Once upon a time, China was the leader in bitcoin mining, accounting for an estimated 71% of the bitcoin mining market. But that bubble burst in September 2017 when the Chinese Central Bank completely banned all ICOs. In spite of the ban, Bitcoin has managed to flourish, increasing by over 144% since the ban. Still, China isn’t worried. According to the PBOC, Bitcoin is dying.
Speaking at a financial forum in Shanghai over the weekend, the deputy governor of the People’s Bank of China, Pan Gongsheng, was asked to give his view on the recent surge in Bitcoin’s price. He was quoted as saying (translated):
If we had not shut down bitcoin exchanges and cracked down on ICOs several months ago, if China still accounted for more than 80% of the world’s bitcoin trading and ICO fundraising, everyone, what would happen today? Thinking of this question makes me scared.
Pan further underscored his opinion of the digital currency by citing Eric Pichet, an economist and professor at the Kedge Business School in France, who just last week wrote an article in La Tribune (link in French) where he declared that Bitcoin is merely a bubble waiting to burst. As far as Pichet is concerned, Bitcoin is the “new avatar of the long series of speculative follies” like the Tulip Mania in 1637 or the Internet bubble of 2000.
Pichet believes – like Pan – that it is just a matter of time before Bitcoin dies, whether through a massive and unrecoverable hack of the blockchain or through a joint initiative on the part of global governments to ban the digital currency.
Concluding his talk, Pan again quoted Pichet, saying:
As Keynes has taught us, ‘the market can remain irrational longer than you can remain solvent.’ There is only one thing left to do: Sit by the river bank and see bitcoin’s body pass by one day.
Unlike the Indonesian government, whose fear is the undermining of the country’s fiat currency, China’s fear is the social chaos that could erupt as a result of the losses in investments made by small investors in their financial market, and Pan’s stance confirms this. The country has seen the recent effects of regional commodity exchanges and peer-to-peer lending schemes that resulted in losses in the millions of dollars. As far as China is concerned, investments and trading in Bitcoin are no different from those scenarios.
After China’s ban on ICOs and exchanges, trading platforms, bitcoin wallet providers, and mining pools had to move their operations abroad. This didn’t stop die-hard investors, however. They merely turned to peer-to-peer marketplaces to continue trading or, in some cases, followed providers to their new destinations.
Is China’s goal to wipe out mining and trade completely? Rumors have been floating around for months that Beijing is getting ready to ban Bitcoin mining and cryptocurrency trading altogether. At this time, however, it appears to be just that – rumors – as China has shown little sign that it is prepared to go that far.
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