While bitcoin use remains controversial, the online currency represents an emerging trend in China, as affluent consumers can use bitcoins to acquire properties overseas.
Bitcoin is a digital peer-to-peer payment method with no single administrator and no central repository. Since bitcoins aren’t officially considered currency, they are not restricted by the government’s foreign exchange policy. Proponents believe this could make China, a country with strict capital controls, a large market for the bitcoin.
Bitcoin is “an easier and quicker way to invest overseas,”says Bobby Lee, chief executive officer and co-founder of BTC China, one of the largest bitcoin exchanges in the world. Lee spoke last Tuesday at an inside bitcoin conference in Hong Kong, making a case for the value of the payment system in modern China, according to China Daily.
“As long as people in foreign countries are willing to accept bitcoins, we can help get the deal done,” Lee said.
Many others are less enthusiastic, viewing the bitcoin phenomenon as “a bubble about to burst” from further regulations and a general lack of confidence in the currency. Shanghai-based bitcoin expert Zennon Kapron notes that the currency comes with potential transaction fees that start at 2 percent. The bitcoin’s value is also unstable, and could possibly shift even mid-transaction. According to the South China Morning Post, hackers represent another threat.
For these reasons, the Chinese government is proceeding with caution in the bitcoin industry. While Internet trade in bitcoins is still allowed, regulators are trying to discourage investing in them by “closing off any currency-related services such as trading, clearing, or settlement.”
“The stance regulators are taking is like ‘crossing the river by feeling the stones,’ because the banking industry is still very young is going through a hard time with capital issues as a whole,” Kapron said.
The bitcoin is also seeing a dip in value, with the currency plummeting from a peak of over $1,000 to a current value of just $600. Transactions have also declined, according to Leon Li, the founder of major Chinese bitcoin trading platform huobi.com.
Nevertheless, international brokers are already lining up for what they see as a potentially lucrative market. London-based Cai-Capital, for instance, allows clients from Hong Kong to purchase multi-million-dollar homes and flats in London with bitcoins. Richard Mathieson, the company’s chairman and managing director, says he plans to expand Cai-Capital to the mainland as well.
“We believe that [China] could be a large market, simply because of the [mainland’s] currency restriction,” he said.
image credit: tim lam