Currency war between China and the US has been on the mind’s of financial analysts, and has mostly been about China reconsidering the dollar as a global reserve currency while China itself is a major stakeholder of the dollar. A debate is raging about what would happen if the Chinese adopted Bitcoin. If China started using Bitcoin, could it then begin leaking US dollars into international markets thus lowering the reserve currency’s value?
Assumptions are made that it could be a mere attempt to propel Bitcoin’s value at the expense of fiat owned reserve currency.
Barry Naughton, a professor of Chinese economy at San Diego doubted that China is interested endorsing Bitcoin. He further stated:
“I’m sure there are many people in China fascinated by money in all its various forms, and so non-fiat money is especially interesting and the media would respond to this. Also, since China’s capital account is still not open, people will be especially interested in something that might allow them more freedom with their money, including the freedom to move it offshore”
China legalized gold purchases for its citizens in 2005 at the time when the gold price was around $400/ounce. In fact, Bitcoin isn’t the only attraction for China to crypto-currency. A startup of Chinacoin (CNcoin) also gained initial interest, including some test mining groups. However, this startup languished to deliver its perspective and lost its effectiveness.
While the Chinese officials show no sign of leisure in the economy, the statistics show China’s hashing power are on the rise. The Craze for Bitcoin is now well-documented over past year, and now over 80% of Bitcoin volume is obtained by Chinese markets. An interesting fact is, most transactions have been made by US dollar followed by the Euro. With these Statistics, Bitcoin’s prospects in China are predicted to be expanding and might become a major mining hub.
Despite the major trading activities, Bitcoin was toned down by People’s Bank of China by banning financial establishments from Bitcoin trading with a warning that it is a vehicle of speculation. The Bank also took measures to prevent Bitcoin companies from accessing payment processes. However, few payment processors re-emerged as with the growing stability of Bit coin’s economy in China can’t be overlooked.