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Why was China reluctant to cryptocurrency and what changed their mind?

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Why was China reluctant to cryptocurrency and what changed their mind?

China’s government stopped all the activities related to cryptocurrency. Let’s see what made them stop all the crypto related activities.

By banning fundraising through initial coin offerings and shutting down all mainland digital currency exchanges, China’s government started an all-out war against bitcoin and other digital currencies.

On 15th October 2017, two of the largest cryptocurrency exchange companies announced that they will stop the trading activities in cryptocurrency and Yuan as on 31st October 2017. A day earlier, a Shanghai based cryptocurrency exchange company announced that they would stop all the trading activities on 30th September 2017.

A centralized effort from Beijing was seen to restraint or even eliminate cryptocurrency from mainland as the three biggest cryptocurrency exchange companies along with 20 other companies were concluded. The price of bitcoin was pushed below US$3,000 briefly as a result of governments decision.

In a week’s time when initial coin offering was banned, Beijing cracked down Bitcoin, Litecoin, Ethereum and other cryptocurrencies, defining it as unauthorized fundraising and also a criminal offense in China.

The popularity of cryptocurrency had increased amongst the bankers and regulators. JPMorgan’s chief executive Jamie Dimon, called bitcoin a fraud and also threatened to fire the employees at his bank if he found that anyone in there was trading in virtual currency.

The analyst regarded the notice which was issued by China’s seven government agencies, led by the People’s Bank of China, as a death sentence to all the ICOs and the centralised trading currencies.

“For China’s central bank, the cryptocurrency market is a hot potato,” said financial technology expert Cai Kailong, the founder of Destoned Asset Management, a private equity fund. “They need to guard against risks from bitcoin speculation and any illegal activities such as money laundering.”

China had banned all the crypto related activities for a particular reason. Zhao Xijun, a finance professor at Renmin University in Beijing, said that the authorities had taken this harsh step because of illegal fundraising schemes involving fake digital coins and thought this was an easy way out.

In 2017, according to an official jurisdiction database virtual currency related cases reached 200 which is six times more than 2013.

“Banning ICOs is just a risk management measure on the surface … what the central bank really wants is to get back the power of control,” Zhou Yuzhong, the chief executive of Shanghai-based RUFC Blockchainsaid. “I still don’t believe the People’s Bank of China would prefer moving bitcoin trading underground or overseas,” he said. “Rather, the central bank may want to keep a few exchanges that are in compliance with regulations.

Hoping to complete the process at the end of 2019, China has begun to create national standards for blockchain technology. China’s regional and national government has shown support towards this platform. They are planning to implement top-level, or “top down,” standards to compete in the global market. Reports say that the plan for the standards been published and soon a committee to handle the development will be set.

Li Ming, director of the Blockchain Research Office of the Electronic Industry Standards Research Institute of the Ministry of Industry and Information Technology said that the standards will include requirements for interoperability, safety, and reliability.

China has not said anything about the cryptocurrency exchange, but they are sure impressed with the blockchain technology and want to implement it in different departments. They believe that the technology can lead to technological innovation and even technological development.

In March, China’s national government set up the Blockchain Registry Open Platform (BROP) through the country’s central bank. It aims to develop intellectual property rights on the blockchain.

Numerous local governments around the country are also pushing the development of the technology. In April, Shenzhen announced its first blockchain venture capital fund. The initiative is led by Shenzhen Angel Capital Guiding Fund. Hangzhou has been looking at its development after setting up a Blockchain Industrial Park.

Additionally, the technology was high on the agenda at Guangxi Autonomous Region’s annual “Two Sessions” meeting in January. Liu Jianhong, deputy secretary of the region’s Science and Technology Department, said it could bring new industries to the area and revitalize existing sectors.

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