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article imageChina may launch its own cryptocurrency and regulate others

By Ken Hanly     Aug 29, 2017 in Technology
The People's Bank of China, the Chinese central bank, has already developed a prototype for its own cryptocurrency that could begin circulating in the near future alongside the official renmibi or yuan.
The bank will be simulating possible scenarios and also running mock transactions in cooperation with some commercial banks.
There are many benefits for China in developing such a currency and system: First, it would decrease the cost of transactions, and therefore make financial services more accessible, which would be a big help to the millions of people in the country who are unconnected to conventional banks. Second, as it would be supported by blockchain, it has the potential to decrease the rates of fraud and counterfeiting, which would be of service to the government’s attempts to reduce corruption — a key concern. Third, it would make the currency easier to obtain, which would increase the rate of international transactions, allowing for more trades and faster economic growth.
Some of the promoters and early developers of cryptocurrencies thought of them as providing an alternative to traditional capitalist banking systems which would allow financial transactions without third party intervention by banks and governments. Some of the strong libertarian strands are exhibited by some participants in the appended video.
However, as more and more merchants and buyers accept the main cryptocurrency bitcoin, companies and even governments are becoming more interested in them. The deputy of Russia's central bank said that “regulators of all countries agree that it’s time to develop national cryptocurrencies.” More and more stores are accepting Bitcoin payments in many different countries. Burger King in Russia has announced its own cryptocurrency the Whopper Coin. New bitcoins are not created by governments but by a process called mining as described in one of the appended videos and also discussed in the documentary video as well.
The second biggest cryptocurrency is Ethereum. Ethereum was recently endorsed by Microsoft and JP Morgan Chase. In late February this year these economic giants teamed up with ten other companies to form the Enterprise Ethereum Alliance (EEA). Credit Suisse, ING, Bank of New York and Thomson Reuters are among the founding members of EEA.
A number of governments have legitimized bitcoin as a means of payment including Japan and Australia, and in many countries merchants will accept bitcoins as payment. Recently a study showed between 2.9 and 5.8 million users of cryptocurrencies most of whom are in North America and Europe.
Recently there have been many new initial coin offerings (ICOs) some of which may simply be money-making scams. The Chinese government is developing new rules that may be used to crack down on such offerings.
A draft of the regulations has been released by the Legislative Affairs Office of the State Council. In part it says: "If the department overseeing illegal fundraising activities found a fundraising without proper permission, or a fundraising that violates the relevant provisions of the State, and if one of the following circumstances is found, the department shall launch an administrative investigation. Other relevant departments shall cooperate with the investigation.…. to raise funds in the name of issuing or transferring equity, raising funds, selling insurance, or engaging in asset management activities, virtual currency, leasing, credit cooperation and mutual funds..."
The new regulations are happening after public outrage over several pyramid selling scams. The new regulations have not deterred Ripple, a company that specializes in international financial transactions using its cryptocurrency from continuing with its attempts to enter the Chinese market.
China is not alone in seeing unregulated cryptocurrency development as a problem. Australia has also introduced regulations as have other countries.
More about China, regulation of cryptcurrencies, bitcoin
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