Before instituting a ban against bitcoin trading in 2017, China accounted for over 90% of trading volumes in cryptocurrencies. One way in which China exerts an influence on bitcoin prices is through its exchanges. Bitcoin and other cryptocurrencies offer protection against a slowing economy and capital controls at home. In response, the government had instituted capital controls to prevent yuan outflow and a subsequent drop in its value. Rich Chinese are reportedly hunting for investment opportunities abroad and exchanging local currency for U.S. Returns from conventional state-backed investments have dwindled. As China’s economic growth engine has slowed, those factors have become important. “What they care about is income-can bitcoin make me money now?” he said.
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An added attraction is that bitcoin transactions are free from government control.īobby Lee, founder of the BTC China exchange, said the Chinese don’t care about the political aspects of bitcoin.
A QZ.com article quoted an engineer at the Chinese Academy of Sciences in Shanghai as saying that the Chinese buy bitcoin because it will increase in value and is a hedge against inflation. Miners set up shop immediately afterward.īitcoin’s politics aside, Chinese investors are enamored with cryptocurrencies and their ability to transcend borders. Even Baidu, China’s search engine giant, began accepting bitcoin for website security services. In 2013, a Chinese charity began accepting bitcoin, and a wave of businesses followed suit by accepting cryptocurrencies. Considering this anti-crypto stance, how can China be influential on cryptocurrency prices? Despite the country's attempts to wean its economy off cryptocurrencies, the nation still exerts significant influence on prices.įirst, a little bit of history about cryptocurrencies in China because the relationship has been complicated.īefore the government’s volte-face in 2017, China was among the earliest countries to enthusiastically embrace cryptocurrencies. These were attempts by China to clamp down on the digital trading market. In 2021, according to Reuters, the country stepped up its crackdown on cryptocurrency by banning financial institutions and payment companies from providing cryptocurrency transaction services and warned investors against speculative crypto trading. In 2019, China banned initial coin offerings.
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