China seems ultimately unable to say “no” to the bitcoin. This is the message of an editorial of the Global Times, in which the eagerness of the digital coin is knit. “There is a growing belief that simply saying no to Bitcoin will not solve the issue of encryption,” writes Xiao Xin, who signs the editorial. “A more fundamental approach would be to embrace new technology without compromising the country’s financial system.”
This approach is an example of Beijing’s tendency to tighten the regulatory framework for the digital currency in the US, Japan and South Korea’s line, rather than go ahead with its full ban. This could spike Bitcoin‘s prices, which had taken the “down ride” in recent months. Bitcoin‘s market regulation is definitely better than its full ban.
The Global Times editorial comes months after Beijing’s decision to ban Initial Coin Offerings (ICOs) and buy-sells of cryptography, crushing Bitcoin and other key siblings. It was more about the beginning than the end of the efforts of the governments of the world’s largest economies to return Bitcoin to what it once was – an “exotic” currency for technologists and romantic “radicals.”
The truth is that the Chinese government and its counterparts in the rest of the countries, large and small, have a number of reasons that make them want to control the creation and exchange of cryptographic data. The key is to protect the public from market manipulation and ensure financial stability.
This is something that governments have been doing for many years with many conventional financial products and instruments. But the complete ban on ICOs and China’s exchange of cryptosancies goes beyond the traditional market regulation policy. It questions the very legitimacy of Bitcoin as a currency unit.
This is because the coin currency undermines the monopoly of the government and the banking system in creating money and faith. China, more than any other country, wants to maintain control over its banking system to channel its lending on the basis of its government’s political agenda.
This means that a competitive currency such as Bitcoin could pose a threat even to its political system. So why not crush it early than regret it later? The answer is that Bitcoin‘s crash would simultaneously mean a crash of innovation, especially at a time when China wants to make the Great Leap Forward by copying foreign technology into the development of its own.
Besides, the ban on Bitcoin in China will not stop the currency. It will just leave Beijing a step back in the digital currencies revolution. As Xiao Xin says, “a fence around bitcoin transactions can not actually eliminate them, and fears of a Bitcoin bubble would leave China behind in the digital coin revolution.”
The digital revolution, moreover, is one of the key factors that can change the status of China from that of an emerging one to that of a developed country. Hence Beijing’s second thoughts on the ban on Bitcoin, which can not be ruled out in the near future.