November 24, 2020

Cryptocurrency’s Rocky Road: China’s ICO Ban

In the wake of China’s ICO bar, what befalls the world of cryptocurrencies?

The largest event in the cryptocurrency world recently was the declaration of the Chinese government bodies to shut down the exchanges where cryptocurrencies are traded. As a result, BTCChina, one of the largest bitcoin exchanges in China, said that it would be ceasing investing activities by the end of September. This news catalysed a sharp sell-off that will left bitcoin (and other foreign currencies such as Etherium) plummeting approximately 30% below the record highs that were reached earlier this month.

So , the cryptocurrency rollercoaster continues. With bitcoin having increases that exceed quadrupled values from December 2016 to September 2017, some experts predict that it can cryptocurrencies can recover from 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 have a tendency 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)… that will blow up”. He goes to the extent of saying that he would flame 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 how 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 managing the market without completely stifling the particular growth of the currencies. The big issue for these economies is to figure out how to try this, as the alternative nature of the cryptocurrencies do not allow them to be classified under the policies of traditional investment assets.

Some of these countries include Japan, Singapore and the US. These economies look for to establish accounting standards for cryptocurrencies, mainly in order to handle money washing and fraud, which have been rendered more elusive due to the crypto-technology. Yet, most regulators do recognise that there appears to be no real benefit to completely banning cryptocurrencies due to the economic flows which they carry along. Also, probably because 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 able to work out some control, which seems to be exactly where cryptocurrencies meet fiat currencies (i. e.
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the cryptocurrency exchanges).

Whilst 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 associated with Gatecoin, said that the company received “a high number of inquiries from blockchain project founders based in the mainland” and that there has been an observable rise in the number of Chinese clients joining on the platform.

Looking slightly further, companies like Nvidia have portrayed positivity from the event. They claim that this ICO ban will only gas their GPU sales, as the ban will likely increase 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. As a result, individuals looking to obtain cryptocurrencies in China now have to obtain more computing power, as opposed to making straight purchases via exchanges. In essence, Nvidia’s sentiments is the fact that this isn’t a downhill spiral to get cryptocurrencies; in fact , other industries will receive a boost as well.

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