In a recent report by Goldman Sachs, the Chinese Yuan is now used in about 80% of Bitcoin exchange transactions. In addition to this, they stated that Bitcoin is a megatrend that could redefine the financial industry within the next decade:
“Bitcoin, along with improved payment security, ‘big data’ analytics and faster payment networks are the components of a technology trend that will disrupt the payments ecosystem.”
Is The Chinese Yuan Taking over Bitcoin?
Bitcoin’s momentum is only gaining in China, something that will likely pose a large threat for China’s Central Bank, and Zhou Xiaochuan, the governor, in particular. At a time when China accounted for 50 percent of Bitcoin transactions, Zhou retaliated strongly, stating concerns that the payment system was enabling money laundering and undermining capital control. Many financial institutions were unable to provide services that dealt with Bitcoin transactions, stating that these transactions and Bitcoin lacked “real meaning.” In March 2014, Zhou further ordered the banks to close the trading accounts of over 10 Bitcoin exchanges, disrupting Chinese trade and resulting in a large drop in Bitcoin’s global trade value. Those were the crackdowns imposed when Bitcoin accounted for 5 out of 10 transactions. As stated earlier, that number now sits at 8 out of 10.
While Bitcoin can be used for the three main functions that define a currency (account, exchange, and storage) the value is currently too volatile to be used as a country’s main currency. What Bitcoin does have going for it, though, is the fact that it is incredibly easy to send funds globally, for minuscule fees. Bitcoin’s technology will soon bury the archaic money sending services that charge heavy fees to send money globally.
Zhou Xiaochuan will no doubt be facing difficult decisions about what to do. As the yuan continues to decline globally, interest in Bitcoin and Chinese involvement in Bitcoin transactions continues to increase. While other financial problems might be easy to regulate, Bitcoin itself is a much harder thing to control, the entire system is decentralized, making it very difficult to stop use, even if it was made illegal. Zhou’s choices will no doubt have influence into China’s use of Bitcoin though they won’t be as effective as other financial policy that deals with things outside of cryptocurrency.
What does this mean for the rest of the world?
- China’s influence in the global Bitcoin market is increasing rapidly; this means that they will have greater control over Bitcoin price than any other nation in the world.
- Continued decrease of China’s economic health and decline of the Yuan will result in greater Bitcoin adoption rate and even higher Bitcoin transaction volume in yuan.
- If the yuan weakens further, Zhou Xiaochuan will be more crunched for time and will have to create Bitcoin policy sooner.
- Zhou Xiaochuan’s future policy towards Bitcoin will have even greater influence on Bitcoin’s value.
China’s influence on Bitcoin is significant and is growing rapidly. China’s policy towards Bitcoin will be pivotal in the global growth of Bitcoin. Goldman Sachs’ report states that Bitcoin will give large companies an advantage in saving money for transactions. When companies choose to accept Bitcoin, they can save money over traditional payment processing companies such as Paypal, and credit card processors. These savings could be passed on to consumers. Companies like E-gifter and Gytf offer triple reward points for all gift card purchases that are made with Bitcoin, simply because they don’t have to pay the transaction costs on those transactions. As Bitcoin continues to spread, Bitcoin users will likely be subject to additional discounts over users of other payment methods such as Paypal and credit card.
Bitcoin’s future looks promising after Goldman Sach’s report. The next ten years for Bitcoin will likely be very exciting.
What do you think about the future of Bitcoin? Comment below!