It’s Complicated: China’s Relationship With Bitcoin And The Blockchain

Trades between bitcoin and China’s renminbi (RMB) were once very popular, but that’s reportedly no longer the case.

News came this week that the volume of currency trades between the RMB and bitcoin have plummeted in recent months. While that pairing comprised more than 90 percent of global bitcoin trades in December, trades involving the Chinese currency now only make up a mere 1 percent of all bitcoin trades.

The possible reason? The Chinese government’s state-run press agency, Xinhua, reported that the country had “ordered a ban on initial coin offerings (ICOs) last year and stopped direct trading between RMB and virtual currencies, including bitcoin, as the rapidly expanding market spawned concern over financial risk.”

The rationale behind the move was reportedly due to market volatility. A blockchain analyst told Xinhua that the actions “effectively fended off the impact of sharp ups and downs in virtual currency prices and led the global regulatory trend.”

It’s no secret that bitcoin has been on a wild rollercoaster ride lately. Following a regulatory crackdown and recent hacks, bitcoin prices slumped to lows not seen for months. The popular cryptocurrency dipped just below $5,800 in late June — a far cry from last year when bitcoin neared the $20,000 mark.

That level may not come as a surprise to some market observers, as it was reported earlier this year that Citi analysts believed that the cryptocurrency could fall below $6,000 to a range between $5,605 and $5,673. According to CoinDesk, bitcoin was trading at around $6,350 as of mid-day on Wednesday, July 11.

Bitcoin prices aside, cryptocurrency cybercrime is not uncommon in China. This week, for example, it came to light that Chinese authorities had reportedly arrested 20 people in an alleged cryptojacking scheme. Their method of choice? A plug-in that infected computers. And through that avenue, the individuals may have earned about $2.26 million, or 15 million Chinese yuan.

Aside from cryptojacking, Chinese authorities have also busted miners for stealing electricity — crypto mining is an energy-intensive process. Earlier this year, for example, police reportedly arrested six individuals in Tianjin for mining bitcoin with stolen electricity from the power grid. And, in another case, police arrested two individuals in Wuhan and charged them with the same crime.

While China’s government might be cracking down on bitcoin – and crypto – it is, however, interested in the blockchain technology that underpins digital currencies. Multiple local governments are rolling out blockchain development-friendly policies, and some locales have even rolled out dedicated funds for the technology.

But China Banking and Insurance Regulatory Commission (CBIRC) official Fan Wenzhong cautions that the world shouldn’t “mythologize blockchain.” It’s just a new take on and old concept, Wenzhong argued, “because the earliest human transactions were without central authorities.”