Over the past year Bitcoin has soared in value, largely due to its popularity in China, one of the world hubs of Bitcoin mining and trading. Unfortunately for Bitcoin, the Chinese government is not a fan of cryptocurrencies, which are mostly traded by Chinese citizens who are hedging against falls in the yuan. It’s an extra problem the central government could do without in its longstanding battle to stabilize the yuan and eventually turn it into a fully floating currency.
In the past, the Chinese government has banned Bitcoin transactions at banks and retailers, and more recently it banned ICOs, Initial Coin Offerings. Now it’s going further:
Chinese authorities are ordering domestic bitcoin exchanges to shut down, delivering a heavy blow to once-thriving trading hubs that helped popularize the virtual currency pushing it to recent record highs. China’s central bank, working with other regulators, has drafted instructions banning Chinese platforms from providing virtual currency trading services, according to people familiar with the matter.
It’s still legal to mine Bitcoins and invest in them, but for how much longer? China seems pretty determined to keep Bitcoin from gaining any more traction. Will it work? Or will determined traders figure out a way to keep using Bitcoin regardless? In the past, China’s actions have pushed down the value of Bitcoin for short periods, but it always rebounds, finding ever higher highs. Recently it hit $5,000 before falling to a bit over $4,000:
The latest Chinese action could push Bitcoin down even further. And if it doesn’t, will China get tougher, banning Bitcoin investment entirely? This will be an interesting test of the power of stateless digital currencies vs. the old-fashioned power of real-world governments to control their own territory. As China goes, so goes Bitcoin.
