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Is China’s Cryptocurrency Ban A Sign Of Things To Come?

The Chinese government have taken the somewhat controversial decision, and ordered several Bitcoin and other cryptocurrency exchanges to close. The ban seems to have taken the industry by great surprise, given that China has the world’s largest cryptocurrency market – around 80% of Bitcoin transactions take place in yuan.

The worrying thing is what effect this ban will have on cryptocurrencies as a whole. Is the ban in China, just a sign of things to come, and will other countries follow suit?
We take a look into the reasons behind the ban, and the short and long-term effects of this.


Why have China banned cryptocurrency?

Initially, China placed a ban on all initial coin offerings (ICO’s) after they came under great scrutiny from officials to prevent fraud and illegal fundraising.

Because an ICO is basically an unregulated way to raise funds for a new cryptocurrency venture. This is because you can essentially bypass rigorous and regulated processes that you would normally have to go through. During each campaign, a percentage of the new currency is sold to backers in exchange for money, or another cryptocurrency.

The cryptocurrency firm must create a whiteplan explaining how much money is required, and what it will fulfil upon completion. During the campaign, these crypto coins can be purchased (known as tokens), and if the ICO is successful, these funds will then be used to launch the new currency. The problem lies when the campaign fails though. The funds are meant to be returned to the backers; however, this is incredibly difficult to regulate, and why China eventually banned them completely.

What effect will this have on cryptocurrencies?
The truth is that China’s recent ban on ICO’s might not have been as unexpected as first thought. It also doesn’t mean that regulators are completely shutting the door on all cryptocurrencies. The recent ban is likely to hurt local developers the most, as they will now have to look elsewhere to fund their digital projects.

What came as more of a shock is when China announced that it would be suspending all operations in cryptocurrency exchanges by the end of the month. As we have already said, China has the world’s largest cryptocurrency market, so this ban will inevitably have an effect on other cryptocurrencies.

Already, the ban has seen Bitcoin suffer, as the currency plummeted in value not long after the ban was announced. The value of the currency dropped by $500, after the ban was first announced, and it is unknown if it will fall further, as more closures take place.

News initially sent the prices of Bitcoin plunging, and everyone is asking whether this will have a lasting impact on cryptocurrencies or whether this was an initial plunge that will soon pick up again.

The good news is that, although it is still early days, evidence would suggest that it is in fact the latter that is happening. Bitcoin, in particular, has surged more than 390% since the start of 2017, so this 10% price drop that was seen after the ban did not damage the overall price of Bitcoin. In fact, within just two days of the announcement, the prices had started rising again.

Will other countries follow suit?
Everyone is now wondering if China’s ban will see other countries following, fearing that this will have a major detrimental effect on cryptocurrency as a whole. We must remember that Bitcoin is already banned in several countries, and China has just added to this list, rather than starting it.

Bangladesh, Iceland, Thailand and Sweden, are among the countries, where Bitcoin, if not all cryptocurrencies are banned. What made China all the more shocking was the fact that they had the world’s largest cryptocurrency market.

The point is though, that China simply adds to the already growing list. This suggest that countries have long been banning cryptocurrencies, and less that it is an immediate sign of things to come. As long as demand for the currencies stays high, there is no reason that the price should falter dramatically.

References And Further Reading:
• The Verge; China tightens cryptocurrency ban with new directive
• The Diplomat; China’s Crackdown on Cryptocurrency Trading – A Sign of Things to Come
• Cryptocoins News; Chinese Bitcoin Exchange Executives Banned From Leaving The Country: Report
• CNBC; ICO crackdown may just be the start: China is reportedly planning tighter cryptocurrency rules
• Fortune; Cryptocurrency Chaos as China Cracks Down on Initial Coin Offerings
• Fortune; China is shutting down all of Beijing’s Bitcoin and cryptocurrency exchanges
• Reuters; China hits booming cryptocurrency market with coin fundraising ban
• Business Insider; Bitcoin drops $500 after more reports China will ban cryptocurrency exchanges
• The Register; China bans crypto-currency fundraising schemes
• Interactive Insider; Cryptocurrencies plunge as China bans initial coin offerings
• Forbes; China’s ICO Ban Doesn’t Mean It’s Giving Up On Crypto-Currencies
• Tech Crunch; China has banned ICOs
• Tech Radar; China bans initial coin offerings over crypto currency fraud fears
• Business Insider; Bitcoin drops $500 after more reports China will ban cryptocurrency exchanges
• Business Insider; China’s crackdown won’t kill cryptocurrencies – but it will have an impact
• IG; What does China’s ICO ban mean for the cryptocurrency market?
• Investopedia; How Might China’s Ban Affect Bitcoin?
• Cryptocoins News; Top 10 Countries in Which Bitcoin Is Banned

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Frances is a writer for Crypto Daily™, and she is responsible for bringing you the latest news on everything that is related to the Crypto world. She has a keen interest in Cryptocurrencies, and has many years of experience writing in all different roles. She is incredibly passionate about writing, and this combined with her interest into the finance, and virtual currency sector means that you are kept up to date with all of the latest news and information regarding all cryptocurrencies.