China made the right decision in banning ICOs and running cryptocurrency exchanges out of the country, said People’s Bank of China deputy governor Pan Gongsheng on the weekend. Bitcoin will soon suffer a fatal hack or face global bans, he predicted — though cryptocurrency markets largely ignored his remarks.
QZ reported that Pan expressed dread at what digital asset markets would look like today, had China continued to dominate:
“If we had not shut down bitcoin exchanges and cracked down on ICOs several months ago, if China still accounted for more than 80 percent of the world’s bitcoin trading and ICO fundraising, everyone, what would happen today? Thinking of this question makes me scared.”
Pan added further concerns that bitcoin and other crypto-asset prices are a dangerous bubble, and the technology is risky. He quoted economist Éric Pichet, a bitcoin bear, saying: “There is only one thing left to do: Sit by the river bank and see bitcoin’s body pass by one day.”
Harsh Words but Is Anyone Still Listening?
The response — or lack thereof — was a sign of how dramatically the digital asset environment has changed in 2017.
There was once a time when such harsh comments by a PBOC official would have kicked the BTC price down a few notches. However it seems the market has long since priced in China’s negativity — and now ignores it completely.
When China banned fundraising via initial coin offerings (ICOs) in September, the bitcoin price dropped from around $4,500 to just below $3,000. It didn’t last — with a few hiccups it has mostly risen ever since, and now sits above $11,000 at press time.
China’s government deliberately tried to crash bitcoin’s price with ambiguous regulations as a way to discourage speculation, claimed BTCC’s Bobby Lee in October. Ultimately, the efforts were in vain and regulators implemented more direct measures.
That’s not to say Pan is wrong. His prediction of a burst bubble could very well come true at some point, just as it did for 90s dotcom mania in 2000. But if the crash comes, it will likely have the similar effect of clearing out the unworthy while leaving an infrastructure for future revolutions.
Chinese Bitcoin Companies Moving to UK, Elsewhere
Even the Chinese companies that once dominated cryptocurrency trading have smelled the coffee, realizing there’s little future for them in their homeland. For the past few months, even longer, they’ve been moving their operations, staff and expertise to friendlier jurisdictions.
Of the “big three” Chinese exchanges of yore, Huobi now has headquarters in South Korea and Singapore, OKCoin (OKEX and OKLink) has a Hong Kong and now a U.K. entity, and the now foreign-focused BTCC has BTCC UK Ltd.
On December 4th, ViaBTC CEO Haipo Yang and the Cayman Islands-registered entity Viabtc Inc. also filed paperwork on a U.K. corporation called CoinEx Technology. A new exchange called CoinEx is “coming soon in December”.
China Still Dominates Mining Industry
We should note that mainland China still dominates bitcoin mining — both as a location for operating miners and the companies that design and built the hardware. That’s true for the moment anyway, as there have been regular rumors about bans there too.
The People’s Bank’s main concern is seeing Chinese citizens’ life savings wagered on blockchain tokens on a massive scale. A burst bubble could be more disruptive there than other countries.
Even if China itself is no longer a cryptocurrency superpower, it appears the companies it created will live on and continue to have a large influence on the industry.
Does China matter to bitcoin anymore? In what way? Let us know in the comments.
Images via zimbio.com, Pixabay