Is China Against Cryptocurrency?

The ICO (Initial Coin Offering), which is basically same as IPO but with cryptocurrencies is now prohibited in China. Unauthorized fundraising is a criminal offence since the Chinese ban put a block on trading and mining. However, Chinese authorities are quite enthusiastic about the blockchain technology, which lies in the basis of cryptocurrencies.

The actions of Chinese officials concerning ICOs raise a lot of questions. Why would the government want to hinder the development of a new financial branch that, besides all, carry huge economic profits to the country in the long run? Let’s not forget that China is, by far, one of the biggest mining pools along with the USA, Canada, and Iceland. Financial analysts define several reasons standing behind the actions of Chinese authorities.

  1. Eliminating chances of cryptocurrencies challenging government and bank authorities. Chinese government is in control of everything, up to private business of each of its citizens. Bitcoins, and many other cryptocurrencies do not allow proper monitoring and control that because of their decentralized nature, anonymous transactions, and extremely complex blockchain technology driving it.  
  2. Driving up costs. Many bitcoin mining firms were attracted to China because of cheap electricity, rent, and labour. With the ban of crypto mining, offshore businesses have to look for new places, where the same activities will be twice as expensive.
  3. Protecting environment. The least plausible of all, however, bitcoin mining does carry a serious impact on the environment. Mining is a very energy-consuming process and cheap electricity allows miners use their equipment at low costs, without caring about the environmental consequences.

 

Future of Cryptocurrencies in China

Despite the ban of crypto mining and trading, the latter is still possible due to over-the-counter market. The People’s Bank of China even tried to create its own cryptocurrency prototype. These and some other factors do not allow to consider China as completely anti-cryptocurrency. For example, recently, China became the first country to publish the rating of cryptocoins based on the three criteria, technology, application, and innovation. Surprisingly, bitcoin is rated as 13th in the rating, being superseded by less expensive and less liquid cryptocurrencies.

   At the same time, restrictions can negatively influence the development of blockchain technology. Many specialists put high expectations on blockchain in terms of security. The system consists of a number of coded elements that can be solved with special software only. This makes any kind of fraud virtually impossible. Also, with all transactions being anonymous, an identity theft is also impossible. By restricting bitcoin and other cryptocurrencies based on open blockchain, Chinese government raises the risks of miners shifting towards currencies with even less transparent transaction means.

All in all, cryptocurrency mining companies do move away from China due to legal restrictions.However, it does not seem like the end of the game for Chinese coin owners. The government and the banks has seized the highly promising blockchain technology and is soon to introduce it in security innovations. Moreover, cryptocurrency can be still traded, even though ICOs are restricted by the law.         

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