It is no secret that the Chinese government has always maintained a harsh stance towards cryptocurrencies. In contrast, however, even before the ICO boom, the Chinese Yuan made up more than 90 percent of the global Bitcoin trading volume in 2016. However, the Chinese government had already started warning its citizens of the dangers of Bitcoin as far back as 2013.
Towards the end of 2017, while the price of Bitcoin was soaring to unprecedented heights, many ICOs (initial coin offerings) came to the foe, and most of them were complete scams that robbed people of their hard-earned money. In a move to protect its citizens, China banned all ICO-related activities and initiated the inspection of 60 major cryptocurrency platforms.
China’s stance on cryptocurrency
Since September last year when the Chinese government declared a serious crackdown on over 100 cryptocurrency exchanges, China’s answer on the question of cryptocurrencies has remained an outright “No.”
Meanwhile, mobile payment services such as WeChat Pay and Alipay have turned Chinese cities into some of the most prominent cashless societies in the world. Consumers in China are “using their smartphones to pay for almost everything” ranging from transportation to meals and even luxuries such as a foot massage.
By the look of it, there is a huge market in China ready for the uptake of cryptocurrencies. South China Morning Post reports: “Despite multiple attempts by Beijing to shut down all local exchange platforms since September 2017, cryptocurrency trading has continued to prosper, with many Chinese exchanges attempting to skirt the ban by reincarnating themselves under different domain names.”
Even though experts believe that the news about the temporary ban on ICOs and cryptocurrency exchanges could dampen the efforts of novice cryptocurrency traders, most have found a way to use VPN software to get accesses to offshore crypto trading services.
Furthermore, despite the government’s crackdown on all things cryptocurrency related, the Chinese government by itself has shown strong evidence of being interested in behind crypto. It is believed that China is actually interested in developing a national cryptocurrency despite the hash stance.
China set to create a government-backed crypto
If claims by the IG Group, a financial and online trading company based in the UK, are anything to go by, China is on track to introduce its own national cryptocurrency. Granted, the claims by IG Group are bold, and there have been no official statements regarding the national cryptocurrency’s name or launch date acknowledge by the Chinese government.
However, IG Group, a company that has been providing educational resources on leveraged FX products and CFDs since 1974, insists that the government-backed crypto would be introduced alongside the Yuan. The aim of the Chinese cryptocurrency, according to IG Group, would be to give access to millions of Chinese citizens access to standard banking services.
More government control
Recently, the Chinese government has been paying a lot of attention to cryptocurrencies much to the discomfort of many market analysts. For some odd reason, the government’s center for information industry development continues to track and rank cryptocurrencies not to mention a crypto regulation deal signed between South Korean and China.
In light of these events, IG Group insists that the Chinese government’s vision is to use its own cryptocurrency to take back control over the country’s finance sector. Already, China is one of the countries with the biggest number of cryptocurrency miners and enthusiasts and with a high level of surveillance and government control, it would be easy to force these miners to mine for the state-owned cryptocurrency.
Even in the absence of an official statement, China has shown interest by conducting some tests with its own digital currency for interbank transfers. The aim, as it seems, is to provide a secondary digital currency that would function alongside the Yuan. This second digital fiat money would give the Chinese government more hands-on traceability of all transactions.
China state owner crypto spells doom for crypto
Market analysts believe that if China officially launches its own cryptocurrency, the results would be devastating to the overall crypto industry. IG Group experts acknowledge that it is unlikely for any government-backed cryptocurrency to kill-off Bitcoin; however, they admit that the smaller coins in the market would face tougher times.
Given that all foreign cryptocurrencies are forbidden in China, and with no signs of the ban getting lifted, a drop in the price of Bitcoin would be inevitable. IG Group explains that as the Chinese government compels miners to work on the national cryptocurrency, Bitcoin would have less power and a possible market collapse would occur.
China has already proven to be one of the biggest influencers of the cryptocurrency market. After the ban of ICOs and cryptocurrency trading exchanges last year, the cryptocurrency market has gone into a bear market that does not seem to be ending any time soon.
Final thoughts: a chance for a revival
For now, the future of Cryptocurrency in relation to China is anyone’s guess. Experts all over the crypto sphere express varying opinions on the matter. However, it remains clear that China has a bright future with the use of Blockchain technology. Already there are major Blockchain startups sprouting all over the country with major players such as NEO, QTUM, and VeChain gaining popularity and acknowledgment even from the government.
At the moment, even though China enforces a harsh stance on cryptocurrency trading, mining and investing, Chinese crypto enthusiasts can own cryptocurrencies, but they are not allowed to transact. Experts believe that Blockchain and crypto go hand in hand and that as the crypto market stabilizes, there is still a chance for cryptocurrencies to experience a revival even in countries like China.