Cryptocurrency’s Rocky Road: China’s ICO Ban

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The biggest event in the cryptocurrency world recently was the declaration of the Chinese authorities to turn off the exchanges which cryptocurrencies are traded. As a result, BTCChina, one of many largest bitcoin exchanges in China, said that it might be ceasing trading activities by the finish of September. This news catalysed a sharp sell-off that left bitcoin (along with other currencies such as Etherium) plummeting approximately 30% below the record highs which were reached earlier this month.

So, the cryptocurrency rollercoaster continues. With bitcoin having increases that surpass quadrupled values from December 2016 to September 2017, some analysts predict that it could cryptocurrencies can get over the recent falls. Josh Mahoney, a market analyst at IG comments that cryptocurrencies’ “past experience tells us that [they] will likely brush these latest challenges aside”.

However, these sentiments don’t come without opposition. Mr Dimon, CEO of JPMorgan Chase, remarked that bitcoin “isn’t going to work” and that it “is a fraud… worse than tulip bulbs (in reference to the Dutch ‘tulip mania’ of the 17th century, recognised because the world’s first speculative bubble)… which will blow up”. He would go to the extent of saying he would fire employees who were stupid enough to trade in bitcoin.

Speculation aside, what is actually going on? Since China’s ICO ban, other world-leading economies are taking a fresh look into the way the cryptocurrency world should/ can be regulated in their regions. Rather than banning ICOs, other countries still recognise the technological benefits of crypto-technology, and are looking into controlling the marketplace without completely stifling the growth of the currencies. The big issue for these economies would be to figure out how to do this, as the alternative nature of the cryptocurrencies do not allow them to be classified under the policies of traditional investment assets.

A few of these countries include Japan, Singapore and the US. These economies seek to determine accounting standards for cryptocurrencies, mainly to be able to handle money laundering and fraud, which were rendered more elusive due to the crypto-technology. Yet, most regulators do recognise that there is apparently no real benefit to completely banning cryptocurrencies because of the economic flows they carry along. Also, probably since it is practically impossible to shut down the crypto-world for as long as the internet exists. Regulators can only focus on areas where they may be in a position to exercise some control, which appears to be where cryptocurrencies meet fiat currencies (i.e. the cryptocurrency exchanges).

While cryptocurrencies seem to come under more scrutiny as time progresses, such events do benefit some countries like Hong Kong. Since the Chinese ICO ban, many founders of cryptocurrency projects have been driven from the mainland to the city. Aurelian Menant, CEO of Gatecoin, said that the company received “a high amount of inquiries from blockchain project founders based in the mainland” and that there has been an observable surge in the number of Chinese clients registering on the platform.

Looking slightly further, companies like Nvidia have expressed positivity from the event. They declare that this ICO ban is only going to fuel their GPU sales, because the ban will likely raise the demand for cryptocurrency-related GPUs. With the ban, the only way to acquire cryptocurrencies mined with GPUs would be to mine them with computing power. Therefore, individuals looking to obtain cryptocurrencies in China now have to obtain additional computing power, as opposed to making straight purchases via exchanges. In essence, Nvidia’s sentiments is that this is not a downhill spiral for cryptocurrencies; in fact, other industries will get a boost as well.

In Spice of all commotion and debate surrounding cryptocurrencies, the integration of the technology in to the global economies appear to be materialising hastily. Whether you believe down the road of the technology, or believe that it is a “fraud… that may inflate”, the cryptocurrency rollercoaster is one worth your attention.

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