Bitcoin is a form of cryptocurrency that was invented in 2009. A cryptocurrency is a virtual, digital currency. It uses cryptography for its security. This security makes it difficult to counterfeit. The currency is of organic nature, meaning it is not given by a central body making it theoretically impossible to manipulate or interfere with. This is the most endearing feature of cryptocurrency, especially bitcoin, the biggest cryptocurrency.
Bitcoin transactions are carried out without any middle men, including banks. No transaction fees are charged and the transactions allow the participants to remain anonymous. The current trends with bitcoin growth indicate that more merchants are continually accepting bitcoins. The fact that there is no transaction fees with bitcoins means that more traders are willing to accept them especially with the small businesses as they avoid credit card fees.
Since governments have no control over the bitcoins, they are uncomfortable with its increasing popularity. Governments have full control over the traditional currencies using monetary policies that dictate the value and flow of the traditional currency. This control allows governments to track the flow of money, collect taxes and track criminal activities. This control is lost when bitcoins are used hence different governments look for ways of controlling and influencing the bitcoin transactions.
China’s War on Bitcoins
Due to the increasing pressure piled by the consumers in the bitcoin business, the Chinese government has been cracking down on this business. Their intention is to limit the risks that come along with bitcoin business such as being used in the transactions of illegal actions. Therefore, the Chinese government is not happy with the business and is advocating for development of “legal” digital currencies.
The national internet finance association of China is a state backed internet finance body. Li Lihui, a senior official at this association said in a conference in Shanghai that it was necessary to have global regulators working together for the supervision of bitcoins and other cryptocurrencies.
Bitcoins are stateless and lack sovereign endorsement, a country’s trust or a central issuing body. This makes them illegal and should not be used as digital currencies, Li Lihui said. This makes them a unique tool that can be used for illegal flow of funds and investment transactions.
The main intention of the crack down on the bitcoin businesses and exchange is to minimize the risks the consumers who use bitcoin put on the market and economy of China. Of all bitcoin trading worldwide, China accounts for 10 percent which is a significant value. Reuters and other media have reported that China intends to shut down all bitcoin exchanges in the country.
As a result of the new regulations and guidelines given by the Chinese government financial agencies, one of the largest Chinese bitcoin exchanges, Shanghai-based BTC China, reported on Thursday 14 Sept 2017 that they would stop all bitcoin trading on 30 Sept 2017. The smaller bitcoin exchanges also made similar announcements.
The impact of China withdrawing from the bitcoin trade has a negative impact on the cryptocurrency. Since 10% of bitcoin trading activity happens in China, the effects of regulation on the strength of the currency is felt everywhere. For instance, upon announcement of closure of BTC China, the bitcoin value fell over $200, trading at $3,385.15.
However, the Chinese government holds that bitcoin trading may resume once all regulations and guidelines are put in place and strictly adhered to. Before this happens, great uncertainty will continue to be witnessed with bitcoins.
Despite such uncertainties and controversies around the bitcoin, the bitcoin continues to be endearing to many. It will be difficult to eliminate or completely control and regulate the bitcoin trade.