The Chinese Government has tried but failed to halt the growth of cryptocurrency.
The communist country’s ban on ICOs and crypto exchanges in late 2017/early 2018, was seen as a major factor in crypto winter with fears that 1.4 billion people would no longer be able to access crypto.
But the bans have just sent Bitcoin underground – where it is thriving as it was designed to do.
Experts believe a major component of Bitcoin’s price increase this year was due to a flood of Chinese money seeking a safe haven from the US/China trade war – Bitcoin jumped 40% in a few days when tensions ramped up in May.
President of the Bitcoin Association of Hong Kong Leo Weese recently said that this trend will only increase if the country becomes increasingly isolated from the global financial system.
“In the context of China we do have a very reasonable fear that China would be increasingly cut off from the international financial system in the same way that Ukraine or Russia has been cut off,” he said.
“If Chinese individuals, businesses or even the state want to continue to transact in a world where they’re increasingly cut off it’s quite likely that Bitcoin will be their money.
“Essentially the worse things get in China and the more inflation their currency sees the more demand there’s going to be for Bitcoin in China.”
China has not imposed an outright ban: it’s legal to mine Bitcoin and to own and trade BTC between individuals on peer to peer platforms.
Anecdotal and circumstantial evidence suggests large volumes are being traded in Over the Counter transactions or via VPNs to overseas exchanges.
The level of surveillance in China is Orwellian and is only getting worse with the new Social Credits system which punishes people for transgressions like buying too much alcohol.
All financial transactions on WeChat and AliPay can be monitored and China has strict capital controls preventing residents from sending any more than about $50,000 overseas.
Opportunities to invest outside of China, such as in overseas property have been significantly curtailed.
Chinese citizens can send money out of the country to relatives overseas using cryptocurrency – or simply load up a debit card with Bitcoin and send that off with a relative or friend heading out of the country.
Wheese said Bitcoin also offers an attractive investment vehicle for many Chinese who view the stock market as a scam and are wary of falling property prices.
There are some small signs, the country of 1.4 billion people is becoming less antagonistic to crypto – with the Bank of China this week putting up a positive Bitcoin explainer infographic on its website.
There are also reports the People’s Bank of China is working on a state cryptocurrency in response to Facebook’s Libra.
Earlier this month China’s Hangzhou Internet Court found bitcoin is a commodity because it carries value, it’s scarce, and it can be used as a means of transferring value – though Bitcoin still does “not have the legality of an official currency.”
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