Bitcoin has been busy again.
In a further sign of the crypto-currency’s increasing significance, the Chinese state come out as openly hostile to Bitcoin, banning its banks from using it. The criticism, and the sale it enforced, immediately brought a dramatic fall in the price of Bitcoin, which lost around $200 in value – around 20% of its value.
The People’s Bank of China is quoted in today’s Guardian newspaper as denying the currency has any “real meaning“, and lacks legal protections. Opportunities for its use have opened up in China, as a way to circumvent the strict currency control measures in place to keep yuan within the country’s borders.This follows in the wake of previous, slightly warmer, noises from the US financial establishment. Whether favourable or not, the big players engaging with Bitcoin is significant in itself. A currency that genuinely had no meaning would not draw comment from the Chinese authorities. Exactly what Bitcoin’s ‘meaning’ is can’t be clearly stated now, although there are plenty of people willing to do just that.
China is looking to increase its regional and global power. One very significant way to do this is to control the currency used by themselves. At present that is the dollar, which they do not control. Speculation is rife that China will, almost inevitably, seek to replace the dollar’s position as reserve currency. This may well happen locally at first, formalising the Chinese co-prosperity sphere that already exists. What can be said with some degree of certainty is that Bitcoin represents a threat to this way of thinking. As a de-centralised and completely uncontrollable currency it could lead to capital outflows, and could potentially challenge state backed and controlled currencies. As for Bitcoin, its value has already soared and plunged several times, so the dip today says little about its long-term viability.
There’s plenty more to be said about this, so posts will follow on China’s gold hoarding, as well whether Bitcoin is already too big to be supplanted by another crypto-currency.
STOP PRESS! Apparently Alan Greenspan has come out as anti-Bitcoin. Ha ha ha.