After announcing a blanket ban on cryptocurrencies in September 2017, China’s central bank publicly called the move a success on July 7, 2018.
Unauthorized Financial Products Will be “Crushed”
On July 9, 2018, Yicai reported the statements of Pan Gongsheng, head of the Internet Finance Rectification Working Group, who noted that the country still holds a pessimistic view of ICOs, cryptocurrency trading, and “disguised” ICOs. The group was authorized by China’s State Council in 2016 to scrutinize illegal activities in the “internal finance” ecosystem, along with executing crackdowns specified by the Chinese government.
Since terming ICOs as an “illegal public finance” mechanism to facilitate money laundering and “disrupt the economic and financial order,” over 88 exchanges and numerous cryptocurrency businesses have moved to other “crypto-friendly” jurisdictions or have ceased operations altogether.
After the September 2017 ban, enterprising Chinese citizens opened bank accounts in neighboring Hong Kong, a region under China politically but following a different legal and regulatory structure, and cryptocurrency exchanges like Huobi and BitFinex set up additional offices in the city.
Gongsheng noted that several China-based token issuers had moved abroad after the ban, yet continued to market their product to Chinese investors. In his view, this is an illegal and illicit activity. Gongsheng stated, “Any new financial product or phenomenon that is not authorized under the existing legal framework, we will crush them as soon as they dare to surface.”
While no methods of wholly curbing Chinese exposure to cryptocurrency trading and ICOs were stated in the report, messaging giant WeChat is reportedly policing digital asset trader chats on their platform, as reported by Forbes in March 2018.
Chinese Influence on Crypto Market Overestimated
According to a report on local news Xinhuanet, Chinese investors now account for less than 1 percent of all bitcoin trading, despite accounting for over 90 percent of the world’s total trading volume in 2017. Notably, the government outlawed Renminbi-to-cryptocurrency trading before placing more extensive regulations and, as reported by Business Insider, even enforced a travel restriction on board members of OKCoin and Huobi, two of China’s largest cryptocurrency exchanges by traded volume. However, no immediate panic sell-off was observed at the time of the restriction news, which indicated China’s influence over the digital asset market was vastly overestimated.
The apparent hate towards cryptocurrencies is balanced by China’s embracing stance on blockchain technology. The country has launched several state-backed blockchain incubators and established a $1.6 billion “blockchain park” in Hangzhou in March 2018. Blockchain was also mentioned in the country’s “Five Year Plan” in 2017, and the state-owned China TV famously called the technology “ten times more valuable than the internet” in June 2018.