China has had a very up-and-down relationship with bitcoin. The nation has often been rather harsh with the world’s number one digital currency by market cap, and yet in many ways, it holds a large stake in the digital currency market. Much of the world’s bitcoin mining operations stem from China; it houses the two biggest distributors of mining equipment in both Bitmain and Canaan Creative, and it was once one of the world’s largest purchasers of BTC.
China Now Seems to Be Pro Bitcoin
Now, in a new statement, following years of deriding the currency, the Central Bank of China is claiming that bitcoin is a solid “investment alternative,” suggesting that investing in BTC is not such a bad idea. Where is this newfound attitude coming from, and what trick, exactly, is up China’s sleeve?
Over the past four years, China has been initiating a serious crackdown on bitcoin and digital currencies by banning initial coin offerings (ICOs) and respective activity, calling them fraudulent. In addition, many of the country’s most popular cryptocurrency exchanges were then shut down, and for the most part, bitcoin has not always been a positive product within China’s borders, but now it appears that attitude is beginning to change.
Li Bo – the deputy governor of the People’s Bank of China (PBOC) – explained in a forum last weekend:
We regard bitcoin and stable coins as crypto assets… These are investment alternatives. They are not currencies per se, and so the main role we see for crypto assets going forward, the main role is investment alternative… Many countries, including China, are still looking into it and thinking about what kind of regulatory requirements [are needed]. Maybe minimal, but we need to have some sort of regulatory requirement to prevent… the speculation of such assets to create any serious financial stability risks.
How Will This Play with the Digital Yuan?
Many analysts and industry heads are excited by China’s switching of gears. Vijay Ayyar – head of business development at the cryptocurrency exchange Luno – explained in an interview:
I think it is quite significant and is definitely different to their previous statements or positions on public cryptocurrencies… Governments are realizing that [crypto] is a viable and established yet growing asset class and need to regulate it. China regulating crypto would be another massive boost to the industry in China and globally.
It will be interesting to see if China suddenly permits bitcoin usage within its borders and how that could potentially play with the digital yuan. The latter currency has been introduced to people in China on a small scale after years of potential testing. While not yet readily available nationally, China is the first country to really take initiative when it comes to issuing a bank-based digital asset that could potentially replace all fiat currency in Chinese circulation.