China Bans Trading Of Crypto Coins Through ICO or OTC

Buying or selling virtual currency has been comprehensively banned in China, according to a new report from The Wall Street Journal. At the beginning of September, China’s central bank had ruled that initial coin offerings, or ICOs, were illegal, but analysts had believed that peer-to-peer or OTC platforms might still be allowed. At a closed-door meeting, however, it appeared that China had decided to ban all virtual coin trading platforms.

Since China and Chinese yuan have been the third largest market for bitcoin trading throughout 2017, this announcement hit markets hard. China has deemed the coins to be illegal fundraising, according to reports, and has regulated them under this standard. There are also signs that the currency has been regulated to prevent those who are betting against the yuan, to avoid the government losing some of their tight control on the official national currency.

While the markets initially saw a dramatic fall from the news, they recovered over the next few days; some experts suggest that the China ban might even be beneficial to the value of virtual currencies, and the stability of the overall market.

Improve Overall ICOs

According to some of the cryptocurrency players, there are some signs in the China ban that this move is not intended to be permanent. Virtual currency is still so relatively new that there aren’t laws or licensing clearly written enough to affect its trading.

According to founders of SweetBridge and ZenCash, China may just be looking for time to better regulate the environment in which these virtual currencies are traded. While decentralization has been a boon for the virtual currency market, some regulation will mean that the ICOs available are high quality and reliable, which is only good for currency and investors.

Reduce market instability

Some experts suggest that China’s withdrawal from the virtual currency market may reduce some of the famous instability of the Bitcoin market. The sheer number of trades will decrease, and weaker or newer investors will drop away from the currency since it will be more difficult to make a fast trade.

With China’s ban, there will also be less hype around the currency; some players seem to view Bitcoins and other cryptocurrencies as almost free, unregulated money. Countries are starting to realize the potential implications of having a large amount of wealth moved out of their currencies and into virtual ones, and are starting to react.

Expect Other Markets To Enter

The Russian Finance Minister, for example, recently spoke about cryptocurrencies. He stated that these coins are a reality. He added that there was no point in prohibiting them, but that a bill to regulate them would be introduced by the end of the year.

But Also Expect To See More Regulations

The simple truth is that the Wild West era of Bitcoin is coming to a close. The United States, Japan, and Singapore are all looking at better, more effective ways to regulate the alternative currency. Regulators can’t really lump the crypto coins under the same rules as other assets, but it’s clear that something needs to happen. At the same time, these countries don’t want to stem the overall growth of the industry.

According to Japan, concerns around cryptocurrencies revolve around the anonymous nature of the trades, and potential for the funds to be used as terrorist financing or for money laundering. The SEC in the United States allows for the coins to be purchased, but councils investors to research the sources and be careful before making a trade.

The only reason China is likely able to directly ban the currencies is because it already has such a robust method of blocking unwanted internet activities. Some have suggested that virtual private networks, or VPNs, could be used to get around the Chinese Firewall (as some already do), but industry insiders have suggested that this would be particularly difficult with the Chinese regulations.

Many CNY Traders Already Moving

Just days after the ban in China went into place, it was already clear that CNY traders were already moving into Japanese based markets. The BTC/JPY trading pair in the Tokyo-based bitFlyer rapidly shifted to become one of the largest trading pairs globally.

While the news about China closing down trading on crypto coins certainly shook up the markets, it does not appear to have done long term damage to the overall cryptocurrency markets. While Chinese trading did account for a substantial amount of the overall hashes in bitcoins, they were a smaller percentage of the volume. It is likely that passionate traders will find ways around the blockade, and those who were more casual traders, looking to make some money quickly, will look for other ways to move forward with investments.