Why has China not opened up cryptocurrency trading?
China's strict restrictions on cryptocurrency trading have multiple reasons, which are related to national strategy and economic management, as well as risk control and social stability. Here are several key reasons:
1. Priority on Financial Stability
The Chinese government places a high priority on the stability of the economy and financial system. The price volatility of cryptocurrencies is extremely high, and if the trading market overheats, it may lead to speculative behavior spreading, threatening the overall security of the financial system.
2. Control of Capital Outflow
Cryptocurrency trading provides a convenient channel for capital outflow. China has been striving to prevent funds from flowing out of the country through illegal or uncontrollable means, and cryptocurrencies, due to their decentralized and hard-to-trace nature, can easily become tools to bypass capital controls.
3. Combating Illegal Activities
Cryptocurrency trading can easily be used for illegal activities such as money laundering, fraud, and terrorist financing. The Chinese government attempts to reduce these potential criminal risks by banning exchanges and ICOs (Initial Coin Offerings).
4. Development of Central Bank Digital Currency (CBDC)
China was the first in the world to launch a central bank digital currency (digital yuan, DCEP) to strengthen control over currency issuance and circulation. If cryptocurrency trading were allowed freely, it could compete with the digital yuan, undermining the central bank's monetary policy tools.
5. Skepticism About Lack of Physical Support
The Chinese government is cautious about assets (such as Bitcoin) that lack physical support or intrinsic value. Although blockchain technology is widely recognized, the government prefers it to be used to promote the real economy rather than speculative asset trading.
6. Protecting Ordinary Investors
Due to the extreme volatility of the cryptocurrency market and the lack of regulation, ordinary investors can suffer significant losses in irrational market frenzy. The Chinese government believes that banning cryptocurrency trading is to protect the public's interests.
What are the possible future directions?
Although China has a prohibitive stance on cryptocurrency trading, it does not deny the value of blockchain technology. On a technical level, China is actively promoting blockchain innovation and has made significant progress in some areas.
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