OKCoin and Huobi, the two largest Bitcoin exchanges and trading platforms in the Chinese cryptocurrency market, were given leeway by the Chinese government to operate until the end of October. Upon the closure of OKCoin and Huobi later this year, the Chinese Bitcoin exchange market will officially be terminated.
Duration of suspension is unclear
Whether the nationwide suspension imposed on the Chinese exchanges and cryptocurrency trading platforms is temporary or permanent remains unclear. Several reports from trusted sources including the Wall Street Journal have suggested that the Chinese government is exploring the possibility of restricting the usage of Bitcoin in addition to cryptocurrency trading activities.
Huang Zhen, a researcher for the country’s central bank, the People’s Bank of China (PBoC), recently published a commentary arguing that cryptocurrencies are threats to the central bank and existing banking infrastructures. He went even further, stating that China should issue its own digital currency.
Zhen’s statement, as translated by Zerohedge, read:
“Cryptocurrencies and other virtual currencies attempt to challenge the sovereign state's right to issue currency, requiring the nationalization of currency issuance. China has a clear understanding of digital forms of money, and is actively engaging in relevant work. The central bank has set up a research group and a digital money research institute to explore the digitization of sovereign money. After this round of virtual money markets supervision, we expect under the auspices of the Chinese central bank to launch our own sovereign digital currency as soon as possible to help maintain China's leadership in the development of global digital finance.”
Zhen, and perhaps others in the Chinese government, has failed to understand that the advantages and merits of cryptocurrencies such as Bitcoin stem from their decentralized nature. Without decentralization, Bitcoin and other cryptocurrencies become vulnerable to manipulation by central entities and thus, the demand for Bitcoin as a digital currency and safe haven asset will decrease.
Still, long-time investors including Jon Creasy remain optimistic in regard to the restoration of the Chinese Bitcoin exchange market. Creasy wrote in his blog that the re-election of Chinese President Xi Jinping, who is an avid advocate of free markets, could lead to the emergence of more efficient and practical regulations for Bitcoin businesses, investors and users. Creasy explained:
“Historically speaking, President Xi Jinping has been one of the largest advocates of free markets China has seen in quite some time, and I expect this trend to continue. But for now, Mr. Xi must appeal to the people who keep him in power: the Communist Party.”