Bitcoin in China still chugging along, a year after clampdown
- 30 March, 2015 23:09
Bobby Lee, CEO of BTC China, speaking at Stanford University on December 5, 2013
A year after China began tightening regulations around Bitcoin, the virtual currency is still thriving in the country, albeit on the fringes, according to its largest exchange.
Bitcoin prices may have declined, but Chinese buyers are still trading the currency in high volumes with the help of BTC China, an exchange that witnessed the boom days back in 2013, only to see the bust following the Chinese government's announcement, in December of that year, that banks would be banned from trading in bitcoin.
This eventually led to a clampdown that scared customers away from the currency, and threw a wrench in the business of local exchanges, including BTC China.
Although financial institutions are banned from dealing in bitcoins, the virtual currency is still legal, and can be traded by individuals willing to take on risk, according to the government. That's given BTC China enough room to operate, deploying a network of people reselling special vouchers that can be exchanged for bitcoins.
The practice has helped BTC China not only stay afloat, but become the exchange with the largest trading volume, according to bitcoincharts.com.
That doesn't mean bitcoin is gaining steam as a currency used to buy goods. Since the government clampdown, the Chinese bitcoin market has matured into one that's focused on speculative trading, said Bobby Lee, CEO of BTC China.
"So it's very much about people coming to use the platform as a trading vehicle to make money," he added.
About 65 percent of all bitcoin trades are made with the Chinese yuan, according to bitcoincharts.com. Some of these deals involve "arbitrage bots", or software that's designed to make a profit from price differences among the different exchanges.
"There's a huge contingent out from Russia that will buy on BTC, and that will cause the price of bitcoin to go up," Lee added.
To expand its business, BTC China has launched a bitcoin mining pool, so that multiple buyers can work together to mine the virtual currency, and share the profit. But attempting to bring bitcoin to a wider audience in China isn't expected to be easy.
"Bitcoin is real and it's here to stay," Lee said, although how it will evolve in China is still uncertain. The tough government regulations have so far restricted its reach, and Chinese users are gravitating toward other third-party payment systems, such as Alipay, a service with more than 300 million registered users.
Lee said he doesn't envision Bitcoin replacing traditional money systems such as credit cards, but given that its meant to be a global currency, and not tied to any government, there's potential for it to grow.
"We have our sights set on Bitcoin being successful and revolutionary," he added. "We don't know how it will happen, or how fast it will happen. Does it take two to three years, or 20 to 30 years?"