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. 

After couple of months of low trading volume and little news, BTC China, previously the largest and still one of the most prominent bitcoin exchanges in China has moved the goalposts for other exchanges (and the PBOC!) by launching the first physical Chinese Bitcoin 'ATM' at the IC Coffee Shop in Zhangjiang Hi-tech Park in Shanghai on Tuesday the 15th. In addition to the physical ATM, BTC China released a new mobile Web appcalled “Picasso ATM”, which is actually the main theme of the ATM launch.

On China's supposed bitcoin 'd-day', April 15th, BTCChina launches Shanghai ATM what could be the country's first bitcoin ATM. Kapronasia was onsite on launch day and will have an update tonight on our experience using the ATM.

As Chinese New Year wraps up and people (very!) gradually come back to work in mainland China, we wanted to take a step back and look at where we are with Bitcoin in China for the year of the horse.

Over the past week, Robocoin Technologies announced they were expanding their Bitcoin ATM offering into Asia with planned ATM installs in Taiwan and Hong Kong.

It sounds trite if you’ve read my other posts on Bitcoin in China, but ‘wow! What a week it has been for Bitcoin in China’. With the PBOC effectively cutting off (legal) funding of accounts on exchange platforms, is there a future for the currency in China?

Kapronasia began researching Bitcoin in China in August 2013. Our Bitcoin in China report released on September 18^th mentioned that in the future there would be two factors that really influence the fate of Bitcoin in China: the Chinese government’s attitude towards Bitcoin and Bitcoin’s acceptance as a method of payment, at least initially, by merchants.

2013 will remembered as an incredibly dynamic year for China’s financial services industry. From the increasing number of hedge funds in the market to the emergence and regulation of Bitcoin, industry observers, investors, participants and regulators have had their work cut out for them keeping up with the market.

The year started out with the prospects of a new government taking a new stance on reforming what had been a highly regulated financial services industry; we weren’t disappointed. Regulators unveiled a reform agenda both at the fall plenary session and throughout the year that has, and will have, a significant impact on interest rate reform, capital market investment in and out of China and the financial industry as a whole. Although some of the measures are still somewhat vague, some of the implementations, including the removal of the floor on lending rates, have already have a significant impact on banking profitability – it will be a new market in 2014.

China's finance in 2013 also brought an increased focus on development zones and centers. Opened to much fanfare, but little detail, the Shanghai Pilot Free Trade Zone (FTZ) was formally established in late September. Although it is still early days, if news reports and indications from the regulators are to be believed, the FTZ promises to be a new test-bed of reform for ‘value-add’ services similar to what Shenzhen was to the manufacturing / production industry in the late 70s and early 80s; arguably, one of the most important developments in China’s economic history. Smaller initiatives such as the Hongkou Hedge Fund Center in Shanghai sought to make it easier for hedge funds to enter the market and trade on China’s expanding base of capital markets products.

And last but certainly not least, we would be remiss if we didn't touch on Bitcoin. Chinese investors and tech enthusiasts were truly ‘chomping at the bit’ in 2013 as Bitcoin went from a little known US$13 cryptocurrency, to a US$1,000 potential economic destabilizer. China topped the world in Bitcoin wallets in May 2013 and then surpassed that again in November with over 150,000 wallet downloads. With the world’s biggest Bitcoin exchange and increasing popularity, China had little choice but to weigh in on the matter and in early December the People’s Bank of China annouced that Bitcoin was not a currency, banks could not deal in it, yet it could continue to be used in China. The price of Bitcoin fell, only to rise almost immediately afterward.

Will the sequel to 2013 in 2014 be as exciting? Will Xi Jinping continue to push reforms? Can the PBOC accept Bitcoins as a legitimate currency? Whatever happens, 2014 will be another dynamic year for Chinese markets and we’ll be here every step of the way to help you understand what’s happening in China’s financial services industry. 

From purchasing property with Bitcoins, to the world’s largest Bitcoin exchange, to incredible mining operations, China over the past few months has become the largest Bitcoin market in the world and a key part of the Bitcoin story.

This is a great image from Fiatleak.com that shows the global flow of Bitcoins to various countries sourced from data from the world's biggest Bitcoin exchanges. Go to their site to see the real-time animated image, which is rightly described as a bit hypnotic.