Bitcoin and other cryptocurrencies experienced losses early this month after The People's Bank of China announced a crackdown on crypto currency exchange sites as well as Initial Coin Offering (ICO) in the country. Such stringent measures by China might result in low confidence in the cryptocurrency market. Potential buyers in China of cryptocurrencies might hesitate to purchase the currencies as the government might impose strict regulations on the creation, trading, and possession of these coins in future. An analyst told CNBC that other countries are also planning to ban these digital coins.
Why nations will lack confidence in Cryptocurrencies
There are thousands of cryptos in the cryptocurrency market. Coinmarketcap.com tracks the market activity of 866 crypto currencies. The website began tracking the market activity of 10 new coins in this market last week alone. Examples of new coins introduced in this market are Moeda loyalty Points, Faccoin, Magnetcoin, Vsync, and Hive. The lack of regulation in this market has increased risks such as fraud and Money Laundering.
There is also allot of fraud in this market. According to express.co.uk, the Australian government introduced measures to ensure that criminals do not use these digital coins to engage in illegal activities. This measure according to the Australian government will also combat money laundering.
U.S investigators shut down online merchant 'AlphaBay' in July this month where buyers engaged in illegal activities and made payments in cryptocurrencies. Cryptocurrencies are also a favorite mode of payment among criminals because the coins can be exchanged anonymously.
Initial Coin offering is whereby a cryptocurrency developer sources funds from members of the public when coming up with a new digital currency venture.
According to iocalert.com, there are about 20 IOC offering every month. Central banks will begin to be worried about cryptocurrency developers who abuse this offering.
The future of cryptocurrencies
More government regulation on this market will be required due to fraud, money laundering and an increase in the number of cryptocurrencies.
The use of this coins by criminals will also result in their banning. Although cryptocurrencies are a sound investment for speculators when compared to stocks and mutual funds, some governments have viewed this coins as an investment risk to their citizens. Due to the recent volatility experienced in this market as a result of China's stringent regulations and crackdown; the robustness of this market will depend on whether or not governments around the world will allow their citizens to participate in this market.
