China Is Praising Bitcoin - Seriously, That China

Mar 08, 2018  David Kieve, Cryptopunk

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China’s relationship with Bitcoin has always been volatile. On the one hand, the cryptocurrency (and, indeed, the underlying blockchain technology) are a direct threat to communist China’s centralized control of every facet of public life. On the other hand, China has been evolving into an economic powerhouse over the past several decades and aims to be at the forefront of any innovation that brings more power and prestige to Chinese companies (regardless of how directly they are controlled by the central government). So, stuck between a rock and The Great Wall of China, what is the country to do?

When I move you move

Paradoxically, investments into cryptocurrencies by Chinese nationals are not nearly as large as China’s population and number of billionaires would suggest. And yet, every time even the most obscure Chinese government official makes a statement (or even a comment) about crypto - the whole crypto market either collapses or skyrockets. Before this monster of a correction that we are still dealing with, the previous big correction was last September - when China forced all domestic crypto exchanges to close. Some even blame this correction on Chinese New Year (that’s right, never mind the whales and the South Korea FUD - it was Chinese grandparents pulling money out of crypto and into red envelopes for New Year’s gifts that cause the 70% correction, sure).

The China FUD Game

There are always rumors of China banning mining and anything else crypto. It’s a FUD magnet. One can (and many probably have) buy and sell crypto relying only on the the level of China FUD (before trying that, test your trading skills).

Where is the love (coming from)?

So what makes people think China is now again a fan of crypto? Well, there was this annual political event happening in early March. It brought together members of the National People’s Congress (NPC) and of the ever succinctly-named Chinese People’s Political Consultative Conference (CPPCC). Basically, the people in charge and… the other people in charge (China has a lot of people in charge).

At that event, key participants made clear and strong statements about China being open to all cryptocurrencies without ever meddling in any way. Just kidding. Yet, participants did discuss the applications of the blockchain technology in China. So that’s a very interesting sign.

Speaking Chinese

It’s important to understand that Chinese officials take a long time to carefully deliberate any major decision prior to making an official announcement (which sounds very reasonable). While they deliberate on the actual action, Chinese officials are really good at “leaking” their sentiment into the press via various small, often passing, statements by officials from different ministries and of different seniority level. In other countries, something said by a mid-ranked beaurocrat may be reasonably ignored as a personal opinion with little weight. In China, however, even the smallest, most innocuous statement can be reliably interpreted as reflecting a stance of leadership of an important government body (if not of the overall country leadership at that).

Now what?

So will these comments from various public and “private” leaders be enough to spark another crypto bull run? Will they be followed by official announcements to liberalize (or even legitimize) crypto and the blockchain in China? Or will the wind change and China will ban everything related to crypto? Even Confucius would have a hard time guessing.