China has a very up and down relationship with Bitcoin. The nation has often been pretty tough with the world’s leading digital currency by market cap, yet still holds a large stake in the digital currency market in many ways. Much of the global bitcoin mining activity comes from China. It is home to the two largest distributors of mining equipment in Bitmain and Canaan Creative and was once one of the world’s largest buyers of BTC.
China now appears to be pro bitcoin
In a new statement, after years of mocking the currency, China’s central bank claims Bitcoin is a solid “investment alternative,” suggesting that investing in BTC is not such a bad idea. Where does this newfound attitude come from and what exactly is the trick up China’s sleeve?
For the past four years, China has taken serious crackdown on Bitcoin and digital currencies by banning initial coin offerings (ICOs) and related activities and calling them fraudulent. In addition, many of the country’s most popular cryptocurrency exchanges have closed and Bitcoin has not always been a positive product within China’s borders for the most part, but now attitudes seem to be changing.
Li Bo – the deputy governor of the People’s Bank of China (PBOC) – stated in a forum last weekend:
We consider bitcoin and stable coins to be crypto assets … these are investment alternatives. They are not currencies per se and so the main role we see for crypto assets going forward is the investment alternative. Many countries, including China, are still examining this and considering what regulatory requirements there are [are needed]. Perhaps minimal, but we need some kind of regulatory requirement to … prevent speculation of such assets to create serious risks to financial stability.
How is that going to play with the digital yuan?
Many analysts and industry leaders are enthusiastic about China’s gear shift. Vijay Ayyar – Head of Business Development at the Luno cryptocurrency exchange – explained in an interview:
I think it’s quite significant and definitely different from their previous statements or positions on public cryptocurrencies … Governments recognize this [crypto] is a viable and established but growing asset class and needs to be regulated. China’s regulation of crypto would be another massive boost to industry in China and around the world.
It will be interesting to see if China suddenly allows Bitcoin to be used within its borders and how this could potentially play with the digital yuan. The latter currency was introduced to the people of China on a small scale after years of potential testing. While China is not yet available nationally, it is the first country to really take the initiative when it comes to issuing a bank-based digital asset that could potentially replace all of the fiat currencies in circulation in China.