China is a big player in the crypto world and its relation to cryptos has been a love-hate one. The country has nothing but honest intentions, and people understand that up to a certain extent. Namely, Chinese authorities fear that cryptocurrencies could be a fertile ground for various money laundering operations, in addition to illegal transactions that cannot be traced. Moreover, there is a fear that some people may try to scam others into giving them money, by introducing Ponzi schemes and other popular “methods” of making people believe that they are going to get more money.
One thing is certain, though. China plays a very important role in the world’s stage, and every action or decision could affect the entire crypto market. Therefore, the country is closely watched by all people who are into crypto so that they know what actions to take if China will try to make some impactful decisions.
To answer the topic question – whenever China changes its attitude towards cryptos (or anything crypto-related), that is going to affect the market up to a certain extent. Let’s take a closer look at China’s relation to Bitcoin.
Bitcoin and China – Frenemies?
The People’s Bank of China (PBOC), which is the main regulatory body that makes sure all things are in order in the financial institution of this country, has clearly stated that all foreign crypto exchanges, as well as ICOs, are not welcome in the country. In other words, they want to cut down the overall trading volume of not only bitcoin but also other cryptocurrencies.
When China announced that they were going to ban all ICOs and made them illegal in the country, the price of bitcoin changed almost immediately, declining by 6% back in September 2017. This is a clear example of how their regulators affect the market and Bitcoin as its leader.
Looking at the numbers, it’s pretty clear that China makes a huge influence on the crypto market overall. However, even after the ICOs and foreign exchanges were banned, things were pretty good in the relation between bitcoin and China – how so?
Well, it seems that the digital currency really caught on in the Asian powerhouse. In fact, China is a really important player in this game when it comes to mining power, so the entire crypto market must rely on it.
Moreover, all crypto exchanges that are not based in China had to close their doors to Chinese users, which significantly affected those businesses. After successfully banning ICOs, the regulators of China decided back in January 2018 to put all of the foreign crypto exchanges on the other side of the Great Firewall of China. By simply stating that these platforms pose financial risks, they banned all of them, and, once again, made a significant impact on the world of cryptocurrencies, affecting the market along the way.
So – Is Bitcoin legal in China at all?
When you google the question, “Is bitcoin legal in China?” the first result is a very interesting Wikipedia page which gives information about the legality of the digital gold across the world. Now, there are three types of “relations” of countries towards bitcoin – permissive, contentious and hostile.
Countries that are labeled as permissive are mostly western countries, including the majority in Europe, as well as in the Americas. Although Africa is still not very opinioned about technology, it’s Asia that creates a sort of a problem. In fact, the two countries are really standing out – Russia and China, as both are labeled as contentious, but they are two different types of contentious.
We are not interested in Russia right now, so let’s talk about China. According to Wikipedia, the country has “some legal restrictions on usage.” In other words, people are allowed to own Bitcoin, and China was actually one of the first countries to make the first step towards applying any kind of regulation to the crypto sphere.
Essentially, bitcoin is legal, but there is a couple of significant bans, meaning that China wants to keep things under control. The problem here is that by now no country has figured out how to regulate cryptos completely and still give them enough freedom to keep them decentralized and not go against the very philosophical essence that cryptocurrencies represent.
China seems very eager to try an experiment in order to figure out how to come up with the best possible solution. The problem is that it will affect the market along the way, and could present a real threat to the price stability of not only bitcoin but all cryptocurrencies.
A Chinese digital currency – Is that a solution?
China has been copying homework from Facebook which announced its Libra cryptocurrency a couple of months ago. Chinese financial regulators decided to follow the company’s footsteps and create a “centralized digital currency.”
The country already minimized the use of paper notes, as most of the transactions are made via Alipay and WeChat. However, this new type of “cryptocurrency” will give the government an opportunity to “protect monetary sovereignty” as stated by China’s Central Bank Deputy Director Mu Changchun. However, many people don’t see that as any kind of protection. In fact, some dare says it’s a sort of “networked totalitarianism.”
China is the most populous country in the world and has grown to become a real superpower in every possible way. They have been at the forefront of exploring various technologies, some of them being connected to finance. However, it seems that the people who run the country don’t like some of the ideas that cryptocurrencies such as bitcoin bring with them. Therefore, they continually make various regulations which should put cryptos and all around them under control.
But we all know that they cannot be controlled that much and all that we learned about the Chinese government is that these guys don’t like when they have no control. Some consider that a good thing, while others think it is a complete disaster that in direct opposition to the very thing that cryptocurrencies represent. One thing is certain – whenever China makes a move, the market is affected in some ways.