Understanding the China Bitcoin Challenge and How it's Shaping Cryptocurrency

The China Bitcoin Challenge is a heavy topic that’s widely misunderstood. It deals with the problem of government control and its potential to reduce demand for cryptocurrency. The decentralized nature of Bitcoin and cryptocurrency, in general, allows anyone to start investing. China, with a population of over 1 billion, is home to one of the largest crypto communities in the world. However, China’s government has taken a negative stance on crypto, which has an effect on the entire market. In this article, I am going to break down what this means for China and the future of crypto.

 

Date: 
December 25, 2018
Read time: 
6 minutes

Understanding the China Bitcoin Challenge and How it's Shaping Cryptocurrency

Author: Joel S.
Date: 
December 25, 2018
Read time: 
6 minutes

The China Bitcoin Challenge is a heavy topic that’s widely misunderstood. It deals with the problem of government control and its potential to reduce demand for cryptocurrency. The decentralized nature of Bitcoin and cryptocurrency, in general, allows anyone to start investing. China, with a population of over 1 billion, is home to one of the largest crypto communities in the world. However, China’s government has taken a negative stance on crypto, which has an effect on the entire market. In this article, I am going to break down what this means for China and the future of crypto.

 

The China Bitcoin Challenge is a heavy topic that’s widely misunderstood. It deals with the problem of government control and its potential to reduce demand for cryptocurrency. The decentralized nature of Bitcoin and cryptocurrency, in general, allows anyone to start investing. China, with a population of over 1 billion, is home to one of the largest crypto communities in the world. However, China’s government has taken a negative stance on crypto, which has an effect on the entire market. In this article, I am going to break down what this means for China and the future of crypto.

 

Innovation in China is advancing just as rapidly as anywhere else in the world and is fueled by the enormous Chinese population.

In China, Bitcoin is not Dead

In 2017, Bitcoin and the cryptomarket boomed to record highs. Much of the hype came from the Chinese market where millions of people were given access to cryptocurrency for the first time. Feeling threatened by the decentralized nature of crypto, the Chinese government made the decision to regulate Bitcoin heavily.
 

China Bitcoin Ban Timeline

  • September 2017 - ICOs are made illegal and all Chinese-based exchanges are shut down.
  • January 2018 - The Central Bank (PBOC) shuts down all baking services to any activity related to cryptocurrency.
  • August 2018 - Alipay shuts down all accounts related to Over-the-Counter (OTC) crypto transactions.

Heavy-handed tactics are to be expected from the government but don’t look at them as permanent laws. While articles about any Chinese Bitcoin news tend to be dramatic, there is a general feeling that the ban will be lifted once controls are put into place. The underlying blockchain technology is not banned and there are numerous projects popping up that work in conjunction with the government.
 

China Bitcoin News is Not All Bad

Outlawing cryptocurrency does not kill it. Just like all outlawed markets in the world, if there is a demand, supply can be found. Remember, cryptocurrency is a parallel finance institution; it doesn’t need central banks to prop it up. While banning fiat trades makes it difficult for new investors to get in, there are plenty of ways around any obstacles.

  • Peer-to-peer transactions.
    WeChat is like the Chinese version of Facebook. People use it to message friends and even pay bills. By using WeChat or simply meeting up in person and exchanging cash for crypto, the Chinese are keeping crypto alive.

China Bitcoin

  • Overseas Companies.
    Blockchain companies started by Chinese nationals are going to crypto-friendly hotspots like Malta. While the developers are Chinese, they are skirting laws by simply relocating.

Considering China has one of the most powerful governments in the world, it is almost comical to see their failures at regulation. The inherent principles of decentralized, peer-to-peer exchanges were created in direct response to such attempts at oversight and control. Keep following the latest on Chinese Bitcoin news to see how crypto evolves. China is a good laboratory for testing new tech and seeing how it operates in a hostile regulatory environment.
 

Top 4 Crypto-Projects in China Right Now

The crypto market always adapts to challenges placed in front of it, including regulatory ones. The creation of blockchain tech is not outlawed yet. This means developers are still relatively free to create as they see fit. Projects are overcoming the Chinese Bitcoin regulation and implementing their own solutions. Innovation in China is advancing just as rapidly as anywhere else in the world and is fueled by the enormous Chinese population. I made a list of 4 projects worth keeping an eye on.

  1. NEO
    Considered the Chinese Ethereum, this protocol is popular not only in China, but all around the world. The protocol uses an improved iteration of Proof of Stake that solves issues faced by earlier versions of the consensus mechanism. NEO allows for smart contracts and dApps. It even has a working product.

    cryptomaniaks

  2. Nebulas
    Traded under the name NAS, this project was launched in 2017 but is already garnering global attention. It is being built as a tool for searching blockchains for information. Think of it as a search engine that can run on top of existing protocols to help you find pertinent information.
     
  3. AELF
    AELF is a decentralized cloud computing protocol that is listed as ELF on exchanges. With AELF’s Delegated Proof of Stake (DPoS) consensus mechanism, users elect nodes to host the network. It solves scalability issues by creating side chains that can be used for private purposes or to create new tokens. It is marketed as an operating system for blockchain technology.
     
  4. VeChain
    This project is a supply chain protocol developed to track manufactured goods from creation to sale traded under the abbreviation VET. Developed for the Chinese economy, it implements KYC mechanisms in its protocol. This allows VET to survive in the Chinese regulatory market and position itself for mainstream adoption.
     

Despite the Chinese Bitcoin ban in full effect, the Chinese market itself remains hungry for crypto.

Is There Still a Demand in China Following the Bitcoin Ban?

Imagine you are a Chinese citizen. Your economy is growing rapidly and you have fiat currency to spend. With the internet, you are now connected to the world economy and your ambitions to succeed are just as strong as everyone else's. To get ahead, you need to trade globally, using a world currency. Your government just outlawed trading and buying cryptocurrency, one of the few connections you had to the outside economy. Would you stop trading it now? Or would you continue to participate in the space despite regulation?

China Bitcoin

Source: howmuch.net
 

As long as the demand to better one’s own economic standing exists, cryptocurrency will never die in China. Barring a violent crackdown on individuals participating, there is not much that can be done to stop it. Chinese Bitcoin regulation can only deter people so much.

 

The Future of Chinese Bitcoin Regulation

The popularity of cryptocurrency caught the Chinese government off-guard. Regulators never anticipated that a competing financial system could become the preferred method of exchange for millions of people. An authoritarian government can easily deal with dissent. Protests can be quelled and political leaders can be disposed of. However, a technological invention that renders the government’s own money supply as inferior? From the point of view of the Chinese government, drastic actions need to be taken.

  • Before the crackdown on domestic exchanges, over $1 billion was traded on a daily basis.
    This is big money. As much as the government values control over the economy, they are just as greedy as the rest of the world. The Chinese crackdown was likely in response to the government not getting a “piece of the pie.” You won’t have to wait long before new rules and taxes are created that allow domestic exchanges to open their doors once more.

Cryptomaniaks

  • The trading crackdown has reduced Yuan related activity from 90% of the global market to less than 1%.
    The Chinese government loves to be the biggest player in the global economic game. They have the economy and the people power to achieve dominance. However, while officials are pointing to this statistic as “mission accomplished,” I guarantee there is some hand-wringing behind the scenes. Without Chinese supremacy in the space anymore, high-ranking officials are certainly plotting to get a seat at the crypto table.
     
  • China leads the world in hashing power for Bitcoin mining.
    71% of Bitcoin's mining power is found in China and the Chinese government just announced a move to shut down mining operations. As a response, most companies have set up subsidiaries in friendlier countries. Unfortunately, electricity is more expensive in other parts of the globe, which will make Bitcoin less profitable for miners. While it is a blow to the crypto-community, it is by no means a knockout punch. It is, however, shortsighted by the Chinese government. They controlled the world’s Bitcoin! And now, because of political ideology, they are intentionally losing that power.

China Bitcoin

Source: buybitcoinworldwide.com
 

I think the Chinese government is working to understand Bitcoin and find ways to inject their own ideas into the technology. The future is murky but I think it’s clear that China will be a huge player within the community for the foreseeable future. Chinese Bitcoin regulation is a reality now, but I fully expect the situation to change as the Chinese adapt and determine their best moves for the future.
 

Bringing Freedom to China With Bitcoin and Cryptocurrencies

China Bitcoin news is mixed regarding the future of the tech. The government in China has implemented a Bitcoin ban but crypto is not going anywhere. The decentralized movement has shown Chinese nationals the power of individualized monetary control. For people looking to escape the dominance of both the Yuan and the US dollar, crypto provides a way to do it.

 

In China, Bitcoin Has a Bullish Future

Despite the Chinese Bitcoin ban in full effect, the Chinese market itself remains hungry for crypto. With over 1 billion individuals, the spread of technology will allow them to interact with each other and the world in ways never before dreamed of. Cryptocurrency fills a niche demand for value transactions without censorship or a middleman. It directly challenges financial institutions that prop up the Chinese economy, which leads to severe laws being written. The popularity of Bitcoin and crypto force the Chinese government to allow for innovation or else fall behind.

Up-to-date investors have a distinct advantage over those who lag behind. Still trying to learn about Bitcoin and how it works? We have created a beginner’s course to help answer all your questions.

Posted by Joel S.

I believe in cryptocurrency for its privacy aspects and for the autonomy it gives individuals from centralized banks. Cryptocurrency is also fun and exciting: there is always something new to learn.

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