China officially bans cryptocurrency

Karim Taleb
Staff Writer

November 1st marked the last day of cryptocurrency exchange in China. The ban was first announced at the end of September, but was implemented later to allow final exchanges. Now, it is officially illegal to trade cryptocurrency, unless it is operated offshore; which is where all the exchanges are heading.

Bitcoin is one of many cryptocurrencies that experienced a boom in the last two years. Many professional investment firms in Hong Kong have been investing in cryptocurrencies, which are often used to fund new start-ups.

Hundreds of millions of dollars have been raised in the Initial Coin Offering (ICO) market — which was also banned — and many of those Chinese investors are either buying cryptocurrencies in offshore accounts or investing directly in start-ups by purchasing the tokens they issue in those ICOs.

According to Scott Freeman, CEO of C2CX, the cryptocurrency market is not affected by the Chinese ban at all, because none of the exchanges previously based in China ceased cryptocurrency exchange; they simply moved their servers abroad.

“The only change is that for the moment the funds will move in and out of local currency via Peer-to-Peer (P2P) transactions instead of via direct deposit. From a regulatory perspective this is an inferior solution because it’s much harder to prevent money laundering,” Freeman said.

Countries often move to diminish or shutdown exchanges to stop criminal activity, including tax evasion. Yet, the decentralized nature of the cryptocurrency world makes it hard to control.

Shortly after the China’s cryptocurrency ban, the price of one bitcoin fell to $3,300, despite nearly reaching $5,000. Ironically, a bitcoin’s price reached $8,060 on Nov. 20 (yesterday).

China’s regulators said it was not giving up on blockchain technologies, which ironically primarily used today as a ledger for recording transactions in cryptocurrencies.

On another note, on Nov. 14, the CME Group, an American financial market company, said they would launch a bitcoin futures contract this year, pending regulatory approval. If so, the U.S. would have taken the lead in the cryptocurrency investing world.

Leave a Reply