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Why Has China Declared War on Bitcoin and Digital Currencies?

China’s supervision is starting an all-out fight opposite bitcoin and other digital currencies by banning fundraising by initial silver offerings and shutting down all mainland digital banking exchanges.

Two of a largest cryptocurrency exchanges in China, OKCoin and Huobi, released statements on Friday night observant they would shutdown all trade between bitcoin and a yuan by Oct 31. A day earlier, BTC China, a Shanghai-based cryptocurrency exchange, pronounced it would stop trade as of Sep 30.

The stop of operations of a 3 biggest cryptocurrency exchanges, along with during slightest 20 other smaller exchanges in China, shows a centralized bid from Beijing to quell or even exterminate cryptocurrencies on a mainland. The government’s preference pushed bitcoin prices subsequent US$3,000 fast before they rebounded over 20 percent.

Beijing’s crackdown on bitcoin, Litecoin, Ethereum and other cryptocurrencies comes only over a week after it criminialized all forms of initial silver offerings (ICO), defining a activity as unapproved fundraising – a rapist corruption in China.

The recognition of cryptocurrencies and conjecture in them has lifted eyebrows among required bankers and regulators. JPMorgan’s (JPM) arch executive Jamie Dimon called bitcoin a rascal this week and threatened to glow any worker during his bank found to be trade in a practical currency. The British financial watchdog has sent a warning reminding a open of a risks of ICOs and a US Securities and Exchange Commission has pronounced it competence umpire initial silver offerings.

Few, however, have struck as tough as Beijing. A notice released by China’s 7 supervision agencies, led by a People’s Bank of China, progressing this month was regarded by analysts as a genocide judgment for ICOs and a centralised trade of cryptocurrencies.

“For China’s executive bank, a cryptocurrency marketplace is a prohibited potato,” pronounced financial record consultant Cai Kailong, a owner of Destoned Asset Management, a private equity fund. “They need to ensure opposite risks from bitcoin conjecture and any bootleg activities such as income laundering.”

The latest attack on cryptocurrencies by a Chinese authorities coincided with Beijing’s attempts to rein in all forms of financial risks forward of a pivotal Communist Party Congress due to start subsequent month.

Fundraising schemes, either by online peer-to-peer lending or pyramid sales, have mostly led to protests when they collapsed, creation Beijing quite heedful of fast swelling ICOs.

As many as 65 ICO projects were finished in China in a initial 7 months of this year, lifting an estimated 2.6 billion yuan (US$397 million), according to a state-backed internet financial confidence committee.

The National Internet Finance Association, an attention body, pronounced in a “risk reminder” on Wednesday that bitcoin and other practical currencies were “tools for rapist activities of income laundering, drug deals, bootlegging and bootleg fundraising”.

Along with a executive bank, a 6 other regulators concerned in a latest fight opposite digital currencies are China’s Office of a Central Leading Group for Cyberspace Affairs, a Ministry of Industry and Information Technology, a State Administration for Industry and Commerce, a China Banking Regulatory Commission, a China Securities Regulatory Commission and a China Insurance Regulatory Commission.

Zhao Xijun, a financial highbrow during Renmin University in Beijing, pronounced prevalent bootleg fundraising schemes involving feign digital coins had pushed a authorities to consider that a sweeping anathema on exchanges competence be an easy approach out. The series of justice rulings on cases associated to practical currencies reached over 200 final year, about 6 times a sum in 2013, according to an executive authorised database.

“There has been an apparent boost of such cases. So a disastrous change of bitcoin is removing larger,” Zhao said.

The People’s Bank of China, however, was eager about formulating a possess emperor “digital currency”. China’s executive bank administrator Zhou Xiaochuan privately got concerned and a special digital banking investigate hospital was combined during a bank early this year, headed by a former executive bank official.

Zhou told a press discussion in Mar a executive bank would inspire a growth of digital currencies – including blockchain technologies that record exchange in practical currencies – and would try to control risks.

Six months later, a executive bank has acted as if things were about to run out of control, according to Zhou Yuzhong, a arch executive of Shanghai-based RUFC Blockchain, who has created dual books on a growth of digital banking in China. 

“Banning ICOs is only a risk supervision magnitude on a aspect … what a executive bank unequivocally wants is to get behind a energy of control,” he said. “I still don’t trust a People’s Bank of China would cite relocating bitcoin trade subterraneous or overseas,” he said. “Rather, a executive bank competence wish to keep a few exchanges that are in correspondence with regulations.”

The executive bank’s distrust of bitcoin, essentially a decentralised currency, became open in late 2013 when it and 5 supervision ministries released a matter aiming to remonstrate a open that bitcoin would never be strictly be permitted as a banking in China.

The matter sent bitcoin’s cost into a unemployment that knocked dual thirds off a value from a rise during a time of 7,588 yuan in Nov 2013. Bitcoin, however, rallied and started to strike one new high after another.

Bitcoin reached about 25,000 yuan progressing this week in China before plunging to 17,000 yuan per silver on Friday after a announced closure of exchanges. However, a cryptocurrency’s vexed value is still some-more than double a cost during a commencement of this year, according to bitcoinity.com.

After a turn of regulations on exchanges progressing this year, China’s share of a tellurian bitcoin marketplace has declined significantly to reduction than a third of a former value today.

Cai during Destoned Asset Management pronounced China’s crackdown would not stop investors from relocating their bitcoin to accounts in other countries that were some-more passive of cryptocurrencies, such as Japan, that accepts bitcoin as a authorised remuneration method.

It will be quite wily for a Chinese authorities when it still wants to use blockchain technologies, he added.

“Many of a blockchain-based products are financed by bitcoin,” Cai said. “Those who pursue blockchain are also chasers of bitcoin. It’s tough to mangle a tie between them.”

Read a original article on South China Morning Post. For a latest news from a South China Morning Post download a mobile app. Copyright 2017.

Article source: https://www.thestreet.com/story/14308372/1/bitcoin.html