The cryptocurrency Bitcoin reacted negatively to news out of Shanghai, the home of the headquarters of the PBOC (Peoples Bank of China).
The announcement speaks of impending crackdowns on what the PBOC called growing cases of illegality that surround the purchase, sale, and trade of cryptocurrency.
Since the statement, Bitcoin and other types of cryptocurrencies are paying the price with some serious losses in the month of November. Prices of Bitcoin are presently at a six-month low after dropping 20 per cent.
While not nearly as dramatic as the losses at the end of 2017, those invested in Bitcoin and other cryptocurrencies are understandably concerned by the PBOC statement of the coming scrutiny.
How Does the Chinese Government View Bitcoin?
- The Chinese government is not shy about its distrust of cryptocurrencies. The
government plainly opposes activities such as Bitcoin mining and crypto trading.
- At one point, Bitcoin mining came under fire ostensibly because the process requires
extensive amounts of power. Insiders suspect the power in question was that of the
Chinese who sought to reign in the practices.
- In early November, China’s National Development and Reform Commission (NDRC) reported
that Bitcoin mining is legal in China. The announcement temporarily pacified the
- Under the government of China’s President Xi Jinping, the hostility towards the
aspects of cryptocurrencies outside of government control is open and widely known.
What About the Chinese Government’s Support of Blockchain Technology?
An interesting feature of the Chinese government’s relationship with Bitcoin and other digital currency is their acceptance and promotion of blockchain technology.
A little over a month ago, Chinese President Xi Jinping made a statement voicing his belief that as the world’s second-largest economy, China should work faster to build upon the development of blockchain technology. Markets responded to President Jinping’s comment by rising more than 40 per cent in two days.
Shortly after the price jump, it became clear that the Chinese President did not intend for the idea of building blockchain technology to pair with the (incorrect) belief that this idea signalled approval for Bitcoin.
What Does China’s Interest in the Blockchain Mean?
Those familiar with the practices and policies of the Chinese government repot the following statements to be factual.
- China is actively pursuing developing its own digital currency
- PBOC’s former deputy governor Zhou Xiaochuan put forth the idea as a way to shield China from the other commonly held and traded cryptocurrency, especially Bitcoin
- The PBOC warns against investing in virtual currencies because of the risk and plans to eliminate their issuance, financing, and trading.
- PBOC Deputy Governor, Mr. Fan Yifei, stated that once Chinese cryptocurrency (reportedly called, Digital Currency Electronic Payment or DCEP) is in place, the cryptocurrency would take the place of China’s fiat currency.
- Posturing by the President of the United States exacerbated China’s interest in creating its own digital currency
For Bitcoin investors or someone interested in cryptocurrency, the lesson learned from China’s influence on Bitcoin value is clear.
Bitcoin and other cryptocurrencies can be exceptionally profitable and wise investments. However, anyone entering the digital currency arena should be certain that they are as well informed as possible so they can guard their investments.