Today, BTC China, China's largest bitcoin exchange, was shut down by the Chinese government. And this is after the government already announced on December 5 that its financial institutions were no longer allowed to deal in Bitcoin, its first attempt to regulate the currency. As of today, the People's Bank of China has informed 10 of the PRC's largest third-party payment processing companies that they were required to cease all Bitcoin transactions, or else.
Not surprisingly, Business Insider's Joe Weisenthal is delighted that he now gets to gloat in front of all the people who sent him death threats and made fun of his sexuality. He's happy to point out that since BTC China announced it would no longer be accepting deposits, the value of a Bitcoin has more than halved, from $1000 to $500.
The first time I ever posted about Bitcoin, one of the questions I asked myself was whether Bitcoin would really prove to be immune to government control and currency manipulation. I subsequently wondered what it meant that the Chinese had embraced Bitcoin, since they're the most notorious currency-manipulators in the world. Well, here are some reasons another author has suggested that Bitcoin took off in China in the first place:
- They’ve already done the whole virtual currency thing—with Q Coin.
- As a medium of exchange, Bitcoin could help Chinese people evade currency controls.
- Insane speculation schemes aren’t so crazy to many Chinese people.
- PCs abound.
- Chinese techies are used to spending an ungodly amount of time mining virtual coins in online games.
- The government can’t track it, can’t block it, and can’t crack down on it.
But remember that in China, the purpose of economic growth (along with almost any other government initiative, like defense modernization) is to maintain social stability and the legitimacy of the Communist Party, as we are constantly reminded by the party's own leadership. When a currency's biggest public selling point is that it's immune to government control, it should figure that the Chinese government is going to start getting nervous once reality sets in and they realize that yes, in fact, Bitcoin might in fact be something even they can't control. What's happening is that the need to make money is not always compatible with the need for control, as Quartz's Adam Pasick points out:
"Ultimately China had little choice but to crack down on bitcoin, because it made it all too easy for Chinese investors to evade already- porous currency controls and anonymously move their funds out of the country. More generally, Beijing had an aversion to a volatile, decentralized and possibly destabilizing digital currency that it could not control...By shunning bitcoin, China...may be passing up the chance to leapfrog the rest of the world by fostering the growth of bitcoin-esque digital currencies and the secure, efficient payments that they may enable. But when a country is simultaneously trying to grow, reform, and maintain tight control of its economy, something’s gotta give."
But...this is where things get a whole lot more interesting. As I was sitting down to write this blog post, I saw some new articles pop up in my Twitter feed. It seems that Bitcoin hackers have retaliated by launching DDOS attacks against the People's Bank of China web site. So just in case we (and the CCP) forgot, take note: Bitcoin isn't just an Internet currency; it's also an Internet movement with a cyber-army of hacktivists that don't take kindly to Chinese au-thor-i-tah. Now, let's see what the Bitcoin army is capable of doing; presumably, Joe Weisenthal is relieved that they've got someone to hate more than himself.
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