Regulation and Blockchain’s value do not mean government’s acquiescence to Bitcoin
People’s net, an A share company and the online platform of People’s Daily, the state-run media, published an article reminding Bitcoin investors that they shouldn’t take it for granted that Bitcoin will be recognized by the government naturally.
Here is the article’s translation:
Investors should be cautious about the heated Bitcoin price though it has been resilient during the period when PBOC is strengthening regulations on exchanges. Investors should be careful about two pits that they might fall into.
The first trap is the misunderstanding of the government policy. There are some special factors behind the fact that Bitcoin price remains above 6,000 RMB even when government is monitoring more closely on it. Some investors just believe government’s recent move on regulating exchanges proves recognition of Bitcoin from the government.
Actually, this is a big misunderstanding: there are boundaries for each specific government agency, which will act within the its law-enforcing boundary. However, this doesn’t mean the far-reaching recognition of Bitcoin from the government unless there are legal basis.
It is a gradual process for government to know about Bitcoin. Previously, government think Bitcoin is a virtual good instead of currency. The focus of recent regulation is that whether Bitcoin should be counted as a currency. As a matter of fact, the government is very tolerant to Bitcoin. But unfortunately, the financial feature of Bitcoin is becoming more obvious to the extent that Bitcoin is traded in exchanges where leverage lending and margin trading exists, leading to great price volatility and thus more stringent monitoring and regulating measures. In a financial trading market without monitoring and regulation, the consequences are private investors tend to lose money while agency earn money and useless capital flow. It may even lead to a financial storm. The good thing is that government is now trying to fix the loophole. Bitcoins trading rules are changes while government recognition to Bitcoin is changing, too. If exchanges don’t follow closely related laws and regulations, the market will face the unbearable regulation of greatest toughness.
The second trap is the misunderstanding of Blockchain technology. Blockchain technology is sought-after as Bitcoin has been accepted in more places. Some financial agencies are also researching it. From this angle, Bitcoin investors indeed created a valuable technology, which might be benefits the world and bring a market of huge value. But the problem is: What dose Blockchain have to do with those Bitcoin investors? For governments of different countries, currency is about sovereignty. What is the possibility what a global currency appears representing a transformation of the world political and economic changes as the world will need to become a bigger consortium? Almost impossible. Moreover, though Bitcoin will be the final state of “virtual currency”, Blockchain is not inevitably the best technology in the world. Even though “virtual currency” is to be issued in the future, it will be governments that lead the currency instead of a private system with Bitcoin network as pillars. There are many unpredictable factors impacting Bitcoin, then why Bitcoin investors will always benefit from them?
In conclusion, rationale investors should see clearly the essence of Bitcoin and remain discerning. Moreover, for those pyramid schemes in the name of virtual currency, the government will crack them down resolutely.