History of Bitcoin in China
China, a key player in the bitcoin business, retains a history that embodies a bitter-sweet relationship with the digital currency world. Bitcoin, the leading virtual coin, enrolled the virtual cash market in 2008 and became the most popular and successful coin of the crypto sector. China, along with a few accumulators, was its early adopter. Analyzing the importance and aptitudes of Bitcoin and its value that marked it as a competitor to the fiat money, Bobby Lee, along with his colleagues, founded China’s first-ever cryptocurrency exchange BTCC in 2011.
The population of China was determined to hit the investment ground running, and experienced the formulation of a bitcoin mining hardware called Application-specific integrated circuits (ASICs) in 2013.
Investment, not safety?
Reports claimed that Chinese people, though very much familiar with the digital riches, were more inclined towards electronic cash for investment purposes and had little to no concern regarding their privacy. Sci-Fi writer, Changjia stated, “If you call Bitcoin as some P2P digital currency, 95% of the people in China will feel confused. If you call it Gold 2.0, however, most of them are suddenly enlightened.”
Wait and see
China adopted the waiting game and imposed clement rules on bitcoin until 2016 when the significant regulations stormed the cryptocurrency sector. It shut down all digital coin exchange platforms practical in China, declared all ICOs illegal in 2017, etc.
Crypto Mining in China
China, without any dissent, acquired 70 percent of the world’s crypto mining volume along with ample bitcoin exchange due to several reasons.
- Cheap Electricity. Seventy percent of the mining firms were established in the mountains of Sichuan where enormous hydroelectric power makes the electricity less expensive than anywhere.
- Abundant Coal for Energy. The energy obtained from burning coal gets used to mine bitcoins.
- Mining pools. China is native to four out of five Bitcoin mining pools.
Crypto trading ban
The government of China had always opposed cryptocurrencies like bitcoin and believed that they tend to bring fraud and disorder in the nation. Numerous crypto platforms shifted their business to a more crypto-friendly country like Singapore or Malta since 2016. The People’s Bank of China (PBOC) has defined the digital currencies as illegal and forbids its circulation. The censorship by Chinese authorities will eventually affect the crypto market on the global level. The ban on ICOs in 2017 resulted in a 6% decline in bitcoin prices globally. Besides, no trade directly implies no mining. Thus, mining companies like Bitmain and BTC.TOP are also moving its operations to crypto favor environment. China, which held a significant share of bitcoin trade, is now the largest nation to repress bitcoin and other cryptocurrencies.
However, in the thick of these bans, China does maintain a grey world.
The U.S. – China trade war
A trade war indeed became apparent between China and the United States since 2018. The areas of dispute comprise of the imposition of increased tariffs by the U.S. on Chinese goods, accusations on China of stealing American copyrights and arms technology and last but not the least, disagreements regarding the foreign direct investment.
- March 2018, Donald Trump applied taxes on $50-60 billion worth of Chinese goods as a response to China’s unfair trade practices over the past years.
- April 2018, China reverted by imposing tariffs on 128 products imported to America.
- June 2018, Trump dictated another 25% tariff on $50 billion Chinese goods, and so on.
Trade war or Bitcoin Hike?
With the rising tensions between China and the U.S, Yuan had fallen to a deceiving level of 7 to the U.S. dollar for the first time in eleven years. Though a piece of bad news for the country, it does cheer up the owners of bitcoin. To the shock of crypto critics, the trade war’s disastrous impact on the global economy turned to have a negligible effect on the crypto market. Not only the result was insignificant, but it also gave an unimagined rise to the value of bitcoin. The trait of being free from central regulations turned out to be the strength of cryptocurrencies in the time of global economic tensions.
Due to the downfall of Yuan, Chinese investors are attracted to invest in bitcoin, but the regulations on the currency in China make it unreliable to transact bitcoin whenever. However, according to Forbes, this does not add up to be a barrier for the investors as they shift to social networks like WeChat for the trade. As reported, the monthly trade volume of bitcoin through non-traditional ways has gone beyond $1 billion marks and China is possibly responsible for 20% of these across-the-globe trade.
Experts take on trade war
Economists at Goldman Sachs, the global investment bank, affirm a no sooner end to the U.S-China trade war. With the constant damage to the world economy, the conflict will prove to be robust for cryptocurrency bitcoin.
As per the report in Reuters, a note by Goldman Sachs depicts the continuation of the trade dispute till 2020. The war has now been going on for more than a year, and the bank sees no resolution. “Overall, we have increased our estimate of the growth impact of the trade war,” stated the note was written by three bank economists Jan Hatzius, Alec Phillips, and David Mericle.
Chinese payment giants stride
Amidst banning the trade of cryptocurrencies in the country, the China-based payment platforms have gained grounds worldwide. Alipay and WeChat, the top two payment options, have built their recognition among China’s high net worth individuals. Alipay, a mobile payment arm of Ant Financial, secured the position of No.1 preferred system for payments whereas WeChat, regulated by Tencent Holdings, was ranked as the second most popular option.
China’s digital currency or Libra’s impact?
China is all set to launch its cryptocurrency. The People’s Bank of China has been scrutinizing its digital cash from the past five years. Mu Changchun, the deputy director of PBOC Payment and Settlement Division, in an interview with the Shanghai Securities News, stated, “People’s Bank digital currency can now be said to be ready.” Though, to some extent, it is evaluated that facebook’s plans of creating its cryptocurrency have somewhere fast-tracked China into stepping its foot in the same task. Chinese authorities announced about expediting the CBDC development. The use of Libra for Chinese cross-border payments, financial policies and even monetary dominations can turn to be a challenge for the country.
The PBOC, central bank of China had been desirous since forever to possess a digital currency under its command and became the first central bank to study cryptocurrencies in 2014.
The Chinese virtual currency is known as DC/EP, and according to Mu, will adopt a two-tier operating system. Where the single-tier operating system indicates the direct issuance of the digital currency by the bank, the two-tier system will first require the conversion of currency to banks and then to people.
“Summary down, the People’s Bank of China is the upper level, and the commercial banks are the second level. This dual delivery system is suitable for our national conditions. It can use existing resources to mobilize the enthusiasm of commercial banks and smoothly improve the acceptance of digital currency,” said Changchun.
Besides China, the development of Libra is believed to bring an international competition of currencies and many nations would be forced to originate their digital coin.
What do you think?
When will the digital coin of China come into execution? How soon before the people see it? And nonetheless, How soon till people can access it?
Although the statements have been released regarding the DC/EP close to being out, yet, we have no clue how close! The digital currency is still unknown to a great extent, and its implementation would require much more than just a matter of time. The process of regulating a framework, its rules and regulations, taxation and more, are shady and obscure.
Will it be a romp to victory in the cryptocurrency world, or is it just a fiat currency in a digital form?