Are cryptocurrencies dead in China?
The short answer is no. Though things are very much in limbo at the moment.
Up until the China ICO ban, the Middle Kingdom was certainly the mecca for cryptocurrencies. They had the most traders, most miners, and the most to lose. As you may know, the Chinese government has a chequered past when it comes to cryptocurrencies.
Earlier this year the Chinese government began taking a more hard-line stance. They banned no-fee trading and started enforcing regulations on exchanges. Trading plummeted, as it shifted towards countries like South Korea and Japan.
The country was still a hotbed for cryptos, but it never reclaimed its once dominant position.
What’s in Store for NEO?
Yet that hasn’t deterred China-based projects like NEO. NEO is the crypto that has pinned its future on China, and one that is still trading. So what does the future hold for NEO?
Well, first let’s take a look at what’s happened in the past month or so.
Going back to the end of July, NEO had only just become well…NEO. The company had rebranded from the previous name of Antshares. It coincided neatly with the launch of a brand new website, as well as ‘NEO 2.0’.
NEO 2.0 was an update to the company’s blockchain network — the foundational technology behind all cryptos. This update allowed for a more fleshed-out system that paved the way for full smart contract support.
Smart contracts are digital contracts that cut out the middleman. There’s no need for a third-party guarantor, which cuts down on costs and time. The magic of blockchain is crucial to making this possible.
The ‘Ethereum of China’
The update was concluded on 8 August and everything was looking up for NEO. The market was clearly happy as NEO broke into the top 10 cryptos by market capitalisation for the first time. They were well on their way to becoming the ‘Ethereum of China’.
That title though is perhaps more of a curse now.
Ethereum is the leading platform for ICOs. So, it was only natural that NEO would also support ICOs. Yet just as NEO began garnering interest and had a few ICOs in the works, news broke that China had banned ICOs.
Da Hongfei, NEO cofounder commented:
‘In the past few weeks, there were 10 ICOs every week, and a lot of people don’t understand Bitcoin. They don’t know what Bitcoin is. They’re just coming in and want to make big money. When the situation got worse, old ladies were investing their retirement savings, and the government stepped in…’
In short, there was a lot of unscrupulous behaviour. Scams were rife, as it was unregulated and seen as easy money. So the government intervened.
Crypto prices tanked across the board, but NEO was hit harder than most. This was a project devoted to China. Their focus had always been on the nation, and never really extended further than that. It’s true that international investors could throw some money their way, but the project was seemingly devoted to China.
That scared off a lot of people. But it didn’t completely kill off cryptos in China, and NEO survived.
The NEO team put out a statement on the matter on 5 September. Unperturbed, they believed that compliance was always going to be inevitable, which is why they did everything by the book. The news hurt their price, but they were legally safe.
They reassured their community that NEO was more than just an ICO platform, and that development would continue. Things looked to be back on track and, with a new listing on US exchange Bitfinex, the price made a roaring comeback.
China’s Stance on Cryptos
That was followed by another setback. China’s crypto exchanges were ordered to shut down operations by today, 20 September. While the news was a dampener, it was seen as logical. Though the closure of exchanges certainly took people by surprise. This was the surest sign yet that China was taking an extreme stance on digital currencies.
While global markets suffered another downward swing, once more it was NEO that was hit hardest. And, once again, NEO recovered. Despite all the turmoil and uncertainty, it has remained resilient.
Which brings us to NEO’s future. It is almost at a point where it seems the only way is up. Though we’re not confident enough to make that claim here at Money Morning, and we wouldn’t trust anyone who that makes it.
NEO is definitely stuck between a rock and a hard place.
NEO Proving Critics Wrong
The important thing for NEO now is to continue to prove its critics wrong. And it’s already working on just that.
Yesterday, South Korean exchange Coinlink advised that it was looking into listing NEO. A small but nonetheless positive step. Then, last night, news broke that NEO’s first ICO was going ahead in Hong Kong.
Red Pulse will conduct its ICO on 8 October via the NEO platform. And, importantly, they made sure they were bulletproof before committing to it. Red Pulse CEO and founder Jonathan Ha stated:
‘We have hired a team of Hong Kong advisors from a “Big Four” accounting and advisory firm, as well as outside legal counsel, to advise us on our entire RPX sale process, and to ensure we are fully compliant with laws in Hong Kong SAR.’
Long-term ICOs might not even matter for NEO, anyway. Their pipeline includes several big projects that could really make them a crypto star player. They’ve already hinted at NeoX, NeoFS and NeoQS and NeoMessage.
So, clearly NEO has a future beyond China, provided it can deliver. Even if China does an about-face and decides to welcome cryptos back with open arms (to be clear, cryptos still aren’t banned, but they are certainly being impeded), NEO might not even care. The title of the ‘Ethereum of China’ may have been short lived, but perhaps that isn’t a bad thing. NEO’s team are clearly thinking big-picture. Whether they realise that goal is going to be the real challenge.
For more on all things crypto, be sure to follow developments from our two crypto experts, Sam Volkeringand Ryan Dinse. And if you want to get the best crypto insights in Australia, make sure to check out Sam Volkering’s Secret Crypto Network.
Junior Analyst, Money Morning