There have been a plethora of articles of late that posit that Bitcoin has suffered an enormous blow at the hands of government officials in China. The recent crackdown was touted in press accounts outside of China that the authorities were at war with Bitcoin and any exchanges that enabled trading in the “evil token”. As it turns out, nothing could be further from the truth. The carefully orchestrated raids by the government were directed at specifically at eliminating several highflying exchanges that were continually hoodwinking the public. Major exchanges were left alone on the sidelines.
Yes, we often hear the phrase “Blockchain, not Bitcoin” emanating from China, but whatever the source or wherever this phrasing originated, it appears to be a bit misleading in the aftermath of the “China Purge”. Make no doubt about it, there was a heavy-handed crackdown: “According to government mouthpiece Xinhua, more than 500 people have been arrested, and more than 300 crypto influencers’ social media accounts have been shuttered.”
Major crypto exchanges, like Huobi, OKex, and operating platforms that have a distant association with Binance, were bypassed in the scourge that rocked major cities and that eventually delved down into lower tiered townships, as well. The government had one objective – to close those exchange establishments that had preyed upon unsuspecting investors in the past and seemed to be stepping up their schemes after President Xi’s outright support of anything having to do with blockchain.
So why such blatant outrage on the part of government officials? Hindsight is definitely twenty-twenty in this situation. In the West, we rarely see reports of corruption or outright fraud taking place in the Middle Kingdom. The general presumption is that the Peoples’ Republic is run like a police state. Criminals would never be so daring as to broadcast their schemes far and wide for fear of quick retribution. Such a presumption does not take into account the changes in public policy since the days of the Tiananmen Square protests in 1989 that signaled a great political upheaval and major reforms to come.
China has become a more open and free society than before, and yes, the potential for more “bad actors” to practice deceit openly in public has returned. A multitude of crypto exchanges in the mainland have, unfortunately, gone down this “shady” mode of operations. The staff at Decrypt reports that one fine example is the MXC exchange: “MXC, which launched in Sichuan in early 2018, describes itself as “more than just an exchange” and claims to be “the world’s leading assets trading platform”.”
The company’s bio continues: “Though the site is available in different languages and claims to be used by investors in 70 countries, it was believed to be especially popular with Chinese retail investors in the third- and fourth-tier cities, where investors are relatively unsophisticated.” Everything sounds as if it is on the up and up, but then why would the crypto community utter this phrasing: “You are not running a good ponzi business if you are not on MXC, aka Matcha Exchange.”
The MXC exchange, along with a host of copycats, has used its platform to launch the sale of numerous “air tokens”, as the government has called them, an inference that the coins, whether sold or traded for reliable tokens like Bitcoin or Ethereum or for cash, were worth nothing more than thin air. One such example was its VDS token project, which in only two months surged by 5,137% in value. As you might expect, promoters at that point stopped “pumping” and began “dumping”. The value went to zero in a heartbeat. Unsuspecting investors absorbed the losses.
If this instance had been an isolated case, then you might look the other way and educate customers to be more suspect and do their due diligence before investing, but the criminals had found a “formula” that worked and began pressing similar schemes across the country, drawing ire from the government in the process. MXC expanded their efforts, as well.
According to Caijing, a financial news site: “53% of MXC’s token projects reached their highest valuation on the first day of trading. Indeed, more than 53% of the projects lost over 90% of that peak value, with more than 70% trading below their initial offer price. Only very lucky investors—or, perhaps, people who were privy to the dumping schedule—made money.”
After President Xi made his favorable remarks regarding blockchain technology and the opportunities for his countrymen that it entailed, the “bad actors” amongst the crypto exchange community took his message as a green light to promote “air tokens” once again. The government was fully aware that the market was reacting counter to their intent and had to step in to protect the public at large. The crackdown ensued.
Legitimate exchanges were immune to the attacks and are now working closely with the Government to promote its good intentions. As for the fleet-footed fraudsters: “The environment has turned toxic for the smaller, wilder exchanges, who are forced to choose between staying and facing disastrous consequences, or fleeing China.”
But what about Bitcoin? Its value shot up 42% after President Xi’s comments on the presumption that China might be grudgingly opening its doors once again to the leader of all cryptocurrencies. The crackdown dispelled this notion, and the market quickly took back its recent gains. Bitcoin has slowly recovered, and, perhaps, rightly so, as it appears that Chinese authorities may not be so much about “Blockchain, not Bitcoin” as once perceived. There may still be hope that BTC can flourish on the Chinese mainland.