China Does A 180 On Its Blockchain Support

Blockchain, News, Opinion | November 26, 2019 By:

The CCP (Chinese Communist Party) has drafted a warning letter to every Chinese business involved with cryptocurrencies, that additional regulatory measures are to be expected, and that they need to tone down on their dedication towards developing the technology.

Naturally, the Chinese government didn’t focus this warning on the blockchain technology itself, but rather a large part of it which is the crypto sphere. You see, the fact that decentralized currencies are floating around an economy that is extremely centralized is something the CCP wants to get rid of, if not completely then at least partially.

This sudden “mood swing” from the Chinese government may be one of the main reasons why Bitcoin has slipped below $7,000 overnight, thus causing all of the artificial hype created about BTC after China announced its additional participation in the development of blockchain tech.

Many investors didn’t quite understand the tone that the CCP was making. It was very clear that the additional investment will be directed to things like smart contracts and Distributed Ledger Technology only, while cryptocurrencies will remain on the “less important” level. What this means is that cryptos that we know and love, such as BTC, ETH, and LTC are not going to be a priority of this new project. But the Chinese CBDC will be for sure.

The CBDC itself is like mutated crypto. It’s a stablecoin that will be backed by the CNY, and it’s also one of the most centralized crypto coins out there, even beating Venezuela’s Petro to some extent.

What does additional regulation mean?

In order to understand what the CCP meant with its announcement about stricter regulations, we need to go back a bit and remember their restrictions on other financial assets.

Going back to the early 2000s, we can remember the extreme boom that Chinese companies were going through due to the economic “miracle”. Almost every listed Chinese company was growing two-folds overnight, thus making investors millions of dollars within weeks.

This was so lucrative that Western companies started offering CFDs on these company stocks because they didn’t necessarily have access to them directly. The craze made things such as bonuses very useful. Investors that didn’t necessarily have experience or the money to start speculating on the markets would apply for small handouts from the brokers in order to get their feet wet. They’d get around $200 and make $2,000 overnight, thus making both the broker and themselves a decent profit.

The most notorious of these bonuses was when people started to open no deposit bonus account with XM and various other popular Forex and CFD brokers. The options on stocks were simply too lucrative to wait for approval from an actual stockbroker, which caused quite the craze for the best options.

However, when we talk about an economic craze in the 2000s, we need to mention the 2008 crisis. Take a very popular investment model that almost everybody is dumping their money in, pair it up with a crisis, and you get thousands, if not millions of investors going bankrupt overnight.

The damage that this crisis did to Chinese investors, weighs heavy on the CCP to this day, which has convinced them to have a tighter grip on the markets through excessive regulation.

So, let’s now connect the dots.

An economic craze where everybody dumping billions of dollars into a single market backed nothing but one small indicator for growth. The moment this peaks there’s a crisis where the market drops down so hard that people go bankrupt, lose their jobs, close down businesses and etc. Doesn’t that sound familiar?

That’s pretty much what the Crypto winter was like. Considering that most of the volume and mining were happening in China, it’s safe to say that the Chinese got it the worst in terms of the number of investors losing money with cryptos. Ever since then, the Chinese government has been very vigilant on how it allows crypto trading, and whether it allows it at all.