China’s crackdown on bitcoin threatens to undermine the industry’s global economy, according to a new US government report.
Drawing a contrast between the actions of domestic authorities to “investigate and regulate bitcoin without restricting its use” and the recent, restrictive steps taken by the Chinese government, the United States-China Economic and Security Review Commission report concluded:
“If Chinese regulators successfully prevent Chinese users from accessing bitcoin, the global bitcoin market will face continued price declines, significantly decreased trading volumes and threats to its legitimacy.”
Continued uncertainty
In recent weeks, the regulatory environment in China has shifted, with Chinese banks closing the accounts of bitcoin businesses and the government ordering restrictions on digital currency coverage in the media coverage.
While last year’s rapid uptake of bitcoin in China helped take the price to record levels, this year the country has been a source of uncertainty for the bitcoin economy, depressing prices to around the $400-$500 mark.
During this time, Chinese regulators have displayed little transparency about their intentions, the report finds:
“The true attitude of China’s regulators toward bitcoin is characteristically ambiguous; while PBoC pressures banks and bitcoin companies behind closed doors, its officials claim openly that China cannot ban bitcoin.”
Bitcoin’s next China
Although the crackdown has had an impact on China’s bitcoin economy, locations like Hong Kong have benefitted from the Chinese government’s actions.
Hong Kong has a “wide regulatory latitude and tech-friendly atmosphere”, the report notes, arguing that it is the “most suitable transplant location ahead of Singapore and South Korea”.
Still, the Chinese bitcoin economy may be down, but it’s certainly not out. Major exchanges like Huobi and OKCoin, for example, are working to bolster the perception of bitcoin in China, while the broader ecosystem has taken steps to ensure exchanges are not the target of further government action.
The question now is how much farther the Chinese government will go to deter bitcoin businesses.
Dragon image by Roger Price
Bitcoin’s Uncertain Future in China by the United States-China Economic and Security Review Commission