The People’s Bank of China recently cracked down on several bitcoin exchanges in an attempt to “stabilize volatility”. Ironically, in their quest to regulate the markets, their investigation helped trigger a panic sell-off with a 33% drop in price.
The PBOC forced the top bitcoin exchanges in the world, Huobi, OkCoin and BTCChina to cease all margin trading activity. The loss in margin lending fees means that Chinese exchanges may have to start charging fees on trades. Moving away from the zero fee trading model means that most of the fake volume and wash trading will dissipate.
China has been a bitcoin superpower since 2013, controlling most of the network’s hashing power, exchange trading volume and price discovery. The only problem is that their government is fickle and authoritarian. They don’t recognize bitcoin as a currency and forbid its use as a medium of exchange to pay for goods and services.
Coincidentally, it turns out that the People’s Bank of China is working on creating their very own altcoin called RMBCoin. Allegedly this new coin will “truly achieve the goal of money for the people”, except it’s not peer-to-peer and the people have zero control over its outcome. Perhaps this recent move by the PBOC is paving a path for them to shill their own coin.
Japanese Bitcoin Industry on the Rise
Now that the top Chinese exchanges can’t offer margin trading I see price discovery eventually shifting towards Japan. Right now Japanese exchanges rank #2 for trading volume, with even higher stats than USD exchanges. Several of the top Japanese exchanges have a zero fees model and offer margin trading.
Japan has friendlier regulations towards bitcoin, officially recognizing it as a currency. As a result, Bitcoin is slowly started to be accepted into mainstream Japanese culture. People in Japan can now use bitcoin to pay their utility bills and there’s 5270 merchants accepting bitcoin in the country.
A recent report also shows the Japanese banking sector conducted experiments using Bitcoin’s blockchain. Japanese media is now favourable towards Bitcoin, which may help increase user adoption. Also Japan’s internet giant, GMO is entering into the Bitcoin space.
The Chinese Bitcoin community contributes a ton of value towards the ecosystem, yet having user adoption grow in places like Japan and India will help curb some of the influence the PBOC has over the ecosystem. Having too much power concentrated in one country doesn’t bode well for decentralization. As trading volume increases in other places, it will be more difficult to manipulate the price.