In September 2017, the Chinese government set out to battle the fraud it was seeing on a regular basis on Chinese markets. The level of scams and fraudulent activities taking place in markets across China had become a concern for the nation that has been challenging to become the biggest economy in the world for the last two decades. The ban addresses many different aspects of the work of cryptocurrency mining, trading, and asset movements that were previously legal in the People’s Republic of China. The biggest impact on the markets over the course of the last two years has been the ban on the release of Initial Coin Offerings designed to raise money for cryptocurrency-based exchanges.
Fraud and illegal behavior in China
The work of cryptocurrency exchanges and traders in China has been growing since the first piece of legislation was introduced by the Chinese Government recognizing cryptocurrency as a protected form of currency. The currency has always had something of a difficult history in China as the legal status it enjoys has been questionable to say the lead. Despite the fact Bitcoin and other cryptocurrency were recognized by the Chinese Government as a form of currency and protected intellectual property, the ruling class of China has failed to completely embrace the new technology.
The majority of problems with cryptocurrency have been associated with instances of fraud that have taken place at a huge level. As the Chinese middle class has appeared, more people than ever are attempting to invest their money and falling prey to cryptocurrency scams. These scams include the PlusToken group that operated unchecked for long enough to scam an estimated $3 billion from potential cryptocurrency investors, CoinDesk reports. The Chinese government was determined to have a positive effect on the illegal scams and fraudulent companies and had been prosecuting them aggressively to bring an end to the associated problems.
The ban comes into force
Tax and regulation evasion has been the cause of major concern in recent years for the People’s Republic Bank of China. The nation has been expanding its reach across the world with public-private partnerships forming a major part of the development of the Chinese economy as it invests around the world. Investopedia reports levels of fraud have been climbing over recent years as foreign transactions have been expanding over the last few years. Non-compliance with the regulations needed for foreign transactions is now a major problem for Chinese regulators who feel they need to take a positive stance against such crimes.
Foreign exchanges and Shanghai-based cryptocurrency exchanges have all faced closure following the ban on cryptocurrency trading put in place in 2017. One of the largest exchanges in the world, BTCC bitcoin exchange in Shanghai was forced to close its doors because of the ban on cryptocurrency trading. As the band approaches its second anniversary with the ban on trading remaining in place, the Chinese government has not reneged on the initial steps taken to curtail the most stringent aspects of the ban.
A fall in prices across the world
As one of the largest trading areas in the world, China has a major impact on the possible success or failure of new markets with some experts concerned about the future of cryptocurrency. The ban from Chinese authorities covered both ICO’s and over the counter trades that had been the subject of many fraudulent schemes.
After the announcement of September 2017, the closure of the Shanghai-based Bitcoin exchange led to a stunning six percent fall in the global price of Bitcoin. Bitcoin markets and traders have been departing China at regular intervals over the last two years to leave a gap in the market being filled by small trading communities.
Why is the ban “fuzzy?”
The “fuzzy” nature of the ban on cryptocurrency trading is seen as such because of authorities turning a blind eye to growing communities of cryptocurrency investors coming together online. In the middle of 2019, the Chinese Government states the volume of trades involving cryptocurrency in the nation had fallen from 90 percent to just one percent as the ban was working as expected.
However, scratching the surface of the Chinese markets brings a different view of the way the markets are operating in practice. Smaller cryptocurrency exchanges are still operating across China where over the counter trades can be made in Bitcoin and other token-based currencies.
The largest alteration to the Chinese markets comes with the development of online cryptocurrency trading communities operating as WeChat groups. The instant messaging platform allows closed groups to operate using encrypted messaging services that provide a way for cryptocurrency trades to be made without being identified by the Chinese Government. These trades are largely small personal trades using closed messaging groups guarded tightly by administrators.
The markets will return
The question the majority of experts in the markets have for members of the Chinese Government is how long they can afford to maintain the ban on cryptocurrency trades. The Chinese Government has been working towards the development of a new era in cryptocurrency trading designed to deflect the chances of major fraud and scams taking place on the mainland of the nation.
Most traders who have already departed the Chinese mainland for new areas of the world agree their moves out of China will be short-term, largely because of the huge sums to be made from cryptocurrency trading. Smaller nations, such as Belgium are already exploring the opportunities facing them in bringing cryptocurrency trading markets within their borders. At a time when the Chinese Government has seen its first plateau in the growth of the economy, the chance to make trades on cryptocurrency markets cannot be ignored for the long-term.
Instead, the rise of new markets and trading opportunities brought about by cryptocurrencies cannot be ignored for prolonged periods of time. Moving across the ocean to other areas of the world may be a short-term solution for many trading companies but the majority believe the ambiguous nature of the ban will allow a return to cryptocurrency trading to take place in China, sooner rather than later. As cryptocurrency is embraced by nations around the world, the school of thought for the majority of traders and financial institutions is that the Chinese Government cannot afford to ignore this for the long-term. The development of various closed WeChat groups shows the majority of Bitcoin entrepreneurs will not be denied when it comes to the rise of Bitcoin on the Chinese mainland. If these entrepreneurs continue to achieve success in the coming months, the need for greater regulation will drive the Chinese Government to reverse its ban and find new regulatory services for these markets to reopen legally.