DeutschObjectively speaking, the relationship between Chinese politics and cryptocurrencies and the associated technological innovations can be described as ambivalent. It has always been difficult for potential investors in the country. Apart from rumors, there was no clear position from the government in Beijing on the crypto issue for a long time. Repeated reports surfaced this year that China could ban and even penalize Bitcoin mining, the mining of altcoins. In various regions of the vast state, strongholds for mining farms had emerged within a decade of Bitcoin’s market launch. The main reason for the developments was the sometimes very low electricity prices nearby. Bitcoin and China – how does that fit together?
With Bitmain and other producers, China is also home to some of the most important providers of crypto hardware. Some of the most important Bitcoin exchanges at times were/are also based in the Middle Kingdom. “Were” because some companies have made decisions in favor of relocating due to the uncertain legal situation in the meantime.
Enormous Potential in China not yet Exhausted
Against this background, the announcements of bans on mining, exchanges and, at times, even the possession of Bitcoin and Co. came as little surprise overall. According to current analyses, however, the negative headlines are only half the truth when it comes to China’s sometimes contradictory relationship with digital currencies and market developments. If you look at the interest on the part of citizens, for example, China is a promising growth market with plenty of potential. The already recognizable great enthusiasm of investors is fueled by economic and political conflicts. As part of the disputes in the Hong Kong Special Administrative Region in recent weeks, the number of investments and transactions has increased noticeably on a number of exchanges that are currently open to Chinese investors.
Government Wants to Release Billions for Blockchain Developments
The example of China shows that interest in Bitcoin, Ethereum and other coins (as in other countries such as Argentina or Venezuela) increases when states react more or less restrictively to developments in the field of digital currencies. In the case of China, the verdict is surprising insofar as the government considers tokens to be risky, but considers the blockchain to be useful. And to a considerable extent. Despite all the concerns, the Chinese government wants to invest at least US$2.0 billion in the development of the blockchain strategy in the years up to 2023. However, the exact definition of the project is crucial here. After President Xi Jinping publicly reported on China’s future plans, there were some premature interpretations within the crypto industry.
Government Continues to Advise Investors against Crypto Investments
It had often been speculated that the government was finally opening up to Bitcoin and altcoins. The correction followed quickly after the first analyses. China, according to Xi, is sticking to its critical stance towards digital currencies. Investors are advised against investing. Cryptocurrencies are too volatile, citizens should rather invest their money in the traditional investment market. So in this point, at least for the time being, there are no positive changes. However, there has already been some speculation about the introduction of a digital yuan as an answer to Bitcoin. According to official statements, China’s central bank has been considering introducing its own digital currency for some time. This would allow competition watchdogs to react not least to upcoming products such as Facebook’s Libra.
China’s Economic Giants are Increasingly Promoting Crypto Growth
Given the government’s inconsistency, the major corporations and exchanges are among the promoters of the crypto industry in China. Binance China, for example, announced in mid-October that it wanted to enable its customers to buy Bitcoin via the two services WeChat and AliPay. The WeChat chat service in particular has a huge user base. Mobile payment has been part of the service portfolio of the company Tencent’s platform for some time. The combination of digital currency and the WeChat service model could soon lay the foundation for greater crypto interest in the so-called “mainstream” – i.e. among ordinary citizens. It seems rather unlikely that the government will prohibit large corporations such as the online retailer Alibaba, which is also associated with cryptocurrencies, from engaging in activities.
The fact that, despite officially missing licenses, politics also largely allows crypto trading via exchanges is seen by many observers as a signal for a gradual departure from THE formerly strict anti-crypto policy. Alibaba in particular, as the “world’s largest B2B trading platform”, could pave the way for China to become one of the most important locations for crypto startups and established companies in the industry.
Part 1: Argentina and Bitcoin
Part 3: Russia and Bitcoin
Part 4: Germany and Bitcoin
Part 5: USA and Bitcoin
