HONG KONG—China’s crackdown on cryptocurrencies isn’t stopping the industry’s enthusiasts from preaching their tune. Instead, it is emboldening them to find ways to circumvent the curbs.
Hundreds of bitcoin traders and blockchain-technology experts gathered in Hong Kong on Wednesday for a two-day conference originally scheduled to be held in Beijing. The recent regulatory clampdown caused the event to be moved “to lower the risks of being canceled,” according to the website of conference organizer Bitkan, a bitcoin-trading firm.
“We are fugitives here,” John McAfee, a bitcoin bull who is best known for the antivirus company he founded, told the audience. A former fugitive himself for past misadventures in Belize, Mr. McAfee described what the Chinese government is doing as “the opening bell of what will get worse and worse.”
He predicted the industry would continue to thrive. “The creators, designers and innovators will find a way around it. They always do and always will,” he said.
Chinese authorities have decided on a comprehensive ban on channels for the buying or selling of the virtual currency in China, the Journal has reported. The plan, which goes beyond shutting commercial bitcoin exchanges, represents some of the most draconian measures any government has taken to control bitcoin, which was created by an anonymous programmer nearly a decade ago as an alternative to official currencies.
Trading in virtual currencies—of which bitcoin is the largest—has skyrocketed as prices have surged, prompting concerns among regulators that the cryptocurrency market has become a speculative bubble. The dollar price of each bitcoin currently trades around $3,900, up more than 500% from 12 months ago. It topped $5,000 earlier this month. J.P. Morgan Chase Chief Executive James Dimon has called bitcoin “a fraud” that will “blow up.” Ray Dalio, founder of hedge fund giant Bridgewater, earlier this week said bitcoin is a bubble.
China used to account for a vast majority of bitcoin’s overall trading volume, but now makes up less than 15% of the total.
Leon Liu, chief executive and co-founder of Bitkan, said there are still ways for Chinese investors to trade bitcoin directly with each other, such as through messaging apps. “You use WeChat, you meet someone, you chat, you buy and sell, you transfer money, nobody knows why you transferred the money. This is everywhere now,” he said.
Despite the trading curbs, China remains a major creator of bitcoin through a process called mining, and recently accounted for roughly two-thirds of new bitcoin creation world-wide, according to data provider bitcoinity.org
Bitcoin traders and platform operators on Wednesday said miners in China, who operate a vast collection of computers to create new digital coins, are still allowed to operate.
‘The creators, designers and innovators will find a way around it.’
—John McAfee
Jihan Wu, chief executive of Bitmain Technologies Ltd., a large bitcoin mining equipment manufacturer, said in an interview that while rumors are swirling, he hasn’t heard of an official position from the Chinese government on mining. Should bitcoin miners face stricter scrutiny, “it wouldn’t be the end of bitcoin, but it would certainly be a negative shock for the price,” Mr. Wu said.
Han Feng, co-founder of Elastos, a blockchain operating system, said he believes the possibility of miners facing heavier restrictions and fewer electricity subsidies for their power-intensive operations will prompt more of them to move overseas. “They used to be able to find subsidized electricity from the government, now I fear that that’s less possible,” he said.
Mr. McAfee on Wednesday compared China’s increased regulation to prohibition in the U.S., where the government implemented a nationwide ban on alcohol from 1920 to 1933. Prohibition didn’t prevent alcohol consumption, but instead “merely turned it into a criminal activity and created organized crime,” Mr. McAfee said. “The same thing will happen with cryptocurrencies, I promise you,” he said.
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