All the news outlets are saying China banned Bitcoin, but does this ban actually change anything? Let's start with remembering what Bitcoin is. It is a decentralised peer-to-peer currency that was designed to give people financial freedom. The immutability of Bitcoin is what protects people from the government taking control over their funds. However, the Bitcoin price still has room for market manipulation.
China is ranked 13th at “The 2021 Global Crypto Adoption Index Top 20” (Chainanalysis) and is leading in on-chain transactions. This data of course does not include an enormous transaction volume at the OTC market. Since 2018 China has had annual withdrawal limits of RMB 100K (~$15.5K) and the government can ask for approval or additional information even for smaller amounts. Imagine how complicated and long the process can be when you’re doing business with an overseas company or simply sending money to your kids who are studying abroad. Thus, the volume at the crypto OTC market started increasing significantly following such restrictions. It's quite common to hear of an OTC deal for a few million US dollars happening in China.
All WeChat payments (along with other centralised mobile payment apps) and bank transfers can easily be traced, however, not all crypto transactions can be. The fear of money getting out of control is forcing some governments to take action against cryptocurrencies. At the same time other governments are accepting the new economic transition and building a framework for it.
China has been banning Bitcoin (and other cryptocurrencies) for years. The price does react in the short term but doesn't seem to be affected much in the long term. This ban won't help to fight against untraceable OTC transactions. On the contrary, the OTC market will grow even more. The rest of the capital will be migrating to other, more favourable for crypto, locations.
Remember the recent ban of miners? Did it really hurt Bitcoin? No. There was a short-term price decline on the market while miners were moving out and relocating to the US, Canada, Latin America and other locations.
This crypto ban is not different. It will only affect the price in the short term. Also, knowing how volatile the Asian markets are with the constant gambling spirit, maybe we will see fewer swings with Bitcoin price? [Just a joke!] In reality, the money will move to the favourable jurisdictions, the same way it happened with miners. Once a hodler always a hodler, right? I doubt it will force people to sell their crypto holdings.
It's important to understand that no one can take your Bitcoin from you as long as you keep it safe. If you trust centralized exchanges with all your savings you should understand the risks.
Being an early adopter, I joined the field in 2014 and had my first Bitcoins purchased at BTC-e. Not sure how many people remember, but in 2017 the whole trading platform went offline while all servers were seized by the FBI. One of my friends actually succeeded in retrieving a portion of the seized funds, however, I wasn't that lucky. If I had stored my Bitcoins outside of the network and not on a centralised trading platform nothing like this would have happened.
The future of finance is within the DeFi and DEX (Decentralized Exchanges). Those are the ways to separate and protect your money.
Let's look at this index:
The majority of the countries in this top 20 chart are developing economies. However, all of them have a few things in common: lack of trust in government institutions and/or failing economic and financial systems (followed by skyrocketing inflations and other complications). These reasons are bringing more people into crypto.
We keep hearing the same thing "Cryptocurrencies are used for drugs and criminal activities". Well, do you want to say that the US dollar (or other fiat currencies) was never used for any of such? As if we’ve never seen the cartels smuggling tons of cash in their trucks or criminals using cash for other illegal activities. Yes, some people use Bitcoin (and other cryptocurrencies) to buy drugs but the majority uses it to protect their savings from inflation and get access to basic financing.
Let's build an economy that works for us, not the economy we need to escape from.
by Elena Obukhova, Entrepreneur, Mentor, & Crypto Enthusiast. You can read a Meet The Writer story with Elena here