Why Does China Love Cryptocurrencies?

Bitcoin ChinaThe bitcoin market has expanded in every possible direction. Demand is surging in China, which may disrupt the local financial industry. Of course, the Central Bank is well aware of the existence of the cryptocurrency and wants to regulate it more carefully.

Many investors are turning to bitcoin, because growing demand is likely to drive up prices in the future. Other Chinese investors are purchasing bitcoin to circumvent the government’s draconian regulators.

However, regulatory uncertainty, unstable growth and other problems have also created problems. The future of bitcoin is very promising, but investors must still be prepared for challenges along the way.

Bitcoin’s Turbulent History in China

A few years ago, the future of bitcoin in China looked bleak. The Central People’s Government released a report titled Guarding Against the Risks of Bitcoin and announced that Bitcoin trading would be illegal. They imposed stricter restrictions shortly thereafter, which threatened the future of the industry in China.

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The government’s hostility to bitcoin created ripples in global markets. Bitcoin prices fell 35% less than an hour after the news. Some experts speculate that concerns about bitcoin adoption in China may have helped trigger other events, such as the collapse of MtGox, which was one of the biggest shocks in the history of bitcoin.

Realizing that adoption of bitcoin appears to be inevitable, the Chinese Central Bank has expressed that it will allow some bitcoin exchanges to operate. Bitcoin will be regulated more tightly in China than other countries. Leveraging, margin trading and short-selling will still be prohibited. The Central Bank has also discouraged bitcoin providers from waiving fees to boost trading volume.

“Although the government is being tough on bitcoin, but in some sense, we should give a break to companies that has a top 10 market capitalization ICO market. We should give a chance to people to invest on these companies — at least you could possibly be investing on some disruptive technology. It’s better than buying some stocks that are actually trash,” stated Yao Qian, the director of the digital currencies department at PBoC.

Despite the government’s continued hostility to bitcoin, the fact they are laxing their policies is an encouraging sign. Bitcoin investors may start to increase holdings in the near future.

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About the Author: Monika is the Head of Business Development at Fried Inc. and Co-Founder of Festination.com. She is passionate about business, tech, and music.

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