With the popularity of Bitcoin, policies on cryptocurrency have become a hot issue. eDaily, a widely-read South Korean daily focused on business and economics, published an article analyzing the reason why the Chinese government’s financial policy is focused on controlling cryptocurrency. The article references an article from CKGSB Knowledge, “Blocking Bitcoin: Why China’s Cryptocurrency Ban Could be Here to Stay”, and mentioned both Cheung Kong Graduate School of Business and the school’s publication CKGSB Knowledge as the sources of the article.
Traditionally, central banks, governments or financial companies controlled the flow of money in a market. However, the popularity of cryptocurrencies has meant that ordinary people can make transactions anywhere in the world and it’s virtually uncontrolled by established institutions.
The Chinese government has a big problem with cryptocurrencies and the underground economy it has created. eDaily, a well-known daily focusing on business and economics in South Korea, published an article analyzing the reasons why the Chinese government’s financial policy is focused on controlling cryptocurrency.
The report references an article from CKGSB Knowledge “Blocking Bitcoin: Why China’s Cryptocurrency Ban Could be Here to Stay”. The article mentions both Cheung Kong Graduate School of Business and the school publication CKGSB Knowledge magazine as the sources of the article.
Until September 2017, China had been the world’s largest virtual currency market, accounting for 90% of global transactions. But then the Chinese government banned fundraising through initial coin offerings (ICOs) and shut down cryptocurrency exchanges. The Chinese government believes the crackdown on cryptocurrency is necessary to curb systemic financial risk.
Of course, the Chinese government banned cryptocurrency to prevent money laundering, but the true nature of the regulation lies in the government’s efforts to maintain the current financial system.
Despite the government’s policy against cryptocurrency, it is interested in the underlying blockchain technology. The transparency of blockchain technology creates a decentralized digital public record of transactions that is secure, anonymous, tamper-proof and unchangeable. Making use of this technology, a government can control all activities in the financial field. Blockchain technology can also be used in nearly every other industry. In addition, automation on the blockchain, widely referred to as “smart contracts,” could also appeal to the Chinese government.
Eventually, China intends to take advantage of the benefits of digital currency while maintaining a “centralized” order in the financial system by launching its own sovereign digital currency, which is different from a cryptocurrency like bitcoin in that the former must have the backing of a central bank, while the latter is decentralized by design.
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