Bitcoin is an innovation China cannot deny.
This is the takeaway from an editorial by the Global Times, which only had praises for the digital currency. “There’s an increasing belief that just saying no to Bitcoin won’t be the eventual solution to the cryptocurrency issue,” Xiao Xin, the author of the editorial, writes.
“A more fundamental approach would be to embrace the new technology without putting the country’s financial system at stake,” Xiao added.
This move indicates that Beijing is making preparations to tighten regulations around bitcoin, the same way that Japan, Korea and the U.S. have done, instead of banning it altogether.
This could also be a bullish move for bitcoin prices, which have been struggling to get to the $10,000 level in recent months. Regulating bitcoin is no doubt a better option than banning it outright.
The Global Times editorial comes a few months after Beijing announced that it would be banning Initial Coin Offerings (ICOs) and cryptocurrency trading.
To be fair governments around the world, and not only China, have pretty good reasons to regulate the process of creating and trading cryptocurrencies. Among these would be protecting public from market manipulation and safeguarding financial stability.
This is something that governments have been doing for years with conventional financial products and tools, so why not apply it to cryptocurrencies as well?
However, banning ICOs and cryptocurrency exchanges altogether, like what China did, goes beyond traditional regulation—it questions the validity of bitcoin as a currency.
Why? Because bitcoin challenges the government and banking system’s monopoly on creating money and credit.
China wants to have a tight grip of its banking system, and allot credit based on its political agenda. This indicates that competing currency such as bitcoin would pose a threat to its political system. Why not let it thrive when you can simply crush it?
And yet, crushing bitcoin would also crush innovation, something that China is badly in need of to make the ‘Great Leap Forward’—to develop its own technology rather than copying from other countries.
In addition, banning Bitcoin trade in China won’t put a dent to bitcoin’s growth. It will simply mean that the country will be left behind in the digital currency revolution.
“Fencing off bitcoin exchanges can’t effectively end Bitcoin trade, and fears of a bitcoin bubble will leave China behind in the digital currency revolution,” Xiao said.
A digital revolution is exactly what China needs to transition from an emerging to a developed country.