China is one of the world’s greatest driving forces when it comes to cryptocurrencies. There are more developers and evangelists in the West, but China is the domain of most miners and traders. While in the West most bitcoin users are associated with cryptoanarchism, China’s most widespread view of bitcoin is pragmatic, and it is considered a mere store of value.
There are objective reasons for such approach, namely the country’s creeping recession and strict government control of capital flows. For many Chinese nationals, bitcoin isn’t an experiment but a conservative way to store money under unstable economic conditions.
At the same time, the increased interest in cryptocurrencies in China causes some problems. Earlier this year, the state regulator has made a serious strike at the Chinese cryptomarket by launching a series of inspections in the country’s three biggest cryptocurrency exchanges (BTCC, Huobi and OKCoin) and introducing rigorous requirements in order to reinforce its monitoring capabilities.
Remarkably, this move by the People’s Bank of China wasn’t that much of a surprise for local cryptoenthusiasts. A week before the inspections kicked off, Lion Yung, the CEO of Bitkan, one of China’s biggest cryptocurrency exchanges, told ForkLog:
“The increased price is the biggest risk for Bitcoin. It may stimulate government activities in the AML direction, and therefore result in price decline. It’s quite risky for the healthy development of bitcoin’s ecosystem. Still, we witnessed formation of a strong ecosystem around bitcoin after eight years in development. It can’t disappear into thin air. Bitcoin will be developing regardless of price fluctuations.”
One may say that China’s faith in bitcoin is completely unshakable. While recognizing serious risks that are still present for the local cryptocommunity, China’s users aren’t really afraid of serious market fluctuations, and believe there is nothing that could stop bitcoin from growing further. This observation seems to be correct.
Sandy Liang, BitKan COO, commented:
“Bitcoin is unstoppable. One can easily see that by looking at its current price and market volume. It has recovered and even reached a new peak. The market will be evolving just as confidently. The entire community, of course, should be cautious about scam artists and overheated speculations. And most certainly, they should keep a close look at the signals originated by the state regulator.”
Chinese exchanges generally agree with problems referenced by the People’s Bank. The official reason behind those inspections were to tackle money laundering via exchanges. Notably, the PBoC’s moves drove traders’ safety level upwards: before that, they had no protection against whatever major exchanges opted to do.
After yet another round of government activities, China remains the world’s biggest cryptocurrency nation.
“After the regulator’s entrance to the market in 2017, relative trade volumes have noticeably dropped at China’s exchanges. Still, China remains a great jurisdiction for cryptocurrency investment. In order to avoid obvious risks, it’s important to diversify your trading activities and prefer over-the-counter platforms,” Sandy Liang says.
Most certainly, China isn’t the only whale in the market. The United States, Japan, and South Korea are just as important. Experts believe the next cryptocurrency spree will strike in India. Russia also has certain ambitious plans of expanding its presence. Still, China is likely to remain the cornerstone of the entire bitcoin ecosystem in the short term. In order to keep the ecosystem healthy, Chinese markets, exchanges and traders will have to play by the rules set forth by the People’s Bank.