial Risks Remediation, Sept. 15, 2017.
Cryptocurrencies (- a Tool) For Illegal Operations
Li Lihui, the former president of The Bank of China, currently a Senior Official at the National Internet Finance Association of China, told Reuters:
“Digital tokens like bitcoin or ethereum are stateless and lack the sovereign endorsement, a qualified issuing body or a country’s trust, are not legal currencies and should not be spoken of as digital currencies. They can become a tool for illegal fund flows and investment deals.”
As Sun Guofeng, the director general of The People’s Bank of China research institute, stated in an interview, the move to ban the practice of cryptocurrencies trade, as well as the creation of digital currencies is “necessary and timely.”
The reason given for the ban of practice of creation and selling cryptocurrencies, was as follows; there is no distinction between the currencies which are being studied and developed authorities such as the Chinese central bank, and the currencies such as bitcoin. According to Li Lihui the digital currencies developed by the authorities could be used for good, if the right regulations were applied.
What are the consequences for the cryptocurrency users?
As we read in the leaked documents, several bitcoin exchange offices in China have already announced that they are shutting down. The remaining ones will be required to follow their footsteps as soon as the law is enforced.
The good thing is that the users of cryptocurrencies will face no consequences for using the digital currencies and will be given a chance to withdraw their funds prior to the closure of the exchange offices nationwide.
Ban in China. What now?
Along with the growing popularity of the digital currency market, we are most likely to see the increased regulatory scrutiny of the cryptocurrency economy from Securities and Exchange Commission. As the SEC states, there have been a number of digital currency offerings that look quite suspicious. That pushed the SEC to issue a warning last July, and it is broadly expected to do more on the issue in the coming years.
Despite all these worrying facts, at the moment, it does not seem very likely that other states will follow the China’s footsteps. Back in 2013, the government of the US has clearly stated that the bitcoin trade is legally accepted within the country.
Since the government’s announcement, many national and international investors have poured millions of dollars into the cryptocurrency business, startups and development.
What will be the future of cryptocurrencies in the world? Do you think that China’s move was the right move? Share your opinions in the comment section below!
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