Tag: ban

China: The World’s Biggest Blockchain and Mining Hub

China, the Asian fintech giant, has been through a real ‘crypto whirlwind’ since 2013. Judging by the fact that Chinese regulators banned ICOs and cryptocurrency exchanges last year, many now think of the country as rather unfriendly to blockchain tech. However, that’s easy to contradict. Today we’ll shed some light on China’s attitude to crypto, particularly to cryptocurrency mining, and its future plans in relation to it.  ‘Ambiguity’ is China’s middle name. In 2013 the People’s Bank of China issued a warning notice on the risks of Bitcoin and prohibited financial institutions from engaging in crypto-related activities. Three years later however the Chinese government apparently forgot about this and added blockchain to its five-year technology plan instead.  Then, a real ‘hardcore’ crackdown began in 2017. In September, the Chinese government imposed regulation banning all ICOs and crypto-to-fiat exchanges. Three months later, in January 2018, China imposed regulations banning P2P sales and over-the-counter markets. Later, China finished crypto enthusiasts off by blocking access to foreign crypto exchanges and ICO websites. Despite the fact that the country’s government did not manage to eliminate crypto-related operations for good, its crackdowns made the community skeptical about China’s environment. Before the aforementioned bans were enacted, crypto mining in China had been flourishing and had attracted dozens of giant players from all over the world who wished to locate their facilities in the ‘red superpower’. China was and, perhaps surprisingly, still is home to the world’s largest mining manufacturers, including Bitmain, Canaan, Ebang, to name a few.  To prove how vital the country’s role in the mining market has been, at its peak China accounted for three quarters of the world’s Bitcoin mining operations and over 95% of the Bitcoin trading volume.  Two years ago China was the obvious, if not the only, choice for mining enthusiasts. Low electricity costs were the true temptation for miners, along with an accessible, low-cost and high-efficiency mining hardware. Provincial governments are happy to welcome crypto-based entrepreneurs as they use excessive electricity, meaning more revenue for the local grid. However, recent statistics show that mining in China indeed requires too much electricity (to compare, it requires the equivalent of the power of three nuclear reactors). When the government’s attitude toward crypto became hostile, several large mining entities unsurprisingly began to look elsewhere for places to base their operations. One of those is Bitmain, a somewhat notorious mining company, which decided to expand its activity to Europe, North America and the Middle East in order not to be affected by a possible request to make an ‘orderly exit’ from the country.  Nevertheless, many still remain bullish on blockchain and crypto in China, based on recent statements made by the country’s President, Xi Jinping. In late May, he mentioned blockchain as a “new generation” technology: “The new generation of information technology represented by artificial intelligence, quantum information, mobile communication, internet of things, and blockchain is accelerating breakthroughs in its range of applications.” Following this statement, on June 4, the country's leading state-run broadcaster - China Central Television (CCTV) - issued an hour-long special about the ledger. During the show, it was said that blockchain is "10 times more than that of the internet" in terms of economic value.   Now it’s time to stop here and ask ourselves: How on earth do these severe crypto-bans coincide with a truly supportive attitude to blockchain? That can be easily explained. China's policies suggest a “Blockchain > Crypto” attitude. In other words, the government is much more interested in the underlying technology rather than in cryptocurrencies themselves.  China sees the enormous potential of blockchain, as it always does when it comes to the adoption of innovative new technology. Dominating the blockchain development industry can bring a lot of economic wealth to the region.  And this process has already begun. For instance, Hangzhou, the home city of Alibaba, has committed $1.6 billion to blockchain company investments. Plus, the People’s Bank of China (PBoC) is currently developing a blockchain-based digital currency. 'Decentralized' power in the hands of centralized giants is a hell of an idea - a terrifying idea. If such a blockchain-based digital currency were to be adopted, the PBoC could easily access all kinds of information about the economic activity of its citizens, thus becoming not a decentralized financial institution, but a veritable dictator.  Blockchain is still a unique and unprecedentedly traceable instrument which can allow the financial authorities of all countries to monitor small-scale transactions and reduce fraud, counterfeiting, and money laundering. By all accounts, we should expect China to be one of the leaders of a new blockchain-based economy in the nearest future. Photo by Henry & Co. on Unsplash

Articles/November 29, 2018

Crypto’s Red Zones: The Most Crypto-Unfriendly Countries

Countries around the world differ considerably in their approaches and attitudes to cryptocurrency and decentralized technologies. While superpowers such as the US and Japan have generally displayed a positive attitude towards crypto, there are still many governments with ambiguous positions -Schrödinger's regulators - who at best are taking crypto with a pinch of salt. As you may remember, in our recent posts we have highlighted the most crypto-friendly regions and countries. Today however we’d like to talk about those countries in the other camp - the ‘crypto-naysayers’, which continue to enforce harsh bans and rigorous policies. Here’s our pick of the top crypto-skeptic countries. Bangladesh  Bangladesh, the most densely populated country on earth, is a real nightmare for crypto holders. Bangladesh’s authorities are really on the hunt for crypto traders.  In accordance with the country’s anti-money-laundering laws, any holder of digital currency in any form would be sent to jail. Officials of Bangladesh’s Central Bank also stated that the use of crypto would be considered a ‘punishable offence’, to put it mildly. Specifically, anyone in Bangladesh found guilty of using Bitcoin could be sentenced to up to 12 years in jail.  Bolivia  Interestingly, Bolivia was the first country in the world to completely prohibit the use of "any kind of currency that is not issued and controlled by a government or an authorized entity". Since 2014, El Banco Central de Bolivia - Bolivia’s Central Bank - has considered all cryptocurrencies to be Ponzi schemes.  Moreover, in May 2017, the Bolivian Financial System Supervision Authority arrested 60 "crypto promoters". These users were carrying out a kind of ‘training activity’ relating to crypto trading and investing. Following the arrest and growing hype around crypto, Bolivian authorities stated they will arrest anyone involved even in small-scale discussion groups on WhatsApp, Facebook and other social media. Egypt  Speaking of the legitimacy of cryptocurrencies, Egypt’s legislation is one of the hardest to follow in the world. Not only has crypto been questioned by the government, but by religious leaders too.  Shawki Allam, the Egyptian Grand Mufti, issued an official fatwa in 2017 which banned all crypto-related operations. According to his statements, cryptocurrency carries risks of "fraudulence, lack of knowledge, and cheating”. He also compared crypto exchanges with gambling, which is forbidden in the country due to “direct responsibility in financial ruin for individuals”.  An adviser to the Grand Mufti, Magdy Ashour, endorsed Mufti’s statements, having previously stated that crypto is “used directly to fund terrorism”.   There were glimmers of hope for the local crypto community, inspired by the Egypt’s Central Bank. To be precise, there were rumors that the bank was going to begin to permit ownership of crypto assets. However, this was nipped in the bud by deputy governor Gamal Negm. Last summer he stated the following: “For stability of the Egyptian banking system, the banks deal with the official currencies only, and never deal with any virtual currencies” Drawing the line  The geography of crypto regulations is becoming clearer with each passing day. Some governments are afraid of losing their financial power within their nation due to the decentralization and anonymity that crypto can facilitate, which are deemed to be incompatible with governments’ interests. A number of countries are stuck in a 'ban-by-default' mode of thinking, and risk remaining mired in obsolete traditions. For instance, Bangladesh’s Foreign Exchange Regulation Act was enacted in 1947. Governments following similar policies should understand one thing. True development is based on two pillars, adoption and recognition - especially when it comes to the fintech sector - those which hinder either one will suffer. 

Articles/October 30, 2018