When Bitcoin arrived in China it found a welcoming people, cheap electricity, and room to grow. Before long the industry in the country exploded, and for many years the global market followed the lead set by Chinese companies.
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Even now, when the Chinese government has spent more than a year trying to squeeze cryptocurrency out of the country with increasingly repressive rulings, four of the ten biggest cryptocurrency exchanges in the world are from China, and two from Hong Kong. Clearly this is a relationship worth looking into.
Everything is illegal
As things stand at the moment, it is not legal in China to hold an ICO or to trade cryptocurrency at an exchange. Chinese Bitcoin mining companies, long responsible for producing the vast majority of the world’s bitcoins, have been told to leave the country.
This year the national firewall was extended to stop Chinese citizens from using overseas cryptocurrency exchanges, and the central bank ordered financial institutions to stop providing funding to any activity related to cryptocurrency.
As of now it is legal to hold cryptocurrency, but making any transactions with it is not.
This policy direction has undoubtedly had its effect. According to Bloomberg, the yuan accounted for 93.2 percent of the world’s Bitcoin trading in January 2017. In February the People’s Bank of China decreed that people were allowed to buy and sell bitcoins but could not remove them from an exchange in any way. Exchanges complied with the instructions, and by June the yuan’s participation in the Bitcoin market stood at only 9.7 percent.
Exchanges started exchanging again in June, but the revival was short lived; more rulings in late 2017 meant that by January of this year the yuan had disappeared from the market.
But the industry is not dead in China – far from it. Michael Foster, co-founder of decentralised exchange Local Ethereum, told Finance Magnates that “China’s over-the-counter market for cryptocurrency is currently booming.” China is one its biggest sources of traders, and “tens of millions of Yuan worth of ether” have been traded on the exchange in 2018.