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A month ago, blockchain technology became popular, and the long-dormant cryptocurrency circle took the opportunity to make some moves. Virtual currency speculation showed signs of rising again, prompting regulators to take action to rectify the situation.
In the past two weeks, regulatory authorities in Shanghai, Beijing, Inner Mongolia, Shenzhen and other places have "drawn the sword" against virtual currencies, either cleaning up virtual currency mining companies or launching special rectifications on virtual currency-related activities. Beijing police also cracked down on the BISS fraud case of illegal digital currency exchange. This is another large-scale "encirclement and suppression" of virtual currencies by regulatory authorities after the ban on ICO (initial coin offering) in September 2017.
During the same period, Binance and Tron’s Weibo accounts were blocked, and the cryptocurrency exchange QBTC announced that it would gradually shut down services for users in mainland China. Bitcoin fell below $7,000, and was reported at $6,723 as of 17:00 on November 25. An investor revealed that the number of inquiries in an investment group he was in had decreased recently, and the selling pressure had increased.
Industry insiders remind us that currently there are still very few blockchain technologies that have been truly implemented, let alone any "killer" applications. If some projects claim to have been implemented or have actual application scenarios, we should still be wary.
Regulators in many places have taken intensive actions to rectify virtual currency activities
On November 11, the Ministry of Industry and Information Technology of the Inner Mongolia Autonomous Region issued a notice stating that the autonomous region’s joint inspection team rushed to some leagues and cities to conduct a joint inspection on the cleanup and rectification of virtual currency “mining” companies. The main content of the inspection was to focus on finding out virtual currency “mining” companies that have nothing to do with the real economy, evade supervision, consume a lot of energy, and use the “big data industry” as a package to enjoy local electricity prices, land and taxation preferential policies.
Three days later, on November 14, multiple media outlets reported that Shanghai would complete the investigation of virtual currency trading venues by November 22. On November 22, the website of the Shanghai headquarters of the central bank announced that the Shanghai Financial Stability Joint Conference Office and the Shanghai headquarters of the central bank, together with relevant departments at the Shanghai municipal and district levels, had launched a special rectification campaign against virtual currency-related activities in Shanghai, and ordered problematic companies found to provide publicity and traffic diversion services for virtual currency trading platforms registered overseas to immediately rectify and exit. The next step will be to continue to monitor virtual currency business activities within the jurisdiction, and immediately deal with them once discovered, to prevent problems before they occur.
At the same time, Shenzhen, Beijing and other cities also announced related investigations and rectifications. On November 22, the Shenzhen Local Financial Supervision and Administration Bureau website issued an announcement stating that due to the recent promotion of blockchain technology, virtual currency speculation has risen, and some illegal activities have shown signs of resurgence. The Shenzhen Internet Financial Risk and Other Special Rectification Work Leading Group Office will conduct investigations and evidence collection on illegal activities, and will severely deal with them once discovered.
On the evening of the 22nd, a Beijing News reporter learned from relevant departments that the Beijing Local Financial Regulatory Bureau and the Central Bank's Business Management Department adhere to the principle of "strike at the first sign" against illegal financial activities and continue to maintain a high-pressure regulatory posture. The report also stated that Beijing police recently cracked a fraud case involving an illegal digital currency exchange, BISS, and arrested dozens of suspects.
On November 25, the official WeChat public account of the Shanghai headquarters of the People's Bank of China once again published an article titled "Blockchain ≠ Virtual Currency: Develop Blockchain Technology and Stay Away from Virtual Currency Speculation" to warn of risks. According to Xinhua News Agency, the Xi'an branch of the People's Bank of China also reminded investors to be on guard against virtual currency fraud routines.
This is not the first time that the cryptocurrency industry has been “encircled and suppressed”. In September 2017, the central bank and seven other departments issued the “Notice on Preventing Risks in Token Issuance and Financing”. The notice clearly stated that ICO is an illegal financial activity that seriously disrupts the financial order and stopped all domestic token financing projects. At the same time, it ordered all domestic digital currency exchanges to close within a time limit. As soon as the notice was released, a number of domestic virtual currency exchanges, including Binance, Huobi, and OKEx, went overseas.
Behind the rectification: signs of virtual currency speculation are on the rise
Regulatory authorities in many places pointed out in their announcements that there have been signs of a rise in virtual currency speculation recently with the promotion of blockchain technology. Some companies have organized virtual currency transactions in the country in the name of "blockchain innovation"; on the grounds of "landing of blockchain application scenarios", they have issued virtual currencies in the form of "×× coins" and "×× chains", released white papers, fabricated usage ecosystems, raised funds or virtual currency assets such as Bitcoin and Ethereum; provided publicity, traffic diversion, and agency buying and selling services for ICO projects and virtual currency trading platforms registered overseas; and even some illegal institutions have impersonated the central bank to issue or promote legal digital currencies, and used the gimmick of "legal digital currencies" to defraud investors of their money.
A reporter from the Beijing News recently discovered that a website called "DCEPAPI" appeared on the market. The webpage reads: "DCEP payment interface will be opened soon", "Please continue to pay attention to us, there will be important news to be announced", "There are still × days before the announcement", etc., but there is no information about the organizer's background, contact information, etc. The "DCEP" is the electronic currency that the central bank has previously announced is being developed.
On November 13, the central bank issued a statement to refute the rumors, saying that it has not issued legal digital currency (DC/EP) and has not authorized any asset trading platform to trade. The central bank's legal digital currency is still in the process of research and testing. The "DC/EP" or "DCEP" traded on the market are not legal digital currencies. The online rumors about the launch time of legal digital currency are inaccurate information and may involve fraud and pyramid schemes. The general public is advised to raise their risk awareness, not to be credulous, and prevent their interests from being damaged.
On November 25, a Beijing News reporter saw in a blockchain forum that there are still issuers promoting virtual currencies. For example, one user posted that "Radarcoin grew up standing on the shoulders of Bitcoin and Ripple, and is a virtual currency with application value."
According to Sun Yulin, an analyst at Zero One Finance and Zero One Think Tank, after Zero One Finance released the research report "RMB 3.0 - China's Central Bank Digital Currency: Operational Framework and Technical Analysis" on October 24, it was recently discovered that some institutions and individuals in the market used the report to engage in illegal speculation in virtual currencies in a distorted and misleading manner. Zero One Finance has issued an announcement to clarify that the report does not contain any illegal virtual currency issuance and trading information. The distortion and tampering of the report for the issuance, promotion, trading and related activities of virtual currencies are illegal acts of defrauding and defrauding financial consumers.
Chang Yong, the founder of Zhimi University, also told the Beijing News reporter that virtual currencies such as various so-called "model coins" that are manipulated by centralized organizations or individuals and use multi-level profit-making, only making profits but not losses, and only pulling the market without doing anything as gimmicks to make profits are not allowed by national laws, regardless of whether they use blockchain technology or virtual currencies, and should be severely cracked down.
Cryptocurrency prices plunge, project owners and investors wait and see
As regulators continue to speak out, virtual currency prices have "plunged". On November 22, the price of Bitcoin fell below $6,800, with the daily decline widening to 13%. As of 17:00 on November 25, it was reported at $6,723, a new low in nearly six months. As for other digital currencies, according to data from the cryptocurrency exchange Bitstamp, as of 17:00 on November 25, Ethereum was reported at $136.05 and Ripple was reported at $0.2122, with a decline of more than 8% in the past 24 hours.
Along with strict supervision, the official Weibo accounts of Binance and Tron, two domestic virtual currency exchanges, were blocked on November 13 and 15 respectively. Currently, search results show that the account has been complained of violating laws and regulations and the "Weibo Community Convention", but the specific content can no longer be viewed.
Sun Yulin told the Beijing News that the main entry point for domestic investors to speculate in cryptocurrencies is exchanges such as Binance. The servers of these exchanges are basically located overseas and there is no way to shut down the servers. However, trading institutions generally have offices in China. The focus of supervision may be to manage the social media of exchanges to control the popularity of cryptocurrency speculation to some extent.
The Beijing News reporter also noted that on November 23, the cryptocurrency exchange QBTC issued an announcement stating that the QBTC entity and all businesses will be relocated to Ukraine, and that services for users in mainland China and Hong Kong will be gradually shut down in the near future, including registration, trading, KYC and OTC. The announcement also stated that the exchange temporarily closed currency trading services at 21:10 on November 23.
Zhang Mingjing, a partner of Lianxing Capital, which focuses on blockchain investment, said that the country currently encourages the development of blockchain technology and applications. Although virtual currency relies on blockchain technology, many projects illegally raise funds under the guise of blockchain. "We generally only invest in blockchain equity projects." Blockchain does not mean hyping virtual currency, especially some air coins without business substance, which will be strictly tightened and suppressed by policies. Any illegal fundraising under the guise of blockchain is challenging the policy red line.
A person from a virtual currency project told the Beijing News that the industry is basically waiting and watching how regulators will manage overseas projects and how to define projects as money-making scams. An investor revealed that the number of inquiries in an investment group he is in has decreased recently, "Everyone is anxious to sell the coins in their hands, and lacks confidence in whether they can continue to hold them."
Blockchain technology is rarely implemented, investors should remain vigilant
Regulatory announcements in many places have reminded people to remain vigilant against illegal financial activities and guard against being deceived.
"At present, we have not seen a killer blockchain application." Sun Yulin said that there are still few practical applications of blockchain. If some projects claim to have been implemented or have actual application scenarios, we should still be vigilant. Investors should not blindly follow the trend of speculating in cryptocurrencies, as the volatility is too large and the risks are too great. Be wary of the legal risks of virtual currency transactions and beware of being deceived.
Zhang Mingjing also said that the current exploration of blockchain is still in its early stages, and the application of blockchain needs to be steadily promoted, and the underlying technology development has yet to mature. In the future, the country will increase investment and layout in this area.
"Blockchain technology is neutral, and decentralized cryptocurrency is an important technological and economic innovation. However, it is still in the experimental stage and the risks are too great. It should not be the object of public investment, and related investment speculation should be regulated." Chang Yong said.
Regarding the development trend of blockchain, Jiang Xuxian, an industry practitioner and founder of Paidun Technology, said that it is foreseeable that after this wave of regulation, some projects without value support will be eliminated by the big waves, which will bring greater downward pressure to the industry in the short term. However, in the long run, some valuable projects that truly provide technical research and development services will settle down, gradually gain social recognition and attention, and will lead the industry to eliminate the false and retain the true, and have more breakthrough development.
Sun Yulin believes that the future direction of blockchain technology is to develop towards industrial blockchain to see whether blockchain technology can really serve enterprises and society. Blockchain technology itself has financial attributes, and it may play a relatively large role in some financial application scenarios (such as supply chain finance).
Jiang Yujie, partner of Xintian Venture Capital, said that the development of blockchain must first solve the underlying technological breakthroughs, and second, find applicable industrial implementation scenarios.
"This rectification will help the blockchain industry get rid of bubbles and return to health, and create more opportunities for more blockchain technology entrepreneurs to empower the development of the industry," said Zhang Mingjing.
Beijing News reporter Cheng Weimiao Zhang Shuxin
Editor: Zhao Ze Proofreader: Jia Ning
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