Chinese regulators have announced that they are banning companies from raising money through digital currencies.
Since then, Bitcoin prices have plunged 20 percent, and one of China’s largest Bitcoin exchanges has announced it will stop all trading come September 30th.
There are concerns that other Chinese exchanges could decide to close as well.
CGTN’s Elaine Reyes explains why China has been so important to Bitcoin.
When a bitcoin is bought or sold for cash, chances are that transaction is now being done in Chinese yuan.
That’s because analysts estimate somewhere between 80 and 98 percent of all Bitcoin transactions now involve the Chinese currency.
But most of that comes from Chinese investors. According to those same analysts, Bitcoin usage among Chinese consumers is still minimal.
Earlier this year, the People’s Bank of China decided to take a closer look. The central bank increased scrutiny on the currency to ensure venues did not violate rules on things like money laundering.
In response, Bitcoin exchanges placed a self-imposed moratorium on currency withdrawals.
But this month, China’s top three exchanges resumed withdrawals, sending prices soaring.
“There’s no centralized bank or repository for Bitcoin,” explains Henry Meier of the Los Angeles Business Journal.
“So nobody controls Bitcoin. Instead, it’s a diversified system. The people that are involved in it are everybody who is either buying or selling Bitcoin.”
The digital currency has been slower to catch on in China than other parts of the world. For example, the United States has had Bitcoin ATM’s for years, and it’s so popular in Japan that regulators are moving to make Bitcoin easier to use.
Still, while more businesses are now accepting Bitcoin as a form of payment, analysts said it’s hard to predict how popular the so-called “cryptocurrency” will become.
“We’ll see,” Meier said. “No one really knows. And the underlying tech is really important to transferring money. Major banks are now using it.”
“So, whether or not Bitcoin is the one that remains the accepted cryptocurrency, no one really knows. It could be. It’s the first, it’s the most widely used. But another cryptocurrency could come up and take its place.”