Today the People’s Bank of China (PBOC) has once again begun issuing warnings to Chinese banks and payment processors regarding Bitcoin. As per usual, this has lead to a quick drop in Bitcoin price, as Chinese investors, plus some international investors, begin to sell their bitcoins in anticipation of the impact.
Will China’s Bitcoin Ban Have Any Real Effect?
However, the only impact that this is likely to have is related directly to those that are panic selling in this way. The PBOC has issued very similar warnings many times before. The Chinese government has spoken out against Bitcoin. There have been many news releases, both real and fake, regarding the Chinese legality and regulation of Bitcoin, and each time it causes a drop in the Bitcoin price, but each time that drop is shrinking to a smaller and smaller %. There is an old idiom which fits this statement: “Don’t cry wolf.” The PBOC has “cried wolf” many times now, and it is unlikely that many will continue to pay them any attention. Bitcoin, by it’s very nature, is not controllable by any government, and any attempt by a specific government, or bank, to restrict it’s use, will only end up harming themselves and their own people.But, as has been made evident by these statements in the past, the PBOC and Chinese government know this.
So, Why “Ban” Bitcoin Then?
It is very unlikely that these warnings will have any impact on the Chinese market, beyond what has already happened. The Chinese based exchanges are moving, or have moved, to using international banks. The people of China can continue to use their Bitcoin as they see fit. The restriction of payment processing companies from interaction with Bitcoin is likely to have a positive effect, in the grand scheme of things, as Bitcoin itself IS a payment processing system. Using a payment processing system to process payments made with a separate payment processing system is redundant.
The Chinese government, and PBOC, seem to like to show their power, and this is one way to do it. In the end, it makes little difference.
Of course, we cannot predict the future, and we will continue to monitor this situation for further developments. For you day traders out there, watch for the bounce.