Improved regulation makes more sense than just saying no to bitcoin in China

By Xiao Xin Source:Global Times Published: 2018/5/30 0:03:45

US news aggregation platform Reddit recently revealed plans to reinstate cryptocurrency payments after disabling bitcoin payments for its Gold membership program in late March, renewing speculation that the digital asset might regain momentum.

The bitcoin resurrection, following three major corrections that the cryptocurrency has experienced so far this year, reignited debate over a broader adoption of the controversial asset, whose trading has been banned in markets including China.

There's an increasing belief that just saying no to bitcoin won't be the eventual solution to the cryptocurrency issue. A more fundamental approach would be to embrace the new technology without putting the country's financial system at stake.

Rumors began circulating in late February that officials from China's central bank visited the country's major crypto exchanges such as Huobi in January and sat down with their executives, a sign that crypto exchanges might be relaunched in the country.

Although the rumors were subsequently dismissed by Huobi Chief Operating Officer Zhu Jiawei, talk about the revival of bitcoin trading never seems to cease in the Chinese economy, which is moving increasingly toward being innovation-driven.

The decentralized asset utilizing the innovative power of blockchain technology is certainly an innovative means of payment. But the highly speculative cryptocurrency, which can make people fabulously wealthy overnight and leave them broke the next day, has bitcoin and other cryptocurrencies marked as bubblemakers.

Thus it makes good sense for China to clamp down on bitcoin exchanges at a time when financial system stability is of pivotal importance to the economy, where reform continues on multiple fronts. Speaking at a press conference during this year's two sessions in March before being succeeded by Yi Gang, Zhou Xiaochuan, who was then People's Bank of China governor, noted that some of the technological applications appear to lack a focus on digital currency payments. Instead, he said, they seem to be virtual asset transactions, which are not in line with China's policy stance that requires financial products to serve the real economy.

There shouldn't be a rush to use these applications, and excessively speculative products need to be avoided, according to Zhou.

But fencing off bitcoin exchanges can't effectively end bitcoin trade, and fears of a bitcoin bubble could leave China behind in the digital currency revolution.

Instead, the country should consider rules and regulations that can ensure the technological advance works in the economy's favor.

The US Justice Department has launched a criminal probe into bitcoin price manipulation, Bloomberg reported last week, citing unidentified people familiar with the matter. The move, an indication of ratcheted-up US scrutiny of bitcoin trading, surely uncovered a market rife with misconduct. But it also reflects a more proactive stance the US takes in regulating the cryptocurrency market, which over time will contribute to digital currency sophistication in the world's largest economy.

It's time for China to lay the regulatory groundwork for its rise as a future digital currency trendsetter.

The author is a reporter with the Global Times.


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