Following the first article which analyzed China’s somewhat complicated relationship with the broader cryptocurrency world, Part 2 of the series more closely examines the positive aspects emanating from Chinese cryptocurrency despite the ill-intentions from officials. Despite the supposed banning of cryptocurrency in China, the regulations have not diminished the Chinese crypto enthusiasts’ ability to not only participate in cryptocurrency-related activities, but also accumulate substantial wealth for themselves, in majority of instances.
Cryptocurrencies Continue to Thrive Despite Government Crackdown
Despite the common belief that China and cryptocurrencies are two antipodal contrary actors following the infamous banning on all crypto-related activities by China, the situation may not be as harmful as it seems.
It was in September 2017; the cryptocurrency community was rocked by the news that China was introducing a blanket ban on cryptocurrency activities. Following this announcement, the price of Bitcoin plummeted by almost $1000. Irrespective of the ban, China still enjoys massive influence in the cryptocurrency universe and subsequently has much leverage. A recent report by Princeton University implied that China could crush Bitcoin and by default all other major altcoins. However, even with these developments, it would suffice to say that cryptocurrency clampdown has been exaggerated and the embryonic industry continues to succeed.
To enjoy proof of a blossoming cryptocurrency sector in China, CoinMarketCap.com would be a good source of information. OKEx, Xbtcc, ZB and even Binance, which initially was created in China, are among the biggest exchanges worldwide measured by daily volume, and new platforms for digital trading assets are being launched on a regular basis in China. The same applies to crypto — wherein the top 50 there are three entries from China (Neo, QTUM and Metaverse ETP).
There’s no denying that China has banned ICOs — a stance the country would very often reaffirm — however, the clampdown failed to affect projects that held an ICO before the implementation of this ban.
There are very often discrepancies between what China says officially and what the reality is. This is true of even non-cryptocurrency related regulations, so the policies generally should not have much thought attached to them. Legally, blockchain and cryptocurrency continue to be considered a grey area, but the country is making substantial progress in developing the technology and has grand ambitions to conquer the West.
Chinese Traders Still in Profit Despite Tighter Scrutiny
Many industry analysts are steadfast in their belief that Chinese investors will continually find ways to bypass the cryptocurrencies trading ban and thus making it nearly impossible for authorities to initiate a complete shutdown on trading.
Despite China blocking access to 124 offshore crypto-exchanges that provided trading services to Chinese investors, along with numerous other attempts by regulators to close down all local exchange platforms since September 2017, cryptocurrency trading has continued to flourish. Many Chinese exchanges are circumventing the ban by re-introducing themselves under different domain names.
By moving their servers outside of mainland China and through foreign legal entities registration, competition among exchanges for the Chinese market continues to intensify.
A few select experts within the industry acknowledge that in the short term, trading interest among inexperienced cryptocurrency enthusiasts could be disheartened, albeit temporarily, by the developments. However, over the longer term, there remains doubt if access to foreign exchanges can ever indeed be abolished.
Traders still have to buy Tether (USDT) with Yuan. Tether is seen as the primary option as stablecoins markedly are less volatile than Bitcoin. The decentralized P2P exchanges only assist the trading process between a buyer and a seller after they have completed full KYC and AML requirements before the execution of any trades.
Chinese traders who want to purchase Tether either have to send money to an exchange via bank transfer, or they could use an online payment platform of their choice. Following the purchase of Tether, Chinese traders can use any crypto-to-crypto exchange by using a Virtual Private Network (VPN).
At this time, China still hasn’t initiated a ban on the use of VPNs, but Chinese officials are actively trying to prevent the payment services mentioned above from executing any crypto-related transactions. Ant Financial (formerly Alipay) has committed to blocking any cryptocurrency trading related accounts. However, there remains widespread skepticism across industry experts towards the likelihood of identifying and banning such transactions.
Chinese Rich List Now Has a Number of New Cryptocurrency Entrants
The most recent edition of China’s wealthiest individuals now includes 13 cryptocurrency titans, whose business interests range through a wide variety of topics. This is especially impressive considering the prolonged bear market and the government’s crackdown on digital currency assets.
The list, compiled yearly by the Huran Research Institute, features individuals within China with a net worth of at least USD 209 million. Yet, for the very first time this year, many prominent cryptocurrency related individuals appeared on the list. Huran recognized blockchain is the fastest growing industry, as summarized in the takeaways of its report.
As expected, Jack Ma, founder of Chinese e-commerce powerhouse Alibaba, tops the list. Although the company is not so much cryptocurrency-orientated, it must be noted that Alibaba is becoming increasingly involved in blockchain and cryptocurrency.
Micree Zhan Ketuan, co-founder of Bitmain, was among the top 100 wealthiest people in China, ranked by the report. Bitmain’s co-founder Wu Jihan was ranked 204th, with a net worth of approximately USD 2.37 billion.
The leaders of some of the world’s top cryptocurrency exchanges also had placed on the list. Zhao Changpeng, founder of the world’s largest cryptocurrency exchange Binance, was the third highest ranked industry behemoth with an estimated net worth of USD 1.67 billion.
The increasing wealth of China’s cryptocurrency moguls is all the more distinguished due to having absorbed the volatility in cryptocurrency prices this year. Admittedly, the crypto related entrants on the list are pretty minor players when compared to the more vastly affluent other entries. However, cryptocurrency is still at its nascent stage, and the report reaffirms the belief that blockchain is a rapidly developing sector. As such, it is conceivable to portray this report as a barometer of progression within the crypto sector.
Chinese Investors Continue ICO Participation Circumventing Ban
Despite the ICO ban that was introduced in February 2018, as well as restriction on cryptocurrency trading, Chinese newspapers have admitted that ICO participation is greater than ever.
Among the newspapers, The Voice stated that the intended crackdown does not have the desired effect and that ICOs remain more popular than ever. Chinese exchanges have moved offshore and continue to provide investors with the services they need to take advantage of new cryptocurrency services, defying the government regulations.
The article states that upon the announcement of the ban, ‘the hot money network’ of cryptocurrency exchanges was quiet, but subsequently, platforms moved overseas and set up infrastructure to provide services to mainland users as foreign companies.
The initial effectiveness of the ICO ban was to silence some projects, but they continue to thrive via veiled attempts such as IMOs, airdrops and redomiciling.
Companies have been able to sidestep the ban by having airdrops in which tokens are distributed for free. As a result, the issuers of such airdropped tokens enjoy the marketing exposure that helps them gain momentum in the broader community.
Whether or not China will ever lessen regulation concerning ICOs is still debatable, but at this very moment, the industry continues to enjoy rich progression.
The last part of this series will take a closer look at China’s overall role in the cryptocurrency market. Yes, there have been several bans that aim to crackdown cryptocurrency activities completely, but as this article has shown, the desired outcome has been marginal at best. So how does everything correlate? Moreover, what could be the future of cryptocurrency in China? All will be thoroughly debated in the next article.
Edited based on original article published on BLOCKZONE, leading digital media, events and information services company of GBIC
