Endangered species? Bitcoin in China
Tuesday 19 May 2015
Well over a year on from the ‘ban’ that saw exchanges hobbled by a government hostile to money it couldn’t control, China is still happily playing with bitcoin. In fact China has some of the biggest exchanges around - if you believe their volume figures, which most bitcoiners don’t. A certain amount of trading goes on, but a lot of it is ‘wash volume’, or bots selling back and forth to each other on zero fees to create the illusion of activity. So what is the deal? Is bitcoin big in China or not? And what does the future for a nation that took bitcoin to heart on the popular level and hamstrung it at the policy level?
I spoke to nxtchina, a Chinese crypto enthusiast I’d met through some work and shared interest we have in a cryptocurrency project, about her thoughts about bitcoin’s appeal and future in China.
Endangered species? Speculation keeps bitcoin alive in China.
The first point to clarify is, of course, that China has not banned bitcoin and probably never will. One reason is because they can’t, and it would look bad to ban something that was essentially un-bannable; people would continue to use bitcoin privately, and short of the kind of universal and intrusive surveillance that is beyond the resources and will of even the Chinese government, no one could stop them. Instead, the Chinese government banned banks and financial companies from providing services to bitcoin exchanges and other businesses. ‘This means exchanges cannot provide services with CNY deposit, CNY <> BTC exchange, and so on.’
How have the Chinese exchanges circumvented this problem? ‘The current situation is that these exchanges let users deposit CNY to an assigned personal account and get CNY tokens on the exchange for trading.’ This technically means they are illegal, but hard to shut down.
Under the radar
‘Secondly,’ comments nxtchina, ‘if you check the registered business scope of these exchanges, you will find that all exchanges are registered as providing tech dev, consultation, services, selling computers, software and related equipment - but they never mention finance or exchange services. This means they are all illegal, but the government turns a blind eye to them so that it doesn’t kill this innovative tech by mistake. Aside from this, no companies are allowed to accept BTC as payment - and they don’t.’
What this means is that the use of bitcoin is reduced to purposes of speculation alone in China. ‘There are almost no use cases. The common types of investment are not diversified in China: just stocks, real estate, gold, and so on. When investors heard that BTC is like gold, they rushed in for speculation. That’s all.’ In other words, it’s all about trying to make a profit. The underlying tech is not important to most users.
Does cryptocurrency have any kind of future in China? Not as money, suggests nxtchina. ‘I think decentralised currency will have a better future in the form of tools based on the blockchain, such as financial tools and proof-of-existence tools, but never as money. This is almost impossible in China, let alone as a replacement for fiat currency.’
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