Why is China giving importance to Blockchain?
Chinese has been feeling very enthusiastic about blockchain lately! The Chinese government may not like cryptocurrencies or in fact Bitcoin, but they sure do like the Technology it is based on. Recently the Chinese president Xi Jinping called the blockchain technology as a part of a technical revolution. Even the Chinese media is enthusiastic about it and called the Blockchain Technology 10 times more valuable than the Internet itself. There have been quite some changes in the Chinese banking sector as well. The Chinese Central Bank has developed a system which are issuing blockchain based checks. An Alibaba-affiliated firm is even promoting Blockchain in the healthcare industry. China added Blockchain to its five-year plans in December 2016.
Chinese Bitcoin Market
Despite the ban on trading cryptocurrencies in China 50 to 70 per cent of the mining is estimated to happen in China. Although trading is prohibited, people can still hold cryptocurrency in their wallets. They are just not allowed to exchange it against flat money. The Chinese regulatory bodies do try to keep a check on all the activity of local miners, due to which they have to move their shop often. The government is very sceptical about cryptocurrencies. The people’s bank of China was first to notice the rising popularity of bitcoin among people in 2013. Due to it being a decentralized system, the Chinese government banned any kind of crypto-related operations. All the companies involved in crypto had to register their activities with the government and its regulatory bodies so that the government can prevent problems like tax evasion and money laundering. Bitcoin is kind of a ‘virtual entity’ in China, just like the credits in your favourite games. You cannot use it to exchange services or exchange it for real cash. In 2017 China banned all ICOs and forced exchanges to stop crypto to fiat operations. In February this year, China blocked the access to offshore exchanges and ice websites as well.
China’s relation with Bitcoin
Due to China’s recent bans on ice and cryptocurrency. The most popular crypto Bitcoin also suffered. Due to these moves of the government Bitcoin mining industry has suffered. Earlier people used to prefer China for mining due to its inexpensive power, local availability of hardware and cheap labour but now they have to look for other places. China’s top bitcoin mining collectives have shifted their operations to countries like Singapore and Canada. Bitcoin exchanges and wallets have also left the country. The ban triggered an instant decline in bitcoin prices which was up to 6 per cent. The central bank of China has ordered all the financial institutions to stop providing any kind of banking services or funding required for activities related to crypto-currencies. The Chinese Investors are using Hong Kong-based exchanges to circumvent these restrictions. In Hong Kong, a business can be set up for less than 1000 dollars which will allow opening of a bank account. Then funds can be easily transferred to the Hong Kong bank account and can be used for trading.