{"id":22890,"date":"2017-12-01T22:52:10","date_gmt":"2017-12-01T22:52:10","guid":{"rendered":"http:\/\/ci027cfe7a901c26c3"},"modified":"2017-12-01T22:52:10","modified_gmt":"2017-12-01T22:52:10","slug":"china-turns-bitcoin-focus-inward","status":"publish","type":"post","link":"https:\/\/bitcoinmagazine.com\/press-releases\/china-turns-bitcoin-focus-inward","title":{"rendered":"China Turns Bitcoin Focus Inward"},"content":{"rendered":"
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The Chinese government has often had a tumultuous relationship with Bitcoin, but things came to a head in 2017. By the end of the year, there was no longer a Chinese industry exchanging bitcoin for fiat currency. How did that happen, and where does China go from here? <\/p>\n

From his office in Shenzhen, Virgilio Lizardo, Jr. has watched the waning of China\u2019s influence on bitcoin pricing with interest. As Vice President of International Affairs at Bitbank Group, he sees cryptocurrency trends and pricing daily. The group\u2019s businesses included China\u2019s fourth largest Bitcoin exchange CHBTC, alongside BW Mining, which manufactures miners and runs its own pool. With its Bitbank Bitcoin bank and crowdfunding business, the group is well-acquainted with all parts of the cryptocurrency\u2019s ecosystem.<\/p>\n

First warnings<\/strong><\/p>\n

Fissures in China\u2019s relationship with Bitcoin appeared in January, when the People\u2019s Bank of China (PBOC) warned citizens about the risk of trading in bitcoin, and then investigated three exchanges: OKCoin, Huobi, and BTCC. The investigation led to a temporary freeze on margin trading<\/a>, traditionally used as a means of capitalizing on short-term price changes.<\/p>\n

Some exchanges subsequently re-introduced margin trading with limits on the available leverage, but the damage was done.<\/p>\n

\u201cIn China, you could get into bitcoin and leverage by 10x, 20x, 100x \u2013 even up to 250x,\u201d recalled Lizardo. \u201cThat ended overnight.\u201d<\/p>\n

International traders who were still interested in the Chinese market suffered another blow in early February, when the three exchanges froze bitcoin withdrawals altogether, locking up bitcoins for four months. <\/p>\n

Enter Japan<\/strong><\/p>\n

This volatile policy shifted the focus of Chinese exchanges from the international to the domestic market. In the meantime, Japan gained dominance, passing legislation legitimizing bitcoin as a payment currency and increasing its price<\/a>. <\/p>\n

By the time the exchanges re-opened withdrawals, market focus had shifted. \u201cBy this time, Japan already cemented its position as the leading market for bitcoin trading, because a lot of international traders just didn’t feel confident about Chinese exchanges,\u201d Lizardo said.<\/p>\n

That lack of confidence was well-founded. In September, the Chinese government once again cracked down on a key aspect of the cryptocurrency market, this time banning initial coin offerings (ICOs)<\/a> (see original announcement here<\/a>). These financial events allow the public to buy cryptocurrency tokens. The tokens give them a stake in new software applications that run on blockchain technology.<\/p>\n

ICO bans and voluntary closures <\/strong><\/p>\n

\u201cIn the summer China was probably the number one market for ICOs,\u201d said Lizardo. \u201cThere were a lot of scammy, fraudulent ICOs happening that caught the attention of the authorities.\u201d<\/p>\n

From there, the conversation escalated quickly, resulting in Chinese exchanges voluntarily closing down their Yuan-BTC trading services. BTC China and Via BTC both said<\/a> that they would halt trading, as did OKCoin and Huobi<\/a>, and BTCC<\/a>. Some exchanges have since mulled moving operations overseas, or restricting activities purely to non-fiat cryptocurrency trading.<\/p>\n

The exchange closures led to plummeting bitcoin prices, which slipped from a high of US$4884 on Sept 4 to US$3312 on Sept 17. But after that, bitcoin\u2019s price rise has been astronomical. It was nudging US$9800 at the time of writing.<\/p>\n

The rebound punctuates China\u2019s decreasing influence over the last year, said Lizardo.<\/p>\n

\u201cIt was a combination of the momentum built up by nation states \u2013 particularly Japan \u2013 legitimizing the currency, and traders realizing that the influence of China on the price of bitcoin is coming to an end.\u201d There are other markets ready to absorb China\u2019s bitcoin trading volumes, he added. <\/p>\n

Refocusing on domestic trading<\/strong><\/p>\n

There are still plenty of options for Chinese bitcoin traders, though, as the market focuses inward and moves to over the counter (OTC) trading.<\/p>\n

\u201cWhen exchanges were locked out of the picture, all the volume and trading in that network went into over-the-counter (OTC),\u201d he said. <\/p>\n

He noted that following the crisis earlier in the year, the user base for BitKan<\/a>, the leading OTC bitcoin app in China, increased fifteen-fold.<\/p>\n

Bitkan, which has since closed, connected users initially, but then enabled them to exchange their own messaging information and begin transacting directly.<\/p>\n

\u201cIn China the mobile ecosystem is beyond anything in the world. It\u2019s easy to transfer fiat to each other using just a messaging app,\u201d he pointed out. Based on BitKan\u2019s user numbers, the real volume of OTC bitcoin trades in China today is probably huge, but it\u2019s also almost entirely invisible.<\/p>\n

\u201cInformally, every OTC trader in China is doing spectacularly well right now,\u201d Lizardo Jr concluded. \u201cThe market is so huge that each trader can have their own network and it won\u2019t overlap with another OTC network, and that doesn\u2019t even count international OTC relations,\u201d he said. <\/p>\n

While the market has refocused internally for the time being, Lizardo said that the government has \u201cleft itself some wiggle room\u201d if it wants to re-establish a trading environment between Bitcoin and fiat markets in the future. <\/p>\n

\u201cBlockchain technology and Bitcoin are marching on at their fastest pace ever,\u201d he said, adding that there is always an option to reopen the markets. \u201cWith Japan and others moving forward more positively, I don’t think that China will stay on the sidelines forever.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

The Chinese government has often had a tumultuous relationship with Bitcoin, but things came to a head in 2017. By the end of the year, there was no longer a Chinese industry exchanging bitcoin for fiat currency. How did that happen, and where does China go from here? From his office in Shenzhen, Virgilio Lizardo, […]<\/p>\n","protected":false},"author":3464,"featured_media":22891,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[39],"tags":[],"class_list":{"0":"post-22890","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-press-releases"},"author_data":{"id":3464,"name":"Btc Studios","nicename":"btc-studios","avatar_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/12\/system-diy-promo-image-96x96.png"},"featured_image_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/11\/china-turns-bitcoin-focus-inward.png","_links":{"self":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/22890","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/users\/3464"}],"replies":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/comments?post=22890"}],"version-history":[{"count":0,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/22890\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media\/22891"}],"wp:attachment":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media?parent=22890"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/categories?post=22890"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/tags?post=22890"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}