Lately it seems like every time bitcoin is moving up again, the situation in China worsens and the price drops. That is exactly what cryptocurrency markets have been witnessing over the past 2 days. Exchange representatives and Chinese authorities met on February 8th. After the meeting, the authorities made it clear that they would enforce foreign exchange regulation on bitcoin, as well as anti-laundering laws. Following those reports, bitcoin started to fall. The dip intensified when some exchanges introduced a 0.2% trading fee to prevent speculator trading, and it worsened further when 2 of the biggest bitcoin exchanges in the country halted cash outs.
The Love-Hate Relationship Between China and Bitcoin
There is no doubt that bitcoin users around the world are concerned with these developments. But bitcoin has been through this before. China has never been the most welcoming environment for the bitcoin experiment. At one point the authorities there even banned bitcoin altogether. Despite those efforts, China was fertile ground for the expansion of bitcoin, and slowly but surely the authorities changed their tune. The resourcefulness of bitcoin enthusiasts in China, helped the cryptocurrency thrive even under the threat of a total crack down. Now China hosts 2/3 of bitcoin mining as well as the overwhelming majority of bitcoin transactions. There is no doubt that as much as the authorities might hate the cryptocurrency, a significant amount of Chinese people love it.
China Set the Conditions for Bitcoin to Thrive
The main reason why demand for bitcoin in China is so strong, is precisely because the government there doesn’t allow people to move their capital freely. Capital controls have prevented people in this country from participating freely in the global economy; the authorities have taken away people’s ability to choose. These policies generally back fire. That is paradoxically why the government in China now has to deal with its “bitcoin problem”, because people will always look for a way to get what they need when government forbids them from doing so.
No Change, Just Bitcoin
So for the time being, even if authorities are intent on bringing cryptocurrency trade to a screeching halt, they will not be able to purge bitcoin out of the country. The cryptocurrency thrived in China under a complete ban. A few set backs are not going to stomp it out of the market. The only thing that the Chinese government will succeed in doing with this attempt to curb bitcoin trading within its territory, is to test the resourcefulness and resolve of the Chinese people. Maybe these efforts will hurt the price of bitcoin momentarily, but prices are likely to recover over the long term. If the authorities cannot bring real change to the pointless capital controls in the country, then bitcoin will remain the only viable long term option for Chinese people to do what they want with their money.
Where there is a will, there is a way. People who want to keep on working with bitcoin will find a way, and the Chinese government will have to expend valuable resources chasing after them. This situation can be as futile as it is pointless. After all the bitcoin economy as a whole is only worth about $16 billion USD. It is so small and gets so much attention that by now criminals might have figured out how to keep on laundering money while Chinese authorities waste their time on a wild goose chase. Their obsession will die down and prices will probably recover like they have before.