China cracks down on scams that are scarier than Covid-19

The Chinese government is not only cracking down on the novel coronavirus but also on cryptocurrency scams. The National Internet Finance Association of China(NIFA) on April 3 warned about the risks of offshore cryptocurrency exchange platforms and speculative manipulation. The NIFA is an internet finance self-regulatory organization that was established jointly by a number of institutions, including the People’s Bank of China, the China Banking Regulatory Commission and the China Securities Regulatory Commission. It is approved by the Chinese communist party and the state council and represents the interests of the Chinese government. The fact that NIFA has released a warning on cryptocurrency exchanges indicates that the Chinese government is currently monitoring cryptocurrency companies. # Risks increase since Covid-19 NIFA posted the warning on its website on April 3. The notification warned that cryptocurrency investment risks have grown since the Covid-19 outbreak. It particularly warned against the damages resulting from data manipulation by cryptocurrency exchanges. It noted that exchanges have relocated offshore to avoid China’s legal regulations. Many exchange platforms have relocated overseas since the Chinese authorities have banned cryptocurrency exchanges and ICOs. Due to the ban, there is no legal protection against investment losses in cryptocurrencies or ICOs. # Chinese media warn that cryptocurrency is not safe People’s Daily, which is the official newspaper of the communist party, warned against cryptocurrency speculation in an editorial published on April 5, in which it argues that cryptocurrency is not a safe asset. It argued against the belief that cryptocurrency including bitcoin is a safe asset that has succeeded in defending its price when the global equity market was heavily hit by the Covid-19. # A major scam Covid-19 itself is a major burden, but why is the Chinese government cracking down on cryptocurrency at a time like this? It’s because there are various scams happening when the country is in a state of emergency, as was pointed out in the People’s Daily editorial. Plus token, the biggest scam in China so far, has recently emerged. The estimated loss from the scam is roughly 10 billion yuan, which is about 1.73 trillion won. The scam was committed under a peer-to-peer (P2P) project titled Silicon Valley Blockchain Chicken. The scam was a Ponzi scheme that involved cryptocurrency and promised high returns. The setup is simple. The platform manages cryptocurrency deposited by the investors. The longer the cryptocurrency is deposited the higher the return. For example, the return on investment is 13 percent when depositing the cryptocurrency for seven days. But this yield is raised to 14 percent for 10 days and 15 percent for 11 days. So if a person deposits 30,000 yuan, or roughly 5.2 million won, after a month, they earn 10,000 yuan, or 1.73 million won. The company said that if the investors introduced new investors, they would be compensated. #The problem isn’t cryptocurrency The damage inflicted by scams is growing at an alarming rate. Although the concerns that the Chinese government has are understandable, it is not a problem stemming from cryptocurrency itself. It is a wrong committed by handful of people that are committing crimes using cryptocurrency. The Chinese government, which is overwhelmed from cracking down every single scam, is rushing to completely ban cryptocurrency. It has been two years since the ban, and yet crimes continue. Isn’t it time for the Chinese government to change the way it is approaching the issue? It could achieve a better result if it lifts the ban and accepts cryptocurrency and lets the market decide for itself

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