Will Bitcoin’s future rest on keeping the dragon happy? We have come a long way from an independent currency. What would you rather have? Wild speculation but a completely government free Bitcoin or a new Bitcoin run by the PBOC?
Bitcoin was envisioned as a free and independent currency and it was always thought that governments could not really have a great impact on the price movement of this cryptocurrency.
Indeed, it has been this aspect of Bitcoin that appealed to many people including people in countries like Venezuela, Nigeria and India where government’s mismanaged their domestic currencies leading to the significant erosion of monetary value or simply unleashed chaos.
Yet, Bitcoin itself seems to be the victim of one particular government and its central bank.
Is PBOC out to get Bitcoin?
We have been covering the actions of the People’s Bank of China (PBOC) from the very beginning when they carried out their so-called “inspections” on Bitcoin exchanges in China. The stated intention then was that they wanted to look into market manipulation, find out if exchanges have correct licenses and if they have implemented anti-money laundering systems.
Well, fast forward to today and the anti-money laundering part of the PBOC diktat seems to have come into full force. Huobi and OKCoin have both suspended the withdrawal of Bitcoin and Litecoin from their exchanges.
Wreaking havoc on Bitcoin price
The announcement of the exchanges after they came out of a closed-door meeting with the PBOC led to a drop in Bitcoin price and many other cryptocurrencies. Bitcoin fell from levels of near $1060 per Bitcoin to $977 yesterday, according to Bloomberg.
At the time of writing, Bitcoin was trading at $966 on Poloniex. The frequent upheavals caused by China’s fear over capital flight or market manipulation are keeping Bitcoin from crossing the $1000 levels. While China has assumed a central role in the Bitcoin market, considering the country’s nationals are leading operators of mines and are also involved in trading Bitcoin, the frequent interruptions of the PBOC in the Chinese Bitcoin market is a source of increasing worry.
Taming the Wild Wild West
There is a view among some experts that the Chinese central bank’s actions are benign and are motivated solely as a reasonable and responsible regulator.
According to Fran Stajnar of BraveNewCoin.com, when asked if there were any financial pressures behind the suspension of withdrawals on Chinese exchanges:
“There is no evidence of financial pressures - withdrawal suspension at the main Chinese exchanges is purely to allow those exchanges time to comply with the PBOC's latest requirements around better AML procedures.”
Charles Hoskinson, co-founder and CEO of Input Output, thinks it's more of a house-cleaning operation:
“I suspect that the PBOC told the exchanges to knock it off and clean up. It's a wild west out there.”
Keep the dragon happy
The PBOC having closed-door meetings and releasing press releases on their website is sinister and worrying.
The fact is that no matter who argues what, each time the PBOC has taken some action in the past few months, Bitcoin prices have nosedived.
The very future of Bitcoin in China and elsewhere is now at stake, especially if the PBOC is to play the regulator’s role in the world’s largest Bitcoin market.
However, there is hope as some think this is a transient phenomenon. Fran Stajnar on the question of Bitcoin in China says: “It will take time for the Chinese exchange landscape to transform into something the PBOC is happy with.”