At the Blockchain Open Forum in Seoul, South Korea, China’s first crypto exchange BTCC CEO Bobby Lee said that investors in China are still trading cryptocurrencies even after the Chinese government imposed a ban on crypto trading in September 2017.
Weird Regulatory State of Crypto in China
The blockchain and cryptocurrency sector is in an awkward position in China. While the country’s government officially banned cryptocurrency trading 10 months ago to prevent the outflow of the Chinese yuan to other major economies, the government has been supporting local blockchain projects and public blockchain protocols like Ethereum ever since.
In April 2018, the government of Hangzhou, one of the more active regions for technology development and innovation, backed a $1.6 billion blockchain fund to finance emerging startups working on commercializing and implementing sophisticated blockchain-related solutions.
Merely two months after the investment of the Hangzhou government in a billion-dollar blockchain fund, China Central Television (CCTV), a state television network controlled by the government, reported that the blockchain has the potential to become 10 times the value of the Internet with wording that demonstrated absolute certainty from the Chinese government about the long-term success of the blockchain.
“Blockchain is the second era of the Internet. The value of blockchain is 10 times that of the Internet. Blockchain is the machine that produces trust”.
For speculators and investors outside of the Chinese cryptocurrency market, the government’s support towards blockchain projects and its antipathy for cryptocurrency trading may be difficult to evaluate.
It has been evident based on the initiatives led by the Chinese government that it is highly optimistic towards the blockchain. Bobby Lee, the CEO of BTCC, said at the Blockchain Open Forum that the ban on cryptocurrency trading imposed by the Chinese authorities can be attributed to the idea that the value of major digital assets is currently overvalued and an outright ban on trading would cause the price of cryptocurrencies to decline.
However, Lee emphasized he believes the market will continue to operate freely in the global space, with minimal impact and interference from the Chinese government. Lee also revealed that many investors and traders within China are still initiating cryptocurrency trading, adding that the volume of cryptocurrencies in China continues to remain high after the ban.
In February 2018, Hong Kong-based mainstream publication South China Morning Post reported that the Chinese government ordered its banks to completely stop cryptocurrency trades by cutting out services to exchanges. The government requested foreign platforms to stop providing services to local users as well.
The report of SCMP referred to the statement of People’s Bank of China (PBoC), the country’s central bank, that the majority of investors in China moved to markets like Hong Kong to continue investing in cryptocurrencies.
“To prevent financial risks, China will step up measures to remove any onshore or offshore platforms related to virtual currency trading or ICOs. ICOs and virtual currency trading did not completely withdraw from China following the official ban … after the closure of the domestic virtual currency exchanges, many people turned to overseas platforms to continue participating in virtual currency transactions”.
Demand is Still There
While the Chinese government officially banned cryptocurrency trading, the demand for digital assets is increasing daily, partially fueled by the government’s optimism towards the cryptocurrency and blockchain sector.
Lee concluded that the rising interest towards digital assets as long-term investments signify the acknowledgment of cryptocurrencies as a new asset class that can co-exist with the current financial system.
Cover Photo by Jimmy Chang on Unsplash