According to reports from publications like Bloomberg, the country of China might be continuing their assault on cryptocurrency markets. They’ve already shut down exchanges that operate within their land, and now they are looking into taking their actions a step further. They will be restricting or eliminating access to exchanges that operate outside of their jurisdiction. The government wants to place barriers to connect to platforms and exchanges that cater to retail and institutional investors.
This is certainly troublesome to those investors in China who are invested into the cryptocurrency markets and have already witnessed the surprising move by the government to shut down their China-based exchanges in the latter half of last year.
China is still a powerhouse contributor to the crypto space, individuals and groups in China contribute both to investment and speculation as well as the aspect of mining.
This increased regulation has caused Chinese mining participants like Bitmain and others to hedge their risks by opening up and setting up shop in Singapore, while looking into moving operations to Vancouver, Canada for both the lighter regulation and the cooler climate.
Other participants who provide services like wallets are also departing and setting up shop elsewhere.
It seems that the government is planning to interfere with the centralized virtual exchanges as Bloomberg notes that there will be less interference with P2P transactions. The government is looking to target groups and organizations which are in the cryptocurrency environment and are involved in the facilitation of trading, exchanging, and other aspects of trading. This implies that those who help to clear transactions, assist in withdrawals and deposits would face scrutiny. If the reports are accurate, this means that the government of China is seeking to step by step dismantle the market by eliminating simple ways to trade.
This is somewhat similar to reports that have been coming about the crackdown in South Korea over minimizing tax evasion and curbing speculation. In South Korea, due to the pressure and pushback from the people, the South Korean government has held off on dismantling the cryptocurrency ecosystem in its country.
Reasons for why the Chinese Government may be doing so
The government of China may want to curb the aspect of risk in its financial markets as well as minimize excessive loans. The other primary concern that Chinese regulators have is the fact that cryptocurrencies can be used to move capital elsewhere. The aspect of capital flight is a concern that the government has been addressing for years and is a matter it continues to stay vigilant on.
Regulatory Fears and Correlation to Diminished Faith
Cryptocurrencies have been on a decline over the past couple of days, and many are coming up with several explanations for this event. Some say that this is because of the Chinese New year and crypto January effect, others say that this is because of regulatory fears coming from China and South Korea, large contributors to the crypto ecosystem.
Further regulatory speculation from other countries like Russia also might play a part in the lack of confidence.
The flight of capital is reflected in the prices of the leading cryptocurrency, which has fallen from a fluctuation of $14,000 to around $10,000 as of press time.