Bitcoin price has seen some big pullbacks in the last two weeks thanks to a comment from JPMorgan’s CEO Jamie Dimon calling Bitcoin a “Fraud”, but mainly due to PBOC (People’s Bank Of China) decision to shut down all cryptocurrency exchanges in China. It was first believed that the decision was only for ICOs, which raised billions of dollars in funding.
First, the news about the Chinese crackdown on exchanges started as a rumor, then all of a sudden we heard about BTCC exchange suspending all trades and operations shortly afterwards. More exchanges such as ViaBTC joined the ranks. OKCoin and Huobi have also confirmed that they will continue operating as normal till the end of October, when they will eventually close down.
It is still unclear whether this ban is just temporary, or it is permanent. What it is clear, however, is that Bitcoin poses a real threat for the Chinese government and its financial sectors, especially the central bank. Huang Zhen who is a prominent researcher for China’s central bank has recently published a statement contending that Bitcoin in specific and cryptocurrencies in general, are major threats to the well-being of banking infrastructures in the country. He goes to say:
“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”
Believe it or not, while this ban might bring the price down, it will bring positive outcome for Bitcoin in the long term, due to more decentralization for exchanges, instead of most of them being based in China. In spite of this, Chinese citizens can still be part of the cryptocurrency community by using VPNs and decentralized exchanges to buy and sell Bitcoin and other digital currencies.
Both Japan and South Korea have passed China in the amount of trades thanks to the legalization in both of these countries, leaving China in the dust. The latter will soon be completely out of the crypto market.