After the financial crisis in 2008, a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System,” which explained the basic ideas of a payment system, was published. The birth of Bitcoin. Due to its use of blockchain technology and position as an alternative to commodities and fiat currencies, Bitcoin attracted global attention. Blockchain, dubbed the next best technology after the internet, provided solutions to problems that we had neglected or ignored for decades. I won’t go into the technical details of it, but here are some recommended articles and videos:
Under the Hood: How Bitcoin Works A brief introduction to blockchain technology Have you ever wondered how Bitcoin and other cryptocurrencies actually function?
Now, on the 5th of February, authorities in China have unveiled a new set of rules to prohibit cryptocurrency. Last year, the Chinese government did this, but many people have gotten around it by exchanging foreign currency. In an effort to prevent its citizens from carrying out any cryptocurrency transactions, it has now enlisted the formidable “Great Firewall of China” to block access to foreign exchanges.
Let’s go back a few years to 2013, when Bitcoin was gaining popularity among Chinese citizens and prices were soaring, to learn more about the stance taken by the Chinese government. The People’s Bank of China and five other government ministries issued an official notice in December 2013 titled “Notice on Preventing Financial Risk of Bitcoin” due to price volatility and speculations (link in Mandarin). The following were emphasized:
1. Bitcoin is a virtual commodity that cannot be used on the open market because of a number of factors, including its limited supply, anonymity, and lack of a centralized issuer.
2. It is illegal for any and all banks and financial institutions to provide financial services or engage in Bitcoin-related trading.
3. All businesses and websites that provide services related to Bitcoin must register with the appropriate government ministries.
4. Organizations providing Bitcoin-related services ought to implement preventive measures like KYC to stop money laundering due to Bitcoin’s anonymity and cross-border nature. The authorities should be notified of any suspicious activity, including money laundering, gambling, and fraud.
5. Instead of spreading false information, businesses that offer services related to Bitcoin should educate the general public about Bitcoin and the technology behind it.
Bitcoin is referred to as a “virtual commodity” in layman’s terms, similar to in-game credits, that can be purchased or sold in its original form and cannot be exchanged for fiat currency. It cannot be defined as money, which is a unit of accounting, a medium of exchange, and a store of value.
Despite the notice’s 2013 date, it still applies to the Chinese government’s position on Bitcoin, and as previously stated, there is no indication of a ban on cryptocurrency or Bitcoin. Instead, the Chinese crypto market will be influenced by regulation and education about blockchain and Bitcoin. China has been a major contributor to the meteoric rise and fall of Bitcoin since 2011. Over 95% of Bitcoin trading volume and three quarters of mining activity were carried out in China at its peak. China’s dominance has significantly diminished as a result of regulators taking over mining and trading operations in exchange for stability.