China Ban Likely to Extend to Over-the-Counter Trading

The Wall Street Journal recently reported that China’s recent roll-out of cryptocurrency-related bans is likely to extend to over-the-counter (OTC) crypto trading, although an earlier report from Bloomberg stated that it was likely that OTC trading would be allowed to continue.

OTC trading is a direct, peer-to-peer method of trading in which buyers and sellers quote their own prices. There is no middleman or third-party exchange involved in an OTC trade; the assets go directly from the virtual “hands” of one owner to another.

China may additionally decide to ban access to foreign crypto exchanges, such as Bittrex, Poloniex, and Coinbase. The report containing this information, while unverified, was shared by Bitcoin Core developer BTCDrak on Twitter; Samson Mow (CSO of Blockstream) tweeted that the report was likely true.

While it would be extremely difficult for the Chinese government to totally stamp out any trace of cryptocurrency from within its virtual borders, it seems that the government is making moves to make transacting with or holding cryptocurrency a troublesome ordeal rife with legal consequences.

China’s Crypto Ban (So Far)

It all began in early September when China announced a freeze on ICOs. The Chinese government cited the as-yet unregulated nature of ICOs as the main reason for the ban; the government articulated its concerns about ICOs as MLM schemes and scams. A notice from the Chinese central bank stated that ICOs “seriously [disrupt] the economic and financial order.”

While the Chinese government is right to look out for its citizens in a world where crypto-based scams do exist (ie Swiscoin and Onecoin), it’s not hard to imagine why the Chinese government–a government that has banned Facebook, Google, and Twitter–would be quick to clamp down on unregulated, decentralized currency systems that are virtually impossible to completely control. 

A week after the announcement of the ban on ICOs, the Chinese government announced that Chinese-based cryptocurrency exchanges are legally required to close down all operations by September 20.

As a result of these announcements, the cryptocurrency markets at large were sent into a veritable tailspin–the markets shed billions, and the price of Bitcoin briefly dipped below US$3000–the lowest it has been since early August. The price has since recovered to around US$4000, down from its high of ~US$4900 last month.

While certain sources, including Hu Bing of the Chinese Institute of Finance and Banking, have speculated that the bans are only temporary as the Chinese government “hashes out” appropriate regulations, the ever-increasing scope of the bans has raised some serious questions about whether or not cryptocurrency will have a practical future in China at all.

Questions Surrounding Possible Mining Ban Arise as Chinese GPU Sales Increase

While it’s unclear whether or not the Chinese government will choose to ban crypto mining, GPU manufacturers NVIDIA and AMD saw a boost in their values last week. The bullish trend could be linked to the Chinese bans, as concerned crypto investors seek ways to continue growing their holdings amid the new legislation.

The RCB’s Mitchell Steves commented that “With the China ban, the only way to obtain cryptocurrencies mined with GPUs is to now mine them with computing power.” In other words: the more computational power you have, the more cryptocurrency you are likely to obtain.

Continued Effects on Crypto Markets

As China continues its series of regulations and bans, the cryptocurrency market is very likely to keep experiencing large fluctuations. Memes floating around Bitcoin forums remind users to “Just Hodl” (hold) onto their coins through the wild ups-and-downs to avoid selling at a loss.

Along with the “hodl” talk spreading around the cryptosphere, Jamie Skella (co-founder of Horizon state) tweeted a rather poignant piece of advice: “As the old saying goes: ‘Anything that China bans, invest in.’ 2009: Facebook. 2010: Google. 2017: Entire Crypto Ecosystem?”