Over the weekend, The Economist offered its take
on Bitcoin’s (and other altcoins’) China problem.
It argues that regulation has driven people in China out of that market in droves over the last four months or so, which isn’t a shock to anyone.
“Most investors have left the market,” BTC China’s Bobby Lee told the magazine.
Then and Now
In late November, Bitcoin’s value against the dollar broke well clear of the $1,000 mark. On some exchanges, it peaked above $1,300. More than 100,000 Bitcoins were traded daily on the BTC China exchange, and we were all excited about China leading the way
Today, Bitcoin’s value in dollars is less than half of that November high, and “hardly 2,000 coins are now traded daily on BTC China,” The Economist notes.
In early December China’s central bank declared that Bitcoin was not a currency. This slowed its rise, but enthusiasts remained unbowed as the declaration fell far short of the outright ban some had feared. Then regulators forbade the firms that act as middlemen between businesses and credit-card networks from working with the exchanges.
Many believe the other shoe is about to drop this week.
Rumours now suggest that the central bank has instructed commercial banks to halt all dealings with cyber-exchanges by April 15. Such a move would be even more harmful to Bitcoin, says Zennon Kapron of Kapronasia, a local expert on the topic. As in most places, Bitcoin has not taken off as a means of payment in China; instead, it is mainly a speculative investment.
All is Not Lost
Despite Lee’s lament that “A billion Chinese won’t all be buying Bitcoin anytime soon,” such a move would not be a death blow for crypto-currencies in China. Much of the activity will simply go offshore and underground
The same is likely even if China continues its plausible deniability schtick in which it doesn’t outright ban anything but keeps the regulatory waters too murky to navigate.
Still, one venture capitalist keen on crypto-currencies predicts “some workaround is likely”. If banks are forbidden to hold corporate accounts for exchanges, one insider whispers that personal bank accounts of senior executives could be used instead.
OKCoin, another Chinese exchange, insists it has an emergency plan involving an “overseas version”.
Chinese exchange Huobi didn’t mince words with its recent statement to the People’s Bank of China:
“If online trading platforms that are following the rules have to stop services, Bitcoin transactions will go offline where they will be unmonitored, and will result in even more difficulty regulating.”