Within 2008 following the financial crisis, a document titled “Bitcoin: A Peer-to-Peer Digital Cash System” was published, detailing the concepts of a payment system. Bitcoin was born.
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Bitcoin gained the attention of the world for its use of blockchain technology and as an alternative to fiat currencies and commodities. Dubbed the following best technology after the internet, blockchain offered solutions to issues we have did not address, or ignored over the past few decades. I will not delve into the particular technical aspect of it but here are a few articles and videos that I suggest:
How Bitcoin Works Under the Hood
A gentle introduction to blockchain technologies
Ever wonder how Bitcoin (and other cryptocurrencies) actually work?
Fast forward to today, 5th February to be exact, authorities in Tiongkok have just unveiled a new group of regulations to ban cryptocurrency. The Chinese government have already done so last year, but many have circumvented through international exchanges. It has now enlisted the particular almighty ‘Great Firewall of China’ to block access to foreign trades in a bid to stop its citizens from carrying out any cryptocurrency dealings.
To know more about the Chinese government position, let’s backtrack a couple years back to 2013 when Bitcoin was gaining interest among the Chinese citizens and costs were soaring. Concerned with the price volatility and speculations, the People’s Loan provider of China and five various other government ministries published an official notice on December 2013 titled “Notice on Preventing Financial Risk associated with Bitcoin” (Link is in Mandarin). A number of points were highlighted:
1 . Because of various factors such as limited source, anonymity and lack of a centralized issuer, Bitcoin is not an official currency but a virtual commodity that cannot be used in the open market.
2 . All banks and financial organizations are not allowed to offer Bitcoin-related financial services or engage in investing activity related to Bitcoin.
3. Most companies and websites that offer Bitcoin-related services are to register with the necessary government ministries.
4. Due to the anonymity and cross-border features of Bitcoin, organizations providing Bitcoin-related services ought to implement preventive measures such as KYC to prevent money laundering. Any suspicious activity including fraud, gambling and money washing should to be reported to the specialists.
5. Organizations providing Bitcoin-related services ought to educate the public about Bitcoin and the technology behind it instead of mislead the public with misinformation.
In layman’s term, Bitcoin is grouped as a virtual commodity (e. grams in-game credits, ) that can be bought or sold in its original form and never to be exchanged with fiat currency. It cannot be defined as money- something which serves as a medium of swap, an unit of accounting, as well as a store of value.
Despite the see being dated in 2013, it really is still relevant with regards to the Chinese govt stance on Bitcoin and as talked about, there is no indication of the banning Bitcoin and cryptocurrency. Rather, regulation and education about Bitcoin and blockchain will play a role in the Chinese crypto-market.
A similar notice was issued upon Jan 2017, again emphasizing that will Bitcoin is a virtual commodity and not a currency. In September 2017, the boom of initial gold coin offerings (ICOs) led to the posting of a separate notice titled “Notice on Preventing Financial Risk of Issued Tokens”. Soon after, ICOs were banned and Chinese exchanges had been investigated and eventually closed. (Hindsight is usually 20/20, they have made the right decision to ban ICOs and stop mindless gambling). Another blow was worked to China’s cryptocurrency community within January 2018 when mining functions faced serious crackdowns, citing too much electricity consumption.
While there is no formal explanation on the crackdown of cryptocurrencies, capital controls, illegal activities plus protection of its citizens from monetary risk are some of the main reasons offered by experts. Indeed, Chinese regulators have implemented stricter controls such as overseas withdrawal cap and managing foreign direct investment to restrict capital outflow and ensure domestic investments. The anonymity and ease of cross-border transactions have also made cryptocurrency a favorite means for money laundering and fraudulent activities.