The inspection of Chinese bitcoin exchanges by China’s Central Bank (PBoC) is coming to an end, according to reports by Chinese media. They have found the anti-money laundering measures used by the exchanges were inadequate and the exchanges engaged in fiat/btc loaning which is illegal.
Measures have already been drawn for punitive action against the exchanges which according to a rough translation appears to mean a monetary fine, although it is not currently known what punishment PBoC may order. They are now just going through the formalities, with a report to be published next month.
After the measures are undertaken, withdrawals can once more resume, but it’s not clear whether quotas may be maintained for Chinese citizens even after all the concerns are addressed.
The above was revealed to Caixin, a Beijing-based media group providing financial and business news, by an unnamed source which suggests it was probably PBoC. They’ve probably decided to say something rather than just release the report because bitcoin has hit 10,000 Yuan, an all-time high and a very big number.
Will China Embrace the Digital Century?
China is currently undergoing a considerable transformation, especially in finance. They have leapfrogged the banking system, jumping straight to AliPay and WeChat Pay apps, whose founders employed the Silicon Valley mantra of move fast and let the regulators catch up.
The two apps account for the vast majority of transactions in the country, with PBoC seemingly trying to figure out how it can keep some control. Their adoption was so fast and widespread, it couldn’t really do much about it, so they are now thinking of joining the digital age with experiments of an ethereum based Yuan token.
But PBoC never liked bitcoin. It made it illegal for commerce use in 2014 and usually comes out to remind everyone they have a hammer whenever bitcoin’s price increases. They want to keep it under a lid, something small and a fringe thing.
The problem for them is bitcoin is global. The currency has shrugged off PBoC’s intervention in January which plunged trading volumes in China from some 90% to now 10%. It went on to double since then, reaching a market cap of nearly $30 billion.
In part perhaps because Japan might have seen an opportunity. They have joined Britain in treating bitcoin as a currency, but have gone a bit further, recognizing bitcoin as legal tender. That’s the very first country to do so and the act is incredibly symbolic as a nation willingly has shared the state’s ancient prerogative of issuing money with the free market.
Hundreds of thousands of shops will soon begin accepting bitcoin in Japan, with interest in the country growing, joined by South Korea, which suddenly is handling some amazing trading volumes for both bitcoin and ethereum.
The lesson here for China and other nations appears simple. You can’t stop the future, so why not join it? Look at London. They grabbed the opportunity in 2014, after New York gave them an opening, with the Chancellor symbolically buying a bitcoin and now they’re booming, especially in Fintech.
It seems Japan and South Korea may now be doing the same thing, diving heads on while perhaps not believing their luck at China willfully giving up what could be a transformational advantage in innovation.
The great manufacturer of the world seemingly doesn’t know what it has, nor, in some way does America with its very restrictive regulations. Both giants, instead of embracing an age of digitization, seem keen to gift it to competitors.
Needs one remind either of them that when Britain leaped by a boom in innovation we now call the industrial revolution, they became the empire where the sun never sets. Yet, perhaps we shouldn’t have expected any different nor need be surprised that it is once more the island nations of Britain and Japan which drive forward a new digital age.
Featured image of the People's Bank of China from Shutterstock.