CRYPTO MOVERS AND PRICES
CRYPTO STORY OF THE DAY
There Has Been Plenty Of Discussion Around China's Crypto / Blockchain / Digital Currency Ambitions Recently - We Believe There Are Widespread Misrepresentations And Misunderstandings Of The Government's Intentions.
China has had a relatively long and aggressively negative regulatory history with bitcoin and cryptocurrency infrastructure. In December 2013, the Government made its first steps in combatting crypto trading with the PBOC prohibiting financial institutions from handling BTC transactions. That ruling was followed up in April of 2014 when the Central Bank ordered commercial banks and payment companies to close bitcoin trading accounts in two weeks. Furthermore, in July 2017, 173 crypto exchanges were closed with the Government effectively banning such platforms. In early 2018 the PBOC went further and announced a crackdown on mining. Cryptocurrency operations, for all intents and purposes, are illegal in China. On Thursday, however, in an official address, Chinese President Xi Jingping noted that the country ought to, 'seize the opportunity [provided by blockchain technology].' We explained yesterday, that this was widely misinterpreted as Xi being positive on crypto, where only days later, in the announced cryptography rules for 2020, the country reaffirmed their bans on the sector. Some commentators went further to note that US regulators were falling behind their Chinese counterparts in their acceptance of crypto. While the sector certainly has its detractors in the US Government, there has never been anything near a ban on broad-based crypto operations, making such statements ridiculous.
Crypto Takeaway: The widely held and quite obvious consensus around China's distaste for crypto is the perception that the sector offers an alternative for citizens to sidestep the country's strict capital controls. As a reminder, individuals are only allowed to take USD 5,000 or CNY 20,000 equivalent in or out of the country less they create heavily monitored and administrated Chinese corporations. Xi's comments follow nearly a year of leaks from officials that the country is working on developing a 'digital currency.' One can be assured that such an effort would serve only to stiffen Government capital controls and effectively serve the opposite purpose of bitcoin. If full adoption of a 'digital yuan' were achieved, the Government would conceivably have full visibility on the financial activity of its citizens. The bullish narrative for BTC driven by the Chinese Government becoming increasingly accepting of bitcoin / crypto is clearly fallacious. In fact, the correct bullish narrative may be that, the more the threat of a 'digital yuan' becomes a reality, the more onshore Chinese may attempt to buy BTC in anticipation of Government controls expanding through that development.