The Chinese government has taken a tough stance on Initial Coin Offerings, ICOs, as many have been found to be bogus methods of raising funds, while some have been used to transfer money for organized crime syndicates. In August, the government warned the pubic against illegal fund raising activities under the guise of “cryptocurrency ICOs” and has now, in one district in Beijing, has banned events that promote cryptocurrency events.
The subject of fake or bogus cryptocurrencies and the response by regulators across the globe has been a subject that we at Classiarius have studied since our inception in March of 2018. The issue is that coins are being issued, but the underlying applications are coming to market at a slow pace, or not even at all. Hence the real life applications of these new ideas has disappointed investors, sending digital currencies to new lows – down about 70 percent since the January 2018 highs when Bitcoin traded to nearly $20,000, now trading at $7,000 to $7,200 range in the past week.
Increased regulatory scrutiny in China has taken the country from the top rank of Bitcoin trading, but again, it still accounts for a substantial part of Bitcoin creation of “mining” processes. The Chinese central bank and regulators have prohibited the sale of cryptocurrencies, resulting in a thriving black market. ICOs were restricted last September – bitcoin-yuan trading has been shut down by the government as well.
A powerful statement was released by five government entities on August, 24, that warned about the risks of illegal funding operations under the guise of cryptocurrency and blockchain businesses. In short, the government is clamping down on a bogus industry. The People`s Bank of China, the Banking Regulatory Commission, the Central Cyberspace Affairs Commission, the Ministry of Public Security and the State Administration of Market Regulation all warned that illicit practices will not be allowed in the future.
Also, in the private sector, some payment channels and mobile payment systems have been shut down as well. Some social media accounts that publish information on cryptocurrencies have been shut down as well.
Despite this cryptocurrency crackdown, the government is encouraging the underlying technology of blockchain. In May, the President of China, Xi Jinging called blockchain a “breakthrough” technology. Also, this technology is supported through a series of books and articles, which focus on the education of readers on blockchain technology.
China is struggling with cryptocurrencies that have gone mainstream and are up to 80 percent bogus or fake. However, the reality is that blockchain provides hope for new technology driven companies that could be leaders in 2025 and beyond.