Chinese government authorities do not seem to be slowing down in their efforts to crackdown on the crypto trading market in the country. In a communique issued by the People’s Bank of China (PBoC), there is a doubling of efforts to enforce bans on domestic and foreign cryptocurrency trading platforms. The announcement by the PBoC is the latest in a series of serious efforts of the government, state officials, and financial regulators to tightly regulate the activities of the cryptocurrency market in the Asian country.
In September 2017, the world woke up to the news of the blanket ban placed on ICOs and online cryptocurrency exchange platforms in China. The move caused massive shockwaves within the entire crypto market as the price of bitcoin and other cryptos took a hit. The decline in price didn’t last long though as the market recovered quite quickly.
Other effects of the ban, however, continued to felt over the following weeks and months after the ban. With the closure of online trading platform operations, some companies like Binance had to move their operations out of mainland China with Japan becoming the preferred destination for many of these companies.
In the aftermath of the ban, crypto traders on the mainland began to subscribe to foreign cryptocurrency trading platforms and served as an opportunity for Chinese citizens to access the market.
In addition to foreign platforms, Chinese citizens also began to make use of over-the-counter (OTC) exchange platforms and peer-to-peer (P2P) exchanges. With the highly restricted internet service in the country, accessing these foreign platforms has not exactly been a breeze. The reliance on OTC and P2P trading also meant a drastic reduction in the speed and efficiency of trading activities.
Not to be deterred in their efforts, the Chinese government began to expand its regulatory scope into the OTC and P2P trading market in January 2018. Financial regulators in the country have been able to freeze bank accounts belonging to major OTC platforms. Many of these accounts held millions of dollars of investor funds which has seriously hampered their operations.
A number of these OTC platforms are concentrated in the Shenzhen and Guangzhou provinces which are also known for hosting mega Bitcoin mining facilities. In addition to the crackdown on OTC and P2P trading platforms, the government has also issued warnings about foreign trading/exchange services. According to a statement by the China Internet Financial Association, foreign trading platforms constitute the same financial risks as the local platforms which have already been banned.
The Chinese crypto crackdown is not just restricted to ICOs and trading as Bitcoin mining has also come under intense scrutiny. There were reports in January 2018 which suggested that there was going to be a restriction on Bitcoin mining in the country. The exact nature of this restriction is unknown, but some experts believe that it has to do with removing or at least lowering the incentives given to miners.
With such drastic measures being taken by the government, it is evident that China is fast creating an environment where the crypto market cannot possibly thrive. It remains to be seen what the future holds for the crypto market in the country, but the prospects appear bleak at best.