Bitcoin: China’s Ban Validates Cryptocurrency
In November 2013 China banned its banks from handling Bitcoin (BTC) transactions, at the same time it banned financial institutions like 3rd party payment providers in December.
The Chinese government also announced that it does not recognize BTC as a currency, but does recognize it as a virtual commodity.
As a result, Chinese citizens can still trade BTC at their own risk, but cannot use BTC as an alternative to the RMB Yuan to buy goods and services.
The BigQ: What was the motivation behind this action?
The Big A: to understand why China’s government is not keen on Bitcoin, one must to understand 2 Key facts about China: it has a goal to dominate the world economy and centralization is the organizing principle of the Chinese Communist party.
A tool used in China’s efforts to dominate the world economy is controlling the currency. It is not a secret that instead of letting their currency freely trade in a competitive market, China artificially keep the Renminbi (RMB Yuan) weak to make their exports cheaper and more competitive.
The Chinese government had to clamp down on BTC before it gained enough momentum to threaten the government’s monopoly on its currency.
If BTC became a medium of exchange for economic transactions, the Renminbi would lose market share, and China would lose the power and influence to manipulate their people and their destiny.
Centralization is the nature of a Communist government like China.
For those in power, there is no current need to decentralize something as important as the control over currency and cede it to BTC, which they or any other government can control.
The sudden increase in interest by Chinese citizens in BTC, BTC software downloads in China outnumbered the US by 2X, and how retailers and restaurants quickly learned how to accept BTC transactions alarmed Beijing.
Because BTCs trade globally, and there can be anonymity with owner names, it could be a method for Chinese citizens to transfer their wealth out of China without the usual foreign exchange controls.
Note: China still allows BTC to be traded like a commodity such as Gold, this allows China to study BTC and decide on its own schedule whether to allow its use or develop its own digital version if it is in their best interest.
Recall that when banks in China were banne from accepting BTC, the price dove from 1,200 to 600 before stabilizing at 800. Then other financial institutions questioned it valitity BTC traded as low as 422 before bouncing back to around 800-900 again its last trade Friday was 872 at Mt. Gox..
Taking a look beyond the volatility and the early setbacks in this long-term affair, the larger and important issues is being missed by most analysts.
That is, China is afraid of BTC because of its real potential to disrupt its plan for economic supremacy.
Bitcoin by its very nature is decentralized, is subject to the free market and the trust between people in a transaction, not by the “fiat” of a government to mandate its own will and purposes against the wealth of its citizens and trading partners
China’s ban validates cryptocurrencies and their transformational possibilities.
Stay tuned, this is an ongoing story…
HeffX-LTN
Paul Ebleing
http://www.livetradingnews.com/bitcoin-chinas-ban-validates-cryptocurrency-26467.htm#.UtQrpfvuYgU
