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January 2017 has seen the Chinese federal Bank step up its war on Bitcoin. First, came press releases from the People’s Bank of China targeted at news outlets in Beijing and Shanghai making fairly generalized warnings about the virtual currency, then announcements that Bitcoin exchanges operating in China are going to be subject to stringent onsite visits.

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People’s Bank of China agents had already made site visits to locations like Huobi and Okcoin in Beijing to investigate whether or not these organizations were operating in compliance with Chinese financial regulations and laws, though no breaches have been reported a result.

  1. Why Does the People’s Bank of China Hate Bitcoin?

The People’s Bank of China is concerned about the popularity of Bitcoin in China because they see this as threatening the stability of the Chinese Yuan. Because Bitcoin is a global, virtual currency it isn’t tied to stocks, and while it is impacted by global events and societal changes and behaviors, it isn’t affected in quite the same way as a national currency like the Yuan. This has led to many people in China seeing Bitcoin as a safe place to put their money – much in the same way as gold has been viewed in the past in some respects.

China is one of the most important markets in terms of the prosperity of Bitcoin. When prices for Bitcoin hit an all time high compared to the dollar at the start of 2017 – just before these actions were taken by the People’s Bank of China – 90% of the trading activity was coming from Chinese investors. After the PBOC’s actions, Bitcoin dropped massively from $1,130 to under $800 – both facts showing just how key the view of the Chinese public is to Bitcoin’s value.

  1. But Was It All in Vain?

While a drop that steep may look like a win for the PBOC, all it really demonstrates is that Bitcoin is volatile – and that is something that Bitcoin investors and forex traders already know. It drops and bounces back in ways unseen with other currencies, and this makes it not only appealing to traders who want to make fast profits, but also for those who want to make longer term investments. There is a sense of safety in a currency that is impacted by the whole world, because for every event that reduces faith in it temporarily (like the aggressive moves from the PBOC), another one will come along that makes Bitcoin look like a smart place to put your money (like Trump’s comment that the dollar was ‘too strong’, which caused the dollar to fall and Bitcoin to rise by 6% in a matter of hours).

  1. Can PBOC Stifle Bitcoin?

If Bitcoin were in some way officially banned in China, this would probably have a huge effect on the viability of the currency. However, as things stand, putting pressure on Bitcoin exchanges and trying to suppress positive news about Bitcoin within China is unlikely to gain significant results for the PBOC.

China may want the Yuan to become the global reserve currency rather than the US dollar, and it remains to be seen how the dollar will move during Trump’s presidency, however the war on Bitcoin doesn’t seem to have the potential to strengthen the Yuan in the way the PBOC would ideally like it to.

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