NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, February 13, 2018

Efforts by Chinese policymakers to introduce bitcoin regulation have made it clear that the cryptocurrency, and its peers, are unlikely to become the dominant payment method within the region as many of bitcoin’s proponents suggest.

In what is one of the most significant setbacks to the adoption of cryptocurrency around the world, China’s Central Bank has made it clear that these assets are only virtual commodities and not legal tender. The PBOC issued this guidance in 2013, although this hasn’t stopped Chinese investors and speculators from taking part in the cryptocurrency boom.

According to a report from Bloomberg, published at the end of last year, around 58% of the world’s cryptocurrency mining pools are located in China, followed by the US at 16%.

Even though significant financial institutions within China are forbidden from providing payment services for products denominated in bitcoin due to bitcoin regulation, other platforms have emerged to offer investors this service.

Regulators have tried to keep up with new entrants to the market. At the beginning of 2017 regulators stepped up the on-site inspection of major cryptocurrency trading platforms leading to several platforms being shut down. This resulted in the volume of cryptocurrency global trading denominated in RMB plummeting from more than 90% of total transactions to less than 20% by March of 2017.

Photo courtesy of angelx77.