It’s mid January 2014 and everyone is waiting to see if the Chinese Crypto exchanges will be able to continue to operate beyond the end of the month. While we wait and see what happens, I thought I would take a more proactive approach by giving a viable solution that would be good for everyone.
In my view, the Chinese government does not hate Bitcoins, but rather the loophole that it provides which allows people to subvert their CNY/USD export restrictions. They would like to limit this free flowing faucet before it’s too late. The knee jerk reaction from China was to ban payment companies from allowing people to place money onto the Bitcoin exchanges. This served it’s purpose to slow down the conversion of CNY into BTC and potentially into USD or any other global currency. Immediately following the change, many Chinese were unable to fund their exchange trading accounts via their personal accounts. BTCChina reacted to this by removing those funding options and reinstating trading fees to reduce volatility. Huobi, another exchange, remained open to personal deposits despite the pending ban and they saw significant uptick in volume as people transferred over. However, a few days ago, Huobi also capitulated and turned off personal accounts and the expectation is they will turn off all primary funding methods soon too. Of course there is a voucher system which exchanges are still using, but with Taobao’s (think China Ebay+Amazon, but bigger) ban on all Crypto-currency related items including vouchers, it seems that that alternative will be for the minority and casual users and not the large accounts as it becomes too impractical. So here we sit, waiting until Jan 31st with no practical solution and the expectation that the Chinese exchanges, which do about 70%, of Bitcoin volume, will no longer be major players in the space.
Well, here’s my solution.
China should reinstate payments to Crypto exchanges and regulate the exchanges by controlling Crypto / BTC withdrawals. This way, the Chinese can participate in Bitcoin speculation/appreciation and the Government can embrace the numerous secondary benefits that the Bitcoin trade is providing for their country. The controls on withdrawals can be as extreme as none to a limited but reasonable amount per day to unlimited.
Other countries that are initially weary about the free flow of money in and out of their countries via Crypto exchanges just need to implement similar models. This allows for a wait and see approach instead of a harsh stance against it which may exclude that country from one of the coolest human society upgrades we’ve ever seen.
What do you think?