Is China Blistering Bitcoin Attack Geopolitical?

Bitcoin, the world’s biggest cryptocurrency, was already having quite a bad week, when all of a sudden the Chinese government decided to up the ante yesterday. In a press communiqué, it warned its 1.6 billion populace that anyone trading in cryptocurrencies was doing so in a highly speculative asset class.

It comes as China hopes for a Japanese dismissal of the Olympics which would focus attention squarely on the Winter Olympics, to be held in Beijing next year.

Plummeted and rebounded

In a statement, three Chinese state-backed industry associations, notably the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China, declared that:

Cryptocurrency prices have skyrocketed and plummeted, and cryptocurrency trading speculation activities have rebounded.

They went on to explain that the price fluctuations witnessed could:

Seriously violate people’s asset safety and disrupt normal economic and financial order.

Of course, with the Winter Olympics due to happen next year and Beijing eager to show the world its own digital currency the so-called e-yuan, any attention that the Middle Kingdom can divert away from any other crypto is welcome. Both CNBC analysts and Digital Galaxy’s Mike Novogratz pointed to the possibility of this issue being geopolitical.

Analyst Adam Reynolds of Saxo Markets claimed that:

It’s no surprise to me, as Chinese capital controls can be challenged by cryptocurrency purchases in the country and transfers out of the country. So avoiding use of them in the country is essential to maintaining capital controls.

Neil Wilson of Markets.com added:

China has for some time been putting pressure on the crypto space, but this marks an intensification – other countries might follow now as central banks make strides towards their own digital currencies. Until now western regulators have been pretty relaxed about Bitcoin, but this might change soon.

Bitcoin could become a geopolitical issue between world powers as it grows in importance. We even questioned last month whether a recent Bitcoin flash crash was showing people how much power Beijing still holds over Bitcoin.

It will be interesting to see how this story develops.

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