China has launched a nationwide crackdown on cryptocurrency as crypto-related illegal activities in the country go rampant again alongside the increasing speculation following the country’s president Xi Jinping’s great push for blockchain adoption.

The clampdown effort since 2017 has led to the shutdown of 173 crypto trading and token issuing platforms previously operating within the country, according to China Financial Stability Report (2019) freshly released by China’s central bank People’s Bank of China (PBoC).

89% of Chinese blockchain firms have tried to issue cryptocurrency

The recent blockchain endorsement from the country’s president Xi Jinping has not only accelerated the massive adoption of blockchain technology, but also led to the return of speculation and illegal activities involving cryptocurrencies.

According to the Bluebook on Blockchain report led by the PBoC, only 4,000 out of the 28,000 blockchain enterprises based in the country are engaged in pure blockchain technology, while as many as 25,000 have tried to issue their own cryptocurrency or token via illegal fundraising or financial fraud.

Some even take advantage of the central bank digital currency DCEP, claiming that they are “authorized” by the PBoC to conduct transactions of DCEP, which drove the PBoC to issue a statement claiming the DCEP is still under research and testing and asking the public to be alert with such fraudulent platforms.

Under such a context, major cities including Beijing, Shanghai and Shenzhen have taken the lead to clamp down on crypto speculation and fraudulent companies that use blockchain as a marketing gimmick without any technological substance in the past few weeks.

Though the regulators’ intention is to crack down on those fraudulent companies and their air coins which is created out of thin air without any real team or development. Crypto exchanges that might provide marketplaces for these scam/air coins are bearing the brunt of the regulatory pressure and first targeted.

Small crypto exchanges under pressure while major ones thrive

Some small crypto exchanges with high-profile presence, such as Biss and MXC, have been under investigation, and the official Weibo (Twitter equivalent in China) account of leading crypto exchange Binance has been blocked.

The tension surrounding Binance even later developed into a tit-for-tat dispute after crypto news site The Block reported police raid at the exchange’s Shanghai office, which was denied by Binance’s CEO Changpeng Zhao. In its latest development, the exchange’s co-founder He Yi clarified in a Weibo post that Binance’s Shanghai office had actually been closed early in 2017 and the so-called office was later used by outsourced customer service staff and some developers.

Apart from Binance, major crypto exchanges such as OKEx and Huobi have not been affected so far, still operating and serving local investors. It is said that that’s because the two actually have close ties with local government.

Early in 2018, Star Xu, founder of OKEx, proclaimed that he was prepared to donate the company to the country at any time; Huobi has established a CCP (Chinese Communist Party) branch within the company since last year, which means that the company is endorsed by the local political authority to some extent.

That said, these trading platforms, as well as crypto news media and blockchain projects, recently have been particularly cautious in terms of their marketing and promotion activities. As sensitive words like cryptocurrency trading or crypto speculation detected by social media platforms would trigger immediate bans.

As the nationwide crackdown lasts and #CryptoCrackdown continues to hit headlines of the country’s financial news, the crypto market is somewhat influenced by it, with bitcoin price sliding downward in the past month and once dropping to $6,500 from the highs around $10,000.

The crackdown is also interpreted by many as part of the preparation for the country’s central bank digital currency DCEP which is coming out soon. It is obvious that China wants blockchain without bitcoin but a state-controlled digital currency.

Following the China Financial Stability Report (2019), this morning, PBoC posted an infographic stating that blockchain technology should be developed while cryptocurrency speculation should be kept away.