A financial new site Caixin is saying that the Chinese government is considering banning cryptocurrency exchanges in China. This single report has made cryptocurrency go into a two-day price drop.
What this means is that Chinese citizens will not be able to use exchanges to buy bitcoins, Ethereum, or other altcoins using Chinese yuan. It also means that they will not be able to exchange any cryptocurrency to Chinese yuan.
Cryptocurrencies are not banned in China but with the potential shut down of exchanges, but does cryptocurrency have value if you can’t exchange them? This is the reason why the market has been crashing for the last couple days.
This is what the cryptocurrency market looks like right now according to coinmarketcap.com:
Bitcoin is currently down 9.7 percent, Ethereum is down 11.8 percent, Bitcoin Cash (very popular in China) is down 12 percent, etc. The crash is worse on Chinese exchanges with Bitcoin down over 15 percent and Ethereum down almost 20 percent on OKCoin.
It is very hard to predict what is going to happen, there is only a single report about the decision to shut down local exchanges but it is enough for Chinese investors to exit the cryptocurrency market because of the fear of being locked into cryptocurrencies.
There are multiple regulations already in place on the exchanges. Those include KYC (know your customer) rules and the anti-money laundering rules. Also, let’s not forget that margin trading is forbidden in China.
We are not sure of the outcome of these new policies but it could mean that China wants more control and is going to create a centralized exchange and regulate those markets as much as possible. But it is also very hard to know exactly what China is going to do because it happens so suddenly.
In the beginning of the week, the Chinese government banned ICOs in China. There is an ICO freeze and the top 60 ICO platforms are being investigated. Authorities thought ICO tokens were like securities but later realized that some of them were a scam.
This is the first time China has had issues with the cryptocurrency market. Remember back in 2013 when Bitcoin dropped more than 50 percent? Well, that was because the Chinese government asked BTCChina to stop accepting deposits in Chinese yuan. That was later overturned when the government changed its mind.