There’s so much rubbish being written about cryptocurrencies, ICOs, blockchain and shared ledgers at the moment that I’m almost tempted to give up on it all. One in 10 ICOs is a scam, blockchain is not the same thing as a shared ledger, and no, I can’t tell you if your grandma should invest your inheritance in bitcoins or not.
So, I could spend all of my time on this blog talking about these things, but would refer you to my earlier blog on ICOs for part one, Dave Birch’s musings on blockchain for part two (“my backside has potential seamless integration with blockchain technologies”), and Izzy Kaminska’s thoughts on crypto for part three (“What is particularly striking about this path to riches is it’s growing money on trees character.”).
So what have I got to talk about, and who is pulling my chain this time? China. Every article I’ve seen over the past week has picked up on the Chinese ban on ICOs and ballooned it into the Chinese banning everything crypto.
Yes, the Chinese did put a ban on ICOs a week ago, claiming it’s illegal fundraising. That saw the price of bitcoin and ether drop, but still trading strongly compared to the year before. Equally, when China bans something, it doesn’t mean it bans it forever. Back in December 2013, China banned trading in bitcoins and the price of bitcoin tanked. Four years later and guess which country loves bitcoin the most? Yep, China.
So when China bans the trade in something, what it really means is that they want to understand it more before they will allow it any legitimacy. As my mate Zennon Kapron, director of the Shanghai-based financial technology consultancy Kapronasia, puts it, the regulators are just putting the brakes on ICOs in order to better understand them:
“Regulators globally are struggling to understand what ICOs are, what the risks are, and how to ring-fence and regulate them,” he said. “China in many ways is no different than the US or Singapore in saying, OK, we need to push back on these for now until we figure out how to deal with them … I think it will be slightly a temporary measure.”
Exactly. That doesn’t stop the rumour mill hyping up the negative news, however. From bitcoinnews:
“Unconfirmed sources claim the Chinese government wants to ban bitcoin exchanges. Various Western news outlets have run this story as well despite not having a credible source for this information. It is highly unlikely such drastic measures will be taken, though. All Chinese exchanges recently underwent major KYC and AML upgrades, after all.”
In fact, a lot of websites are reporting that China is once again banning bitcoin and all other cryptocurrencies. This is because of the ambiguous wording of the People’s Bank of China’s (PBoC) announcement about the crackdown on ICOs, which includes the line that virtual currencies are “not issued by the monetary authorities … do not have legal status equivalent to money, and cannot and should not be circulated as a currency in the market use”.
The PBoC added that “any so-called tokens financing trading platform shall not engage in the exchange of legal currency and tokens”. It even goes so far as to ban platforms from “provid[ing] pricing, information, [and] intermediary services”.
That has been interpreted by some as banning all cryptocurrency trading. It isn’t. It’s banning the trade in crypto tokens, not cryptocurrencies, but it could be interpreted that way.
Anyway, it really doesn’t matter whether China bans currencies and ICOs anyway, as the people of China love these currencies regardless. And even with a ban, the trading in these currencies continues at a pace in China, as noted by Quartz back in 2013:
The People’s Bank of China, the country’s central bank, and four regulators banned financial institutions and payment services (link in Chinese) from bitcoin-related business earlier today … the government’s policy also hasn’t altered Chinese access to bitcoin trading. It neither forbade people from trading bitcoin nor banned trading platforms like BTC China. That’s probably simply because it can’t. While the government could in theory block trading platform URLs, it can’t stop people from circumventing the Great Firewall to trade online.