Cointelegraph’s Aaron Wood reported on the recent Chinese crackdown on the cryptocurrency industry. The article he wrote is entitled “Markets Crash After Reports that Binance’s Shanghai Office Closed in Crypto Crackdown”. In it he describes how Chinese authorities raided the Binance exchange. Chinese regulators say they distributed a notification to comply with the reporting of virtual currencies. However, neither Binance nor the Beijing-funded Huobi claimed to have received the notification.
There are a few reasons why this occurrence is disturbing. Before touching upon these issues, it is important to note that cryptocurrencies do not need exchanges the way securities do for them to be securely traded between users. Blockchains themselves provide the mechanism for securing a transaction. Some crypto trading is even done offline. Users simply trade a paper wallet of the digital key needed to access the funds stored on a blockchain.
One of the main reasons why the crypto market fell so sharply in response to the Chinese raid is because of how most crypto exchanges operate. In the past, money was stolen from exchanges that did not settle crypto trading in the moment. Instead, these centralized exchanges kept their own ledgers of their customers. They would then enact larger blockchain transactions as they saw fit. Binance is a bit different in having its own coin. This might be one reason why the Wood’s article quotes Changpeng Zhao, the CEO and founder of Binance, describing how offices and headquarters are outdated business concepts. It is why the Chinese raid may be ultimately ineffective.
Most all crypto users want their exchanges to be decentralized. An increasing number of exchanges are issuing their own coins. In fact, there is now something termed initial exchange offerings (IEO). Instead of the initial coin offerings (ICO) that many blame for the crypto bubble at the end of 2017, IEOs would be backed by a whole market. It would bring instant liquidity and respectability to any accepted venture.
There are other things that are disturbing about the Chinese action. Probably the next most concerning is that China announced its plans for its own virtual currency. It aims to be a centralized version of blockchain technology. Many crypto users do not believe that this would be a blockchain at all. For a first-world nation to not grasp that blockchain technology is about decentralization brings into doubt other aspects of its economic understanding.
Source: https://cointelegraph.com/news/binance-denies-police-raids-very-existence-of-shanghai-offices
