Analysts are disturbed by the attention the Chinese government pays to cryptocurrencies. They believe that a digital currency launched by the Chinese communistic government can surpass even Bitcoin in popularity.
Despite the ban on trading cryptocurrencies in China, since last year there have been persistent rumors that the country government is going to issue a national cryptocurrency. A couple of months back the national cryptocurrency started to circulate in two Chinese cities — Shēnzhèn and Guìyáng. If the experiment pans out, the cryptocurrency will start to operate all over the territory of China.
Why China needs a cryptocurrency
According to a report by IG Group, a national cryptocurrency is necessary for the People’s Bank of China to bring cryptocurrencies back under the state control. Before banning the circulation of cryptocurrencies, China was the leader among the world’s countries by the volume of cryptotrading. Moreover, China has a considerable number of miners and crypto enthusiasts, only the trade in cryptocurrencies goes now through the neighbouring South Korea and other countries where cryptocurrencies are legalised.
Bitcoin and Ether are still used here to conduct illegal transactions and money laundering. Actually, it is one of the main reasons why the Chinese government aspires to introduce a national cryptocurrency. It will allow to solve a few problems at once: superseding Bitcoin and Ether, making miners switch to mining a national cryptocurrency and reinstating government control over all financial operations in the country. The latter has a huge importance for the struggle against corruption in China.
In spite of the fact that there were no official statements about the release of cryptocurrencies, the testing of the national cryptocurrency ChinaCoin (digital renminbi, RMB), developed by the People’s Bank of China (PBoC) started a few months ago in the cities of Shēnzhèn and Guìyáng.
What is so frightening about Cryptoyuan?
The report by IG Group is not the only ill-boding forecast connected with the Chinese cryptocurrency. That the Chinese cryptocurrency will crash Bitcoin and the whole market of cryptocurrencies is mentioned in the shocking forecasts of Saxo Bank for 2018. It follows from the report that at first Bitcoin will grow in price to almost 60 000 dollars and then fall sharply.
“As foreign cryptocurrencies are already forbidden in China, the government will essentially compel miners to start working with a national cryptocurrency. It can affect the global communities of miners and drop the Bitcoin price, as its extraction will become less popular”, — this is how IG Group explains how the Chinese cryptocurrency can cause the market to collapse.
All in all, the launch of the Chinese cryptocurrency sounds more like a simple assumption, there has been no official confirmation of this. The pressure is also intensified by that the majority of analysts see Bitcoin as a huge financial bubble and are dying to see it finally burst.
For now there is only one national cryptocurrency, El Petro, launched in Venezuela, although this experiment can hardly be considered successful. Besides the small inflow of investments to the national economy, local authorities have not yet managed to achieve serious results by this.
The influence of China on the cryptocurrency market is tremendous. Especially, if we rememnber that one of the causes of the rapid fall of Bitcoin at the beginning of this yeare was the prohibition of cryptocurrency stock exchanges in China. No wonder the analysts expect new shocks from Asia.
In this case. it must always be remembered that trouble comes from where it is least expected.