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On Friday 8 September 2017, and hot on the heels of an announcement from Chinese Government banning involvement in initial coin offerings (ICOs), news hit local media that they had also issued a report detailing their plan to crackdown and shut local bitcoin trading exchanges. With official details and sources being sketchy, confusion ran amok as rumours, misinformation and speculation spread throughout industry forums and mainstream media. Within a matter of hours, bitcoin’s price started a descent from its record breaking growth streak for 2017, dipping sharply over the weekend.
Over the next week, as more information emerged from more reliable sources, it became clear that China was looking to put a stop to trading between fiat and bitcoin and put pressure on exchanges that were operating without what the Government feels is suitable regulatory practices to minimise risk and fraud.
This is not the first time the Chinese Government has intervened, either.
We have seen a bitcoin trading ban issued in December 2013, and then again when all exchanges were forced to freeze trades and withdrawals between February and May this year. The exchanges have been warned on several occasions to ensure that they are proactive in regulatory practices and fulfilling Know Your Customer (KYC) and Anti-Money Laundering (AML) processes and procedures.
As expected, the bitcoin price continued to tumble as Chinese investors sought to offload coins that they did not anticipate they would be able to sell at a later point, fuelled by the massive amount of fear, uncertainty and doubt that followed the announcement.
Naturally, ardent bitcoin supporters, took full advantage of this anticipated en masse sell off and a buying frenzy spurred a relatively short-lived dip, before the price needle pushed back towards the $4,000 point.
It has since been suggested that the ban may not be a permanent situation.
The Government will be drafting a regulatory framework for exchanges, and applications for licences to operate will only be granted to those that meet all requirements.
So, in fact, what currently appears to be China’s drastic attempt at full financial control, could well be the best move for wider adoption of bitcoin as exchange users are protected from unscrupulous businesses that have no accountability for the safety and security of funds.
In a previous article, we detailed China’s role as one of the BRIC nations responsible for building up Bitcoin, despite a tempestuous past with the cryptocurrency. It is our opinion, that this latest move represents another example of China taking the lead in creating a healthy, regulated environment for bitcoin to thrive alongside its traditional fiat currency.
At the end of the day, it is quite apparent that Bitcoin is not going anywhere. It has weathered numerous development and scaling issues. It has survived all thwarts on its usability and viability. It has endured countless calls of a ‘bubble about to burst’. And still it stands strong and firm. Is it not about time that more Governments (ahem, and some big bank CEOs too) realise that this is not something they can simply make disappear, and that it is in their better interest to embrace, not bash, the undoubtable technology of the finance of the future?