With the popularity of Bitcoin, policies on cryptocurrency have become a hot issue. eDaily, a widely-read South Korean daily focused on business and economics, published an article analyzing the reason why the Chinese government’s financial policy is focused on controlling cryptocurrency. The article references an article from CKGSB Knowledge, “Blocking Bitcoin: Why China’s Cryptocurrency Ban Could be Here to Stay”, and mentioned both Cheung Kong Graduate School of Business and the school’s publication CKGSB Knowledge as the sources of the article.
Traditionally, central banks, governments or financial companies controlled the flow of money in a market. However, the popularity of cryptocurrencies has meant that ordinary people can make transactions anywhere in the world and it’s virtually uncontrolled by established institutions.
The Chinese government has a big problem with cryptocurrencies and the underground economy it has created. eDaily, a well-known daily focusing on business and economics in South Korea, published an article analyzing the reasons why the Chinese government’s financial policy is focused on controlling cryptocurrency.
Until September 2017, China had been the world’s largest virtual currency market, accounting for 90% of global transactions. But then the Chinese government banned fundraising through initial coin offerings (ICOs) and shut down cryptocurrency exchanges. The Chinese government believes the crackdown on cryptocurrency is necessary to curb systemic financial risk.
Of course, the Chinese government banned cryptocurrency to prevent money laundering, but the true nature of the regulation lies in the government’s efforts to maintain the current financial system.
Despite the government’s policy against cryptocurrency, it is interested in the underlying blockchain technology. The transparency of blockchain technology creates a decentralized digital public record of transactions that is secure, anonymous, tamper-proof and unchangeable. Making use of this technology, a government can control all activities in the financial field. Blockchain technology can also be used in nearly every other industry. In addition, automation on the blockchain, widely referred to as “smart contracts,” could also appeal to the Chinese government.
Eventually, China intends to take advantage of the benefits of digital currency while maintaining a “centralized” order in the financial system by launching its own sovereign digital currency, which is different from a cryptocurrency like bitcoin in that the former must have the backing of a central bank, while the latter is decentralized by design.
The Chinese government believes the crackdown on cryptocurrency is necessary to curb systemic financial risk. Of course, the Chinese government banned cryptocurrency to prevent money laundering, but the true nature of the regulation lies in the government's efforts to maintain the current financial system.
China has a strict stance on cryptocurrencies because its government believes they will destabilize its currency at a time when it is working on expanding its economy. It has weighed creating its own CBDC and is participating in cryptocurrency regulatory development efforts.
Among other things, Bitcoin may enable the citizens of a country to undermine government authority by circumventing capital controls imposed by it. It also facilitates nefarious activities by helping criminals evade detection.
However, any attempts to ban or regulate Bitcoin out of existence are improbable to succeed. Bitcoin itself is decentralized. Any attempts to shut down Bitcoin would mean all the governments worldwide would have to collaborate and shut down the internet at the same time.
By their very nature, cryptocurrencies are freewheeling, not beholden to country borders or specific agencies within a government. However, this nature presents a problem to policymakers who are used to dealing with clear-cut definitions for assets.
- In 2013, China banned Bitcoin payments. - In 2017, China banned ICOs. - In 2021, China said crypto businesses are illegal and cracked down on mining.
As Bitcoin is decentralised, the network as such cannot be shut down by one government. However, governments have attempted to ban cryptocurrencies before, or at least to restrict their use in their respective jurisdiction. Governments could still try to jointly ban Bitcoin.
Bitcoin can also be taken by the government through a process called forfeiture. Forfeiture is the permanent loss of that bitcoin by way of court order or judgment. Seizure may occur before forfeiture and not all seizures will result in forfeiture.
Can the US Government Ban Bitcoin? In theory, it is possible. However, politicians and regulators are generally cryptocurrency-friendly as long as consumer and investor protection laws are followed.
So, who are the top holders of BTC? According to the Bitcoin research and analysis firm River Intelligence, Satoshi Nakamoto, the anonymous creator behind Bitcoin, is listed as the top BTC holder as of 2024. The company notes that Satoshi Nakamoto holds about 1.1m BTC tokens in about 22,000 different addresses.
Known Bitcoin reserves held by governments account for 2.7% of the total 21 million supply of bitcoins, with the largest being the US Government with over 210,000 bitcoins worth more than $13bn at the time of writing.
While we cannot rule out some form of crypto liberalization in the future in mainland China, it remains unlikely for the near and medium terms because Beijing sees very little upside in decentralized digital currencies.
Money laundering and illicit activities: Cryptocurrencies offer a degree of anonymity, making them attractive to criminals for money laundering, tax evasion, and illegal transactions. Governments are concerned that cryptocurrencies are used to finance terrorism, drug trafficking, and other illicit activities.
The legality of virtual assets, however, have been the subject of debate in China, and the Xiamen court's opinion piece highlights an increasing recognition among authorities in the country that the ownership of cryptocurrencies, which are deemed a type of virtual commodity, is protected.
The Chinese government reportedly holds 190,000 BTC that was recovered from the Plustoken scam in 2019. Members of the Ukrainian government privately hold roughly 46,351 BTC. El Salvador's holdings are currently at 5,800 BTC.
Introduction: My name is Rueben Jacobs, I am a cooperative, beautiful, kind, comfortable, glamorous, open, magnificent person who loves writing and wants to share my knowledge and understanding with you.
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