We cannot but underscore China’s apprehension in accepting and adopting cryptocurrencies. This is reflected in particular in the warning issued to the media by the National Internet Finance Association of China, the China Banking Association and the China Payment and Clearing Association regarding their lack of support in the event of a loss. market collapse or trade dysfunction. They consider trading in a market as volatile as cryptocurrency to disrupt the financial status quo.
However, the cryptosphere has always intended to do so. That’s why I’m not particularly surprised at this response, and responses similar to that from China who fear that crypto is creating a security problem and a breach of the “normal” financial system. This is a reaction that has been seen before, with governments not really knowing how to control and regulate a concept that regulates itself.
The holding company is still relevant
Although China has banned all cryptocurrency exchanges, avid traders can still hold their existing cryptocurrencies, the rule being that institutions cannot provide services for them. This undoubtedly creates a very visible pressure on the cryptosphere and also more generally on the population holding these cryptos, because it is perceived as a contrary incentive. I imagine they may think that “if they can’t trade, what’s the point, the craze won’t last.” This makes it easier to follow the situation and take a step back: an approach that many governments do not like, as crypto is predominantly self-regulated.
Personally, I can imagine that this also has a lot to do with public pressure for “greener” crypto mining, as this remains a rather central topic. But there are also positive changes, like the recent “Crypto Climate Accord” which is a step in the right direction. Inspired by the Paris Agreement, it is a climate agreement signed by organizations in the cryptocurrency sector. Initiatives of this type promote the sustainable development of our sector and must be more numerous to make governments feel more comfortable.
A digital currency unique to China?
Of course, the question arose as to whether the tougher Chinese rules had something to do with their intention to create their own digital currency. This would make sense in a nation turned mobile; According to a survey, in 2018, 92% of the inhabitants of the largest Chinese cities use Wechat Pay or Alipay as their main means of payment. The future Chinese digital currency will therefore be the electronic means of payment on smartphones to replace coins and banknotes, and could make its debut in 2022 during the Beijing Winter Olympics.
Generally speaking, China’s distrust of cryptocurrencies may seem more pronounced when compared to Western attitudes, but this is not necessarily the case: even in crypto-positive environments, bitcoin continues to be a subject of controversy. It is also important to note that the status quo will not last forever. When you consider bitcoin and the technology it emanates from, there have been many changes made since its inception. Over the past few years, there have been many improvements to the Bitcoin network. These innovations significantly improve the system. The same is happening with Ethereum.
The more the sector grows, the more participants it has, in such a way that further innovations and improvements are bound to emerge, which will have an effect on the culture and the way in which governments view it.
China isn’t the only country showing its distrust of crypto with a ban on trading and facilitating its use. Other countries have spoken out about their concerns about the security and disruption of the current financial system. But I know these things move in waves and that a status quo, contrary to what its name suggests, is evolving along with the culture around it.
Giulia Mazzolini is director of Bitpanda France.
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