China’s fight against cryptocurrency seems to be a never-ending battle. After having imposed harsh restrictions to regulate the trade of cryptocurrency within the country, now, the country is planning on extending their surveillance to foreign markets.
The Long Arm of Chinese Law
Recently, the People’s Bank of China made a statement to the Financial Times stating that “To prevent the risk of financial default, China is planning on stepping up their regulations towards ICOs.”
So far, Chinese authorities have warned investors about ICOs and exchanges operating illegally, however, this has not had the desired effect.
Now, to help fight against money laundering, tax evasion, and other fraudulent financial activities, the country also wants to step up their surveillance of foreign cryptocurrency exchanges. The reason for this being that once China began to regulate the use of cryptocurrency within the country, some companies and traders were able to circumvent the law by outsourcing to other countries. In other words, to continue their trade activities, companies simply moved their operations to other countries where there are no regulations against the trade of digital currency.
To try and calm the frenzy surrounding Bitcoin and its derivatives, on several occasions, the Chinese government has adopted new laws limiting the use of cryptographic currency within their borders.
In 2017, after finding several ICOs guilty of fraudulent activity, legislation was passed to ban the fundraisers. Also, laws were passed to ban access to cryptocurrency exchanges and any websites that are related to ICOs.
To take things one step further, authorities attacked Bitcoin at its foundation and another law was passed which restricted companies from mining the cryptocurrency. It should also be mentioned that Bitcoin needs miners to function and that China was the first country to produce Bitcoins.
Where other countries see a promising future, China sees nothing more than a threat. They may even take things one step further and ban all citizens from investing in cryptocurrency.
Why Is China Scared?
For several years now, the Chinese government has been involved in a constant struggle to battle corruption. Being completely decentralized and totally anonymous, the government has had a hard time trying to manage cryptocurrency in the country. It seems that the very nature of cryptocurrency seems to be what is giving authorities a hard time.
Moreover, cryptocurrency represents an important financial risk and to guarantee the stability of the country’s economy, the country believes that the flow of capital needs to be regulated. According to Chinese authorities, digital currencies and ICOs go completely against the country’s best interest since over-the-counter trades can easily bypass Chinese law.
Cryptocurrencies are sometimes subject to deflation so, therefore, they represent a threat to social stability. And, since digital currencies are not backed by any sort of stable assets such as gold or oil, they are extremely volatile and significant losses are a very real possibility to investors.