China announced a ban on the use of foreign exchanges to trade cryptocurrencies last Tuesday. The move is the latest in a string of Chinese injunctions against the industry, but might also be related to efforts of the Chinese government to promote its own cryptocurrency based on ERC20 code.
Government media outlets like thepaper.cn and Financial News reported the moves were to "prevent financial risks," according to the South China Morning Post (SCMP). It is worth mentioning that The Financial News is affiliated with the People's Bank of China (PBoC).
The move follows a crackdown on domestic exchanges last September, shutting down major hubs like OKCoin and BTCC. According to Technode, the state claims that 90% of global crypto transactions were in yuan, slumping to 1% following the crackdown.
That is not exactly true, and the Chinese government admitted as much with the new announcement.
“ICOs and virtual currency trading did not completely withdraw from China following the official ban," SCMP quoted the PBoC as stating. "Many people turned to overseas platforms to continue participating in virtual currency transactions."
Many Chinese traders have turned to offshore exchanges. Local exchange Binance relocated to Tokyo, but claims that Chinese traders still represent its fourth largest user demographic and that business is still booming with Chinese customers fueling it.
Authorities in January cracked down on initial coin offerings (ICOs) and mining operations. The latter was a stark reversal of previous policies which offered tax incentives and electricity rebates. Those incentives attracted companies from abroad, but now mining operations like Bitmain are moving out of China. Some sources reported to Bloomberg that authorities were concerned mining was adversely affecting electricity use.
However, there could be another motivation. Energy and fraud might not be the central government's main concerns. Beijing is pursuing a crypto-like version of its own fiat currency, under the control of its central bank. The People's Bank of China stated in November that its coin would lower transaction costs. The plan also predicts greater access to financial services nationwide.
On the other hand, China prefers to have tight control over the economy, even in the current era of unprecedented growth.
The country's five-year plans represent a Chinese economic tradition. If cryptocurrencies prevail, Beijing would have a weaker hand implementing those detailed plans. China's powerplay would make transactions more traceable and allow more oversight on financial operations, according to the MIT Technology Review.
China's neighbors have taken different approaches to the burgeoning industry. Tokyo has been more encouraging, while South Koreans are extremely enthusiastic. The Korean government made efforts in January to reinforce regulations and tax payments, while dispelling rumors of an impending ban. India's government created anxiety on exchanges last week, when its finance minister stated that he wanted to bring an end to the trade.
Government media outlets like thepaper.cn and Financial News reported the moves were to "prevent financial risks," according to the South China Morning Post (SCMP). It is worth mentioning that The Financial News is affiliated with the People's Bank of China (PBoC).
The move follows a crackdown on domestic exchanges last September, shutting down major hubs like OKCoin and BTCC. According to Technode, the state claims that 90% of global crypto transactions were in yuan, slumping to 1% following the crackdown.
That is not exactly true, and the Chinese government admitted as much with the new announcement.
“ICOs and virtual currency trading did not completely withdraw from China following the official ban," SCMP quoted the PBoC as stating. "Many people turned to overseas platforms to continue participating in virtual currency transactions."
Many Chinese traders have turned to offshore exchanges. Local exchange Binance relocated to Tokyo, but claims that Chinese traders still represent its fourth largest user demographic and that business is still booming with Chinese customers fueling it.
Authorities in January cracked down on initial coin offerings (ICOs) and mining operations. The latter was a stark reversal of previous policies which offered tax incentives and electricity rebates. Those incentives attracted companies from abroad, but now mining operations like Bitmain are moving out of China. Some sources reported to Bloomberg that authorities were concerned mining was adversely affecting electricity use.
However, there could be another motivation. Energy and fraud might not be the central government's main concerns. Beijing is pursuing a crypto-like version of its own fiat currency, under the control of its central bank. The People's Bank of China stated in November that its coin would lower transaction costs. The plan also predicts greater access to financial services nationwide.
On the other hand, China prefers to have tight control over the economy, even in the current era of unprecedented growth.
The country's five-year plans represent a Chinese economic tradition. If cryptocurrencies prevail, Beijing would have a weaker hand implementing those detailed plans. China's powerplay would make transactions more traceable and allow more oversight on financial operations, according to the MIT Technology Review.
China's neighbors have taken different approaches to the burgeoning industry. Tokyo has been more encouraging, while South Koreans are extremely enthusiastic. The Korean government made efforts in January to reinforce regulations and tax payments, while dispelling rumors of an impending ban. India's government created anxiety on exchanges last week, when its finance minister stated that he wanted to bring an end to the trade.