China Bully “Illegal” Cryptocurrency Exchanges

In addition to being a technologically advanced and incredibly wealthy region, China is best known for being a closed state. While they continue to buy up large portions of major companies around the world, they are not willing to open their market to Western investment.

A good example of this is TenCent, the state-owned tech giant is involved in everything from artificial intelligence to mobile transaction processing to video game development.

Being the favoured son of China has given TenCent a captive audience of a billion people, and the money generated behind China’s virtual Great Wall is then used to invest in American and European business.

✓Are You Really Surprised?

China has proven time and again that their primary focus is the enrichment of the country. This has primarily been achieved through not allowing foreign business access to Chinese wallets.

The real surprise was that market valuations took a hit when China announced, via the Peoples Bank of China, that it would be taking a hard stance with regards to the “illegal sale and circulation” of virtual currencies.

They specifically named the sale of Bitcoin and Ethereum as the coins being illegally sold to Chinese investors. They referred to Chinese people purchasing these cryptocurrencies on public exchanges as “illegal public financing activities”. They went so far as to compare the sale of digital coins to “illegal fundraising, financial fraud, pyramid schemes and other illegal crimes”.

✓China Not Playing Games

The sudden need to close off access to crypto exchanges follows hot on the heels of China’s announcement that they are bullish about the adoption of blockchain technology. Any savvy investor would have realised this would mean they want to adopt its use but certainly not that they are about to tear down their walls and allow foreign players into the market.

The official release by the Shanghai Office of the People’s Bank of China said:

“In order to further strengthen prevention and control efforts, according to the overall requirements of the national Internet financial risk special rectification work, the Shanghai Financial Stability Joint Conference Office and the People's Bank of China Shanghai Headquarters launched a special project on virtual currency-related activities in Shanghai. To rectify, order the problem enterprises found in the reorganization to provide publicity, drainage and other services for overseas virtual currency trading platforms registered to rectify and withdraw immediately.”

The "rectifications" they refer to seem to entail closing down companies they claim are creating false hype around crypto-coins in order to drain the public of their money. Which correlates with the recent raids on the Chinese offices of Binance and Bithumb, both being exchanges which allow Chinese users to purchase through offshore servers.

Their recent announcement also boasted that in 2017 China closed down “13 ICO platforms and 10 virtual currency trading platforms”, while simultaneously requiring that Chinese residents to report any virtual currency trading platforms who offer offshore servers to their local public security authority.

This is a clear warning to exchanges that operate in China without government approval that they will be shut down. China is not willing to allow their stranglehold on the market to be challenged.