We’ve heard this before: China’s billion-plus people quietly and quickly worked hard and built up a huge amount of new wealth, catching the rest of the world off guard.
Jon Southurst writes for CoinDesk that what’s going on in Bitcoin looks a lot like the world’s economy over the past 25 years or so.
Reports this month have shown that China hosts the world’s largest Bitcoin exchange by volume and user base, BTC China, and that more than a third of all Bitcoin transactions take place in the country of 1.6 billion.
And while lawmakers in the US are holding hearings to get a handle on what these “virtual currencies” are all about, Chinese state television is showing documentaries on digital currencies, which set off a flurry of new mining activity, Southurst writes.
Chinese mining rigs started selling for more than $12,000 but paid themselves off within weeks. But that was months ago, and mining rigs now cannot show such a fast ROI.
Rising to the head of this vast digital economy is BTC China, the exchange that assumed pole position from Mt. Gox in October. While the Senate committee was wringing its hands over law enforcement and the specter of money launderers, BTC China was closing a $5 million round of Series A funding from Lightspeed Venture Partners and Lightspeed China.
BTC China is only set to grow bigger. And it’s not charging transaction fees.
But you need access to Chinese yuan to trade there. This keeps much of the exchange’s business in the country.
Zennon Kapron, who is based in Shanghai and writes about Chinese business, told Southurst that while BTC China’s no-transaction-fee policy drives a lot of the interest, the fact that it’s hard to get money out of China attracts a huge number of investors, too.
With so much wealth building up but restricted opportunities to invest it outside of China through traditional means, Bitcoin is allowing wealthy Chinese citizens the chance to move money freely around the globe.
In China, Kapron said, the only real investment opportunities are stocks and property — but there are only so many ghost cities developers can build.
Chinese Bitcoin users do have another domestic use for the currency, though, now that Taobao, an online retail and auction site, has set up a Bitcoin payment option.
To be fair to US lawmakers, Chinese authorities are mulling the same questions about law enforcement. They have just as many incentives to stamp out alleged money launderers and currency fraud.
And we can verify that at least one Beijing based exchange, GBL — which claimed to be based in Hong Kong — took someone’s money and ran. The site went offline in November, and with it disappeared more than $4 million in customer deposits.
Despite setbacks, China seems poised to lead the way for Bitcoin.
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