China proves regulations fail – people just move offshore
Ralph Jennings, 10-2, 21, VOA News, How China’s Ban on Cryptocurrency Will Ripple Overseas, https://www.voanews.com/a/how-china-s-ban-on-cryptocurrency-will-ripple-overseas-/6254329.html
Since China’s government declared all cryptocurrency transactions illegal last week and banned citizens from working for crypto-related companies, the price of bitcoin went up despite being shut out of one of its biggest markets. Experts say large-scale Chinese miners of cryptocurrency — the likes of Bitcoin and Ethereum — will take their high-powered, electricity-guzzling servers offshore. Exchanges of the digital money and the numerous Chinese startups linked to the trade also are expected to rebase offshore after dropping domestic customers from their rosters. The shift highlights how virtual currencies can evade government regulation. “The exchanges have been pushing offshore anyways, and with the exchange business you need cloud infrastructure, you need developers, you need management to move things in the right direction, and so whether that is sitting in Taipei, San Francisco, Singapore or Shanghai, it doesn’t really matter — those businesses are very virtual,” said Zennon Kapron, Singapore-based founder the financial consulting firm Kapronasia. “The real impact we’ve probably seen though is in the miners, and most of those miners [are in] the process of shifting overseas or [have] already completed moving overseas,” he said. Strongest anti-crypto action to date On Sept. 24, the People’s Bank of China, Beijing’s monetary authority, released a statement saying cryptocurrencies lack the status of other monetary instruments. The notice, issued in tandem with nine other government agencies, including the Bureau of Public Security, declared all related business illegal and warned that cryptocurrency transactions originating outside China will also be treated as crimes. Explaining the ban, China’s official Xinhua News Agency reported Friday that cryptocurrencies have disrupted the controlled economy’s financial systems and contributed to crimes such as money laundering. Cryptocurrencies — digital commerce tools that aren’t linked to a centralized banking authority — first appeared in China around 2008. Chinese banks began to prohibit the use of digital currencies in 2013 and stepped up regulations after 2016. China was the world’s biggest Bitcoin miner and supported the largest exchange by volume, according to the news website CryptoVantage. It says many of those who suddenly made millions when Bitcoin prices soared four years ago were in China. Chinese miners and traders head to Singapore The Chinese ban carries penalties for international exchanges that do business with people inside China, and news reports indicate international crypto exchanges are trying to cut ties with Chinese clients in recent days. But the companies themselves are largely staying quiet. A spokesperson for digital currency exchange Coinbase said Wednesday it does not “have anything to share at this time” about the crackdown in China. U.S.-based Worldcoin Global, a new type of cryptocurrency, did not reply to a request for comment. China’s growing pressure on crypto over the past few years had prompted stakeholders to leave the country, Kapron said, adding that less than a quarter of the country's original cryptocurrency peer-to-peer lending startups — small firms that connect individual lenders and borrowers — remain in China. Mining for digital currency — the process of using computers to enter bitcoins into circulation and verify cryptocurrency transactions in exchange for a payout — should get easier overseas as Chinese exit the market, Kapron said. Smaller operators, he added, may be able to mine more easily without the competition of giant Chinese operations. Singapore looms as a prime go-to place for operations that need not be physically onshore. The country had accepted about 300 cryptocurrency license applications as of July. From China, e-commerce giant Alibaba as well as digital financial firms Yillion Group and Hande Group have applied, news reports in Asia say.
China ban just forced crypto underground
Ralph Jennings, 10-2, 21, VOA News, How China’s Ban on Cryptocurrency Will Ripple Overseas, https://www.voanews.com/a/how-china-s-ban-on-cryptocurrency-will-ripple-overseas-/6254329.html
Authorities in China are targeting crypto now as part of a wider “crackdown on overnight riches” and to “clean out the wild, wild West,” Hsu said, referring to largely unregulated market sectors. The trade will go underground for now, he forecasts, and China will eventually come out with an official digital currency issued through major banks.
Crypto monitoring fails because data reporting is not required
International Monetary Fund, October 2021, THE CRYPTO ECOSYSTEM AND FINANCIAL STABILITY CHALLENGES, https://www.imf.org/en/Publications/GFSR/Issues/2021/10/12/global-financial-stability-report-october-2021
Monitoring the activity of crypto asset service providers is complicated by limited, fragmented, and, in some cases, unreliable data. Public data sharing by crypto asset providers is currently mostly voluntary and lacking standardization. For example, while most major crypto exchanges report their trading activity, the information content varies widely, ranging from minimal information to full real-time order books. In addition, given that data are self-reported, there are incentives to manipulate the reporting of higher volumes so as to rank higher on exchange rankings
Providers will just move offshore
International Monetary Fund, October 2021, THE CRYPTO ECOSYSTEM AND FINANCIAL STABILITY CHALLENGES, https://www.imf.org/en/Publications/GFSR/Issues/2021/10/12/global-financial-stability-report-october-2021
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