Bitcoin in China, where to go?

Written by Fiona Zhao || 01 May 2014

Fiona Zhao, one of our analysts here at Kapronasia, has been covering bitcoin in China from the beginning. Here she lays out the reasons why bitcoin in China won't survive. 

When I first heard about bitcoin in August 2013, after some research, I reckoned that there was no future of bitcoin in China. However, after 3 months, bitcoin boomed in China and it even rocked to RMB 6000. At that time “bitcoin” was the most heated word in the newspaper, video and televisions - everyone was talking about it.  At the height of the craze, the People's Bank of China (PBOC) came out with a notice on bitcoin, which defines bitcoin as a virtual commodity instead of virtual currency and forbids all the financial institutions to provide products or services directly or indirectly for bitcoin-related services/vendors. Influenced by this notice, the value of bitcoin dropped dramatically. As the notice still left a space for the exchanges, the market earned confidence back quickly. Although there is no official announcement from PBOC anymore, the price of bitcoin still moves ups to RMB 5000 and downs to RMB 3000 due to various media rumors and breaking news.

After several months’ disturbance, bitcoin is facing an inflection point, it will either vanish or survive in China. It is reported that on April 24th, PBOC held a meeting with senior management from some commercial banks and third payment parties. The PBOC criticized Bank of China and China Merchant Bank (CMB) for not ceasing services for bitcoin. Although, the PBOC didn’t make any official announcement during or after the meeting, both Alipay and CMB’s attitudes reflect authenticity of the meeting. Shortly after the meeting, Alipay and CMB announced officially on their micro blog and website that they cease all the services for bitcoin. The news has dragged bitcoin directly from RMB 3000 to RMB 2500.

This reminds me of BTC China’s further movement towards Bitcoin ATM on Apirl 15th as well as the coming launch of Bitcoin ATM from Okcoin on May 10th in Beijing. These two prominent bitcoin exchanges have developed and researched months and come out with Bitcoin hardware and software ATM. The purpose is obviously to avoid the regulations from banks and third payment parties. The question is will this movement save bitcoin in China?

My answer is “No” again. As analyzed in the previous comments, bitcoin is not permitted to be used for payments. The function of stored value like gold, doesn’t seem to make sense. Then where is the confidence from people in Bitcoin? As a policy-oriented country, PBOC’s meeting with commercial banks and the third payment parities seems to alert bitcoin for the last time. Without the support from the government, without the intrinsic value by itself, without the confidence from people, the future of bitcoin in China looks dim.

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