China always plays a critical role in the future of Bitcoin. When local exchanges suspend withdrawals, its price plummets. Now that the PBoC has rendered its latest verdict, the impact on the Bitcoin price remains to be determined. As was to be expected, the institution claims Bitcoin is not money. They also feel there is a growing need for cryptocurrency ICO transparency.
Recent PBoC Statements Will Have Consequences
Contrary to what some people expected, the PBoC will not follow Japan’s plans when it comes to regulating cryptocurrency. China’s national bank has no intention to categorize Bitcoin as money, and that situation will not change anytime soon. The PBoC feels Bitcoin is a string of code fundamentally different from gold and lacks any natural value. Virtual currency has accepted value, which is a factor the bank will not dispute right now.
No one truly expected the Chinese government to officially recognize Bitcoin as money. That would have gone against everything the PBoC stands for and has planned for the future. China is one of multiple countries looking to issue its own national digital currency in the future. Making Bitcoin legal, if only to a certain degree, would have countered those future plans before they were even set in motion. It is certainly possible that this situation will change in the future, but for now Bitcoin is not money in China.
That does not have to be bad news, since the value of Bitcoin will not be affected all that much as a result. China has always been a country known for doing its own thing, and Bitcoin is a significant threat to its own financial ecosystem. Having a tool that provides real-time financial transparency would not be in the best interest of the Chinese government. However, the PBoC’s comments were not all negative as it acknowledged the deflationary nature of Bitcoin would provide economic development.
The PBoC also touched upon the concept of ICOs. As most users are well aware, cryptocurrency ICOs have become the new norm these days. Every project, whizzkid and her dog are raising money to build something new using powerful technology. Very few such projects have anything to show for it, despite receiving millions of dollars in funding to date. Time is of the essence in this regard, as initial investors will not remain overly patient for much longer.
The ICO phenomenon has attracted the attention of the PBoC, which is both good and bad. On the positive side, it seems regulation of these fundraising efforts may be a lot more imminent than we think. The bad side is that this will make it a lot more difficult to raise money in a decentralized manner moving forward. No specific regulatory measures have been proposed, but the central bank “may implement appropriate regulation” if the need arises.
The PBoC feels there is a lack of transparency when it comes to cryptocurrency ICOs, and that the disclosure of associated risks to potential investors needs to be improved upon. Without proper information disclosure standards, there are loopholes waiting to be exploited by people using this method of fundraising in a nefarious manner. The lack of continuous information after the money has been collected is another grave concern. All in all, the PBoC seems to have mixed feelings about cryptocurrencies as a whole.