Instead, the technology became a worthy topic of discussion for governments, having time and again demonstrated its real-world practicality, revealing great promise above the noise of the digital token market. This brought the focus of regulation firmly into the picture, it was an inevitability that the pro-crypto-community didn’t want to face, but one that the blockchain industry needed to.
Cryptocurrencies and initial coin offerings are forever part and parcel of the blockchain sector, and for one to exist so must the other; therefore, governments, lawmakers and regulators have taken numerous, nuanced strides, to accommodate the technology or at least parts of it.
In this first of a three-part regulations-focused series, BTCManager will look into several countries and their past, present and future crypto outlooks. To begin with, we’ll take a look at China, a nation where ICOs and crypto-traders dare not tread.
China has notoriously been one of the earliest and harshest critics of cryptocurrencies and initial coin offerings (ICOs).
When it banned ICOs in late 2017, no one knew what this meant for the future of the industry and naturally, the market wept. Though to the surprise of everyone, China quite quickly established itself as a global blockchain bull and has been massively investing and harvesting blockchain technology for huge projects across many of its sectors.
In March 2013, the country’s bank governor announced that China does not recognize cryptocurrencies as legal tender or as a viable retail payment option. In the winter of 2013, China bore its teeth again, and prohibited banks as well as payment companies from engaging with bitcoin as a currency. In December the same year, the government released a circular that officially deemed bitcoin a “virtual commodity.”
From then on China was relatively quiet regarding crypto regulations; that is of course until a fateful day (September 4, 2017) when the government brought into effect a total ban of ICOs, which was introduced as a means to protect investors and curb financial risk.
As per the ban, ICOs in China were also required to return token assets to their investors.
The People’s Bank of China (PBoC) declared its intentions to develop a state-backed digital currency in January of 2016. Otherwise known as a central bank digital currency (CBDC), October 2017 saw reports which revealed that the PBoC had successfully trailed a CBDC prototype utilizing distributed ledger technology (DLT).
Cryptocurrency exchanges were also hit hard by the sweep of new rules including Huobi, which at the time ceased trading, packed up and moved operations to Hong Kong, Singapore, and South Korea. The new regulations meant that it was illegal for Chinese mainlanders to trade cryptocurrencies unless they operate offshore. Huobi then managed to seize this opportunity and go on to become a giant, with a trading volume that presently ranks it in fourth place globally according to CoinMarketCap.
Li Huo, Managing Director of Huobi Capital, spoke at the Dezentral Summit in Berlin, Germany, where he espoused optimistic views on the future of the technology in China, which has been feverishly adopting blockchain technologies patent after patent.
While it doesn’t have the greatest track record with the monetary facet of blockchain, China has been pouring money into developing the technology for practical purposes, utilizing it to prevent tax evasion, upgrade payment systems at major ports, and verify evidence. It is expected that China will be a leader in the blockchain field according to a study conducted by PricewaterhouseCoopers (PwC).
In July 2018, it was reported that Jiangsu province’s capital city, Nanjing, was to invest $1.48 billion into blockchain technology in a bid to foster domestic projects. Around the same time, the city of Hangzhou also received a $1.6 billion investment which has already opened an Industrial Park for blockchain startups. Furthermore, “mega-city” candidate Xiong’an New Area partnered with blockchain development company ConsenSys in the bid to build a “Dream City.”
Perhaps by keeping cryptocurrencies and ICOs out of the equation, China has been able to apply ample focus into developing blockchain technology at an industrial, private, and public level.
Looking ahead to 2019, it’s tough to say whether or not cryptocurrencies will ever have a place in China, though plans to introduce a CBDC are well underway. In December it was reported that what may have been the last chance for this facet of the tech to exist in China, was dropped. Security token offerings (STOs) recently had the central bank hammer come down on them with the PBoC declaring that the “alternative” fundraising method is also illegal.
Regardless of cryptocurrency and related activities, the government is pressing onward, and in 2019, “blockchain standards” are expected to be published by a state-owned organization, guidelines off which the domestic industry can be expected to thrive.