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How the stifling Bitcoin and cryptocurrencies of China: QuickTake Q & A



China, home to the world's largest community of bitcoin miners, is cracking down on cryptocurrency activity, more than most other major economies. From a halt to the virtual currency trade in domestic exchanges to the prohibition of initial currency offers, regulators have taken a proactive role in shaping the rise of the stratosphere of bitcoin and its peers. The country's movements occur when President Xi Jinping points to the financial risk in the economy after a decade of booms and falls in everything from stocks to real estate. The result: China's dominant role in the world of cryptocurrencies is shrinking.

1

. What exactly is China doing?

First, it banned offers of initial currencies, the equivalent of initial public offerings for new virtual currencies, in September. Then he asked the local exchanges to stop trading with cryptocurrencies. In January, the authorities presented proposals to discourage bitcoin mining: the process of energy-intensive computing that makes transactions with the digital currency possible.

2. Is bitcoin trading allowed in China?

Bitcoin and its peers can still be commercialized, but only in over-the-counter markets, a slower process that some analysts say increases credit risk.

3. Why is China taking strong measures?

There has been no explicit explanation, but the risk of cleaning up financial markets has been the government's mantra for more than two years. Last year, regulators took drastic measures against everything from excessive lending to speculation about equity, and in October, at the Communist Party Congress, the leaders pledged once again to make risk control a priority. One of the main concerns is the shadow banking sector, a potential source of unregulated loans to speculators in whatever the latest craze is. Mark McFarland, chief economist at Union Bancaire Privee SA HK in Hong Kong, said the crackdown "suggests a longer-term process of tighter control of activities that are not in the normal monetary type."

4. China is anti-cryptocurrency?

Just. The People's Bank of China has conducted tests of its own prototype cryptocurrency, moving one step closer to being the first major central bank to issue digital money. The vision of China, however, seems to be based more on taking total control of such transactions in contrast to the libertarian aspirations of bitcoin.

5. What is the impact of China's actions?

The measures are reshaping the bitcoin mining industry. Initially, the miners flocked to China due to their low cost, local chip manufacturing factories and cheap labor, now they may have to look elsewhere. Bitmain, which manages China's two largest bitcoin mining groups, is establishing the regional headquarters in Singapore and now has mining operations in the US. UU And Canada. BTC.Top, mining group No. 3, is also opening an installation in Canada. Bitcoin exchanges and Chinese wallet services are also going, installing over-the-counter stores in Hong Kong or looking to operate in Singapore or South Korea.

6. What about the prices of cryptocurrencies?

Beyond instinctive reactions, prices seemed to have ignored the news of greater Chinese regulation. That's partly because cryptocurrencies can easily be exchanged elsewhere, but some analysts say the growing wave of regulation is beginning to weigh on digital currencies.

7. Where else are the regulators pushing?

Notably South Korea, home to the most frenetic cryptocurrency trade. The country is inspecting some banks in a campaign against money laundering related and has said that it will allow the trade of cryptocurrencies only in qualified exchanges. Officials are also reviewing a possible tax on capital gains on cryptocurrencies in South Korea, where demand is so great that prices are often priced significantly higher than elsewhere. The US Securities Commission at the end of last year began to restrict some sales of digital tokens.

– With the assistance of Lulu Yilun Chen

To contact the journalist in this story: Grant Clark in Singapore at gclark@bloomberg.net.

To contact the editors responsible for this story: Adriana Arai at aarai1@bloomberg.net, Emma O & # 39; Brien

© 2018 Bloomberg L.P.


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