REGULATION

Chinese Bank Releases Statement: Why Does Bitcoin Have Value?

2019/7/31

The Bank of China has posted a message explaining the history of Bitcoin and expressing their belief that the value of Bitcoin will continue to rise, sparking a lot of discussion.

Table of Contents

From the information and images on the bank's website, it explains how Bitcoin was formed, starting from the white paper in November 2008. The bank's website also points out that the initial 50 bitcoins were created in early 2009.

Why Bitcoin's Value Will Continue to Rise

The graphic from the bank tells a story where a Florida resident, Lazlo Hanyecz, paid 10,000 BTC for two pizzas in 2010. Following the coverage of Bitcoin news, they also mentioned Facebook's recent development of the cryptocurrency Libra.

According to the bank, Bitcoin is expected to continue to appreciate in value as the supply is limited to 21 million and it could become a valuable store of value, especially for people in high inflation countries.

Bitcoin is "Virtual Property"

On July 18, a court in Hangzhou, China clarified that Bitcoin qualifies as "virtual property," reaffirming the country's stance that owning pseudonymous cryptocurrencies is legal. The court also stated that Bitcoin holders have the right to legal protection in disputes.

A study released by CoinShares at the end of 2018 showed that about 60% of Bitcoin's hash rate comes from China. Meanwhile, researchers at Diar found that unregulated local cryptocurrency exchanges handle 60% of the global USDT trading volume.

While Chinese citizens may continue to seek alternative ways to engage in cryptocurrency trading, the digital asset industry faces strict restrictions from national authorities. In September 2017, the Chinese government banned local cryptocurrency trading and initial coin offerings (ICOs). Due to these restrictions, Chinese residents may hold digital assets but might not have convenient ways to exchange them for fiat currency.

Chinese Bitcoin Miners Steal $3 Million Worth of Electricity

China's reserved stance on cryptocurrencies may partly be attributed to rampant scams and other illicit activities associated with them.

On July 12, The Guardian reported that Chinese police officials uncovered an illegal mining operation. As detailed in the incident report, miners stole $3 million worth of electricity to mine Bitcoin illegally. Authorities in the eastern Chinese city of Zhenjiang, Jiangsu Province, seized nearly 4,000 sets of mining hardware.

With this case categorizing Bitcoin as a virtual asset in China and subsequent news predicting a gradual rise in Bitcoin value, although China's stance on mining regulation remains stringent for now, the concept of Bitcoin has already been conveyed in China, with hopes that Bitcoin will become a universally recognized "virtual property" in the future.

Further Reading

Join now to get the most comprehensive information on financial technology, blockchain insights, and industry examples!

REGULATION

Related