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How restrictive regulations in China affect Ethereum Killers
Cointelegraph spoke to Eric Gu, the founder of ViewFin, the team behind Metaverse Blockchain in China, about the challenges caused by the China regulators’ shocking actions, the role of geopolitics, further plans of officials and what the Chinese Blockchain-based businesses are planning to do in response. We also spoke about the Ethereum killers and what programming language can give you an edge in China.
On Thursday, second largest Bitcoin trading platform in China, BTCC announced that registration for new accounts for the trading platforms was stopped from that day onwards.
That day, it became known that all its Bitcoin exchange businesses will stop Sept. 30th after considering the announcement made by the Chinese regulators, namely the People’s Bank of China (PBOC), the Cyberspace Administration of China (CAC), the Ministry of Industry and Information Technology (MIIT), the State Administration for Industry and Commerce (SAIC), China Securities Regulatory Commission (CSRC) and China Insurance Regulatory Commission (CIRC).
In response to the regulation. OKCoin has announced on Sept. 15 that it will temporarily stop the registration of new users and deposit service in RMB, and to gradually reduce the exchange of cryptocurrency with RMB until it comes to a stop by the end of October. Huobi has made a similar announcement.
According to Gu, it is possible that in the future, China might disallow the trading of fractions of crypto coins.
“If you want to buy a Bitcoin, you have to buy one Bitcoin, you cannot buy 0.1 Bitcoin because that is security. Security in China is regulated by CSRC. I think in the future if the exchange platforms are not closed, they might not be able to trade fractions of a coin anymore.”
Consequently, the market base will shrink as not many people can afford to buy one Bitcoin. Gu further gave an example ‘In Shanghai, average income is about RMB 6,000 but one Bitcoin’s worth is RMB 30,000. Thus, not many people can afford that, it also takes away the liquidity.’
“These people are a reliable source when Bitcoin was banned in 2013, they were the first to release the rumor and they were right. Maybe this is not a rumor, this can be a fact, you need to take them seriously. The consequences can be severe.”
When asked about how the new regulations might affect the Bitcoin price, Gu explained that, in his opinion, Bitcoin price should have dropped but the recent tension in the Korean peninsula has boosted Bitcoin price. These two events even out the value of cryptocurrency hence it has not dropped significantly despite the Chinese regulations.
The Chinese regulations on cryptocurrency are seen as ‘ad hoc’ by a number of Chinese news portals. DoNews quoted a Chinese financial analyst saying ‘The move to temporarily suspend ICO and while allowing Bitcoin trading is contradictory. Once the regulatory bodies have the technical skills to catch up with the trading of cryptocurrency, it is likely that the deposit in RMB will resume in future.’
“Nobody can predict how the future regulations will be, a lot of companies want to move abroad but their customer base is in China. Let’s say I have a project in China and I moved to Switzerland, the market is in China and how do I explain the market and demands to the investors in Switzerland? It will be difficult. It is not practical.”
Gu stated that working talents, language and the business environment are some of the challenges that will be faced if the Chinese companies want to move abroad.
On Dec. 5, 2013, China moved to restrict its banks from using Bitcoin as currency causing its value to drop 35 percent in 40 minutes. This move is seen as a setback that hindered the growth of the Blockchain industry and the cryptocurrency market by many.
“This is why in China there are so many Blockchain startup companies, actually as many as in the Silicon Valley, because the banks were not involved, they lost three years. When the PBOC suddenly realized that the Blockchain is a huge thing, they ordered the banks to study Blockchain and they found that the best people in the Blockchain industry are not in the banks. Now, this new regulation has come out and we will probably lose another three years. Three years later, people (in China) will look back and say ‘we had Metaverse at a leading level but now we don’t.’ People will have to use Ethereum because there is no other choice.”
Qtum, Metaverse and NEO are seen as three leading smart contract platforms with large operations in China. Each has their unique solutions to the shortcomings of Ethereum. The recent move to ban ICO had NEO’s price dropped. Gu explained that the regulations are making things difficult for these platforms.
“For the past ten days, all I focused on was the regulations, on how to make ourself legal in China. We are not doing productive and I don’t think we are going to do anything productive in two months. We had 30 projects with Metaverse already but ICO is not available for these projects anymore. They have to look for other fundings and that will be difficult. There won’t be new projects anymore if fundings cannot be found. Meanwhile, Ethereum is still growing. We don’t lose only these few months, we are also losing ground.”
ViewFin offers Blockchain as a Service (BAAS) to its clients. They provide the security and network layer to the clients, who are usually the experts in their own fields. Gu described the working relationship with their clients as ‘You do what you do best and leave the Blockchain to us.’ He further explained that Ethereum’s language is Solidity, which poses a problem for the Chinese people.
“The Chinese people don’t write in alphabets, they write in characters. To tell them to write a programming language in alphabets is to double the difficulties for them. In Metaverse, you don’t need to write anything. Just tell us what you need for example a token or a digital identity and the details, we will create it for you. No smart contract needed. This is convenient to business people. If you really need a smart contract, Metaverse has API.”
The other major difference between Metaverse and Ethereum is how projects are created, thinks Gu:
“To me, those who write on Ethereum are mostly developers and developers don’t really understand business.”
He adds: “They ICO-ed the huge projects and after they finished the projects, they start looking for customers. This is wrong. For us, we have clients like ZenAir who has 100 mln customers before they got involved in Blockchain. So today, Metaverse has more users than Ether because these projects are created by real businessmen with real customers. The vision of Metaverse is to attract business people to create their projects with us. They can take care of their business and we can take care of Blockchain.”
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