China's cryptocurrency clampdown: what next for digital-first businesses?

We take a look at the Chinese governmental move on cryptocurrencies

China appears to be getting tough on cryptocurrencies – really tough. Reports suggest regulators have decided on a “comprehensive ban” which includes shuttering commercial exchanges and prohibiting any buying or selling of digital currency, as well as access to foreign exchanges. It’s been a long-time coming but is not a total surprise, given Beijing’s willingness to step in when it sees a threat to financial and social stability.

The question is, what does this mean for the future prospects of cryptocurrency and the businesses which use or have built products around it?

 

Taking a tumble

The cryptocurrency market cap fell by a staggering $60 billion to around US$109 billion in the first two weeks of September – a drop of around 40% following the news from China. That’s sent alarm bells ringing among investors and some tech firms heavily reliant on such platforms.

The move initially seemed focused on closing individual Bitcoin exchanges, and on banning Initial Coin Offerings (ICOs), a funding mechanism for crypto-currency startups. However, that has morphed – in a typically opaque Chinese way – into an outright ban on all activity, aside from international-facing exchanges in the country and cryptocurrency mining, which brings in significant sums of foreign exchange income into the Middle Kingdom.

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