The reason is simple: it is difficult to regulate and will have a serious impact on foreign exchange controls.$BTC $ETH
I know that many people in our cryptocurrency circle now hold the view that "it is really regrettable that the ban on digital currency exchanges by mainland China has resulted in the pricing power of digital currency falling into the hands of the United States." They believe that the country should conduct compliance supervision on digital currency exchanges, which can increase fiscal revenue while competing with the United States for the pricing power of virtual currency.
But in my opinion, this view oversimplifies the complexity of domestic financial regulation.
The legalization of digital currency exchanges they imagine is as follows: the state holds shares and controlling stakes in large exchanges such as Binance, OKX and Huobi, the user database is controlled by regulatory authorities, funds are held in third-party custody by banks, and the hot and cold wallets that store users' digital currency assets are also regulated. In short, digital currency exchanges are made into financial markets similar to the domestic New Third Board and Beijing Stock Exchange.
But what will it look like in reality? The chaos of various local metal and crude oil exchanges in the past is a lesson not far away.
As an old netizen with a long enough online experience, I have experienced the era when spot exchanges across the country grew wildly. Old netizens like me should still remember that from 2013 to 2015, as long as you searched for "gasoline", "oil", "gold" and other keywords related to energy and precious metals on Baidu, then a screen full of Baidu bidding promotions would pop up, including advertisements for Haixi Silver, Tiantong Silver, Tiantong Gold, Beijing Petroleum Exchange, Western Guangdong Exchange, and Pan Asia Exchange.
The various exchanges opened in these places are not open to ordinary people, but recruit franchisees as market makers through the form of developing member units. Anyway, the gold exchange and oil exchange only need to collect transaction fees steadily. As for how these franchisees cut leeks in various ways, they just pretend not to see it. Many people have been cut into pieces by various products with dozens of times leverage designed by these franchisees. At that time, I had a friend who worked as a salesperson on such a platform. According to my estimation, the spot transaction fee of such a platform is as high as 0.6%.
This chaos lasted for nearly a year before it was exposed on March 15, and it took several more years for it to completely disappear from the stage of history. Now, if you search on the Internet, you can still find some news and information about this type of exchange from ten years ago.
Therefore, if digital currency exchanges are truly compliant in the mainland, there is no doubt that all places will want to get a piece of the pie, and we must not underestimate the infinite wisdom of our working people. Not to mention that every province and city may set up its own exchange. Even if only Binance OKX, an exchange with the most Chinese users, is given a license, there can still be various franchise agency platforms across the country, just like the local commodity exchanges mentioned earlier.
The Pan Asia Exchange incident in Yunnan at that time caused a lot of controversy, and Song Hongbing, the author of "Currency War" who stood up for them, was beaten several times.
It is precisely because of these chaos in the past that, from the perspective of supervision, it is better to cut it off. Moreover, digital currency does not require real-world transportation and production like commodities, and decentralized on-chain transfers cannot be completely regulated. After the people exchange their RMB for virtual currency in the exchange, they can easily transfer it abroad, and foreign exchange control has become a mere formality.
Even in the United States, it is difficult to impose taxes on every digital currency trader. A large number of American users do not use licensed digital currency exchanges in the United States, but instead trade on international exchanges such as Binance and OKX to avoid taxes.
Since it is impossible to regulate, the best way is of course to let as few people as possible be exposed to digital currency.
Currently, neither Binance nor OKX can be downloaded directly from the mall. Just exchanging one’s RMB assets for virtual currency is a very troublesome process. For most people, they will be discouraged just by reaching the OTC transaction stage.
Of course, any investment involves risk, it’s just a matter of size.
If A-shares could fight for a little more, there wouldn't be so many people racking their brains to speculate in US stocks and virtual currencies.
Instead of criticizing those who speculate in cryptocurrencies and U.S. stocks, it is better to think about how to make A-shares truly bring returns to domestic investors.
