Within 2008 following the financial crisis, a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” was published, detailing the concepts of a payment program. Bitcoin was born. Bitcoin gained the interest of the world for its use of blockchain technology and as an alternative to fiat currencies and commodities. Dubbed the next best technology after the internet, blockchain offered solutions to issues we have did not address, or ignored over the past few decades. I will not delve into the technical aspect of it but here are a few articles and videos that I suggest:
How Bitcoin Works Under the Cover
A gentle introduction to blockchain technology
Ever wonder how Bitcoin (and other cryptocurrencies) actually work?
Quick forward to today, 5th February to be exact, authorities in China and taiwan have just unveiled a new group of regulations to ban cryptocurrency. The particular Chinese government have already done so this past year, but many have circumvented through international exchanges. It has now enlisted the particular almighty ‘Great Firewall of China’ to block access to foreign deals in a bid to stop its citizens from carrying out any cryptocurrency transactions.
To know more about the Chinese government stance, let’s backtrack a couple years to 2013 when Bitcoin was gaining interest among the Chinese citizens and costs were soaring. Concerned with the price volatility and speculations, the People’s Loan company of China and five various other government ministries published an official see on December 2013 titled “Notice on Preventing Financial Risk of Bitcoin” (Link is in Mandarin). A number of points were highlighted:
1 . Due to various factors such as limited offer, anonymity and lack of a centralized issuer, Bitcoin is not an official currency but a virtual commodity that cannot be used in the open market.
2 . All banks and financial organizations are not allowed to provide Bitcoin-related financial services or engage in trading activity related to Bitcoin.
3. All of companies and websites that offer Bitcoin-related services are to register with the required government ministries.
4. Due to the anonymity and cross-border features of Bitcoin, companies providing Bitcoin-related services ought to apply preventive measures such as KYC to prevent money laundering. Any suspicious activity including fraud, gambling and money laundering should to be reported to the government bodies.
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5. Organizations providing Bitcoin-related solutions ought to educate the public about Bitcoin and the technology behind it instead of mislead the public with misinformation.
In layman’s term, Bitcoin is categorized as a virtual commodity (e. h in-game credits, ) that can be bought or even sold in its original form and never to be exchanged with fiat currency. It cannot be defined as money- something that serves as a medium of swap, an unit of accounting, and a store of value.
Despite the see being dated in 2013, it really is still relevant with regards to the Chinese federal government stance on Bitcoin and as stated, there is no indication of the banning Bitcoin and cryptocurrency. Rather, regulation plus education about Bitcoin and blockchain will play a role in the Chinese crypto-market.
A similar notice was issued on Jan 2017, again emphasizing that will Bitcoin is a virtual commodity but not a currency. In September 2017, the boom of initial gold coin offerings (ICOs) led to the posting of a separate notice titled “Notice on Preventing Financial Risk associated with Issued Tokens”. Soon after, ICOs were banned and Chinese exchanges were investigated and eventually closed. (Hindsight will be 20/20, they have made the right choice to ban ICOs and stop senseless gambling). Another blow was worked to China’s cryptocurrency community in January 2018 when mining procedures faced serious crackdowns, citing extreme electricity consumption.
While there is no formal explanation on the crackdown of cryptocurrencies, capital controls, illegal activities plus protection of its citizens from economic risk are some of the main reasons mentioned by experts. Indeed, Chinese regulators have implemented stricter controls for example overseas withdrawal cap and managing foreign direct investment to restrict capital outflow and ensure domestic investments. The anonymity and ease of cross-border transactions have also made cryptocurrency a popular means for money laundering and deceptive activities.