When China’s central bank barred financial institutions from handling Bitcoin transactions, the notion that “China was banning Bitcoin” spread like wildfire.
After dust clears, Bitcoin price and transactions drop
As the dust began to clear on December 6, 2013, Bobby Lee, founder of China’s largest Bitcoin exchange, BTC China, woke up to a hard reality: Bitcoin’s value had fallen from $1,100 to $500 and trading volume on his exchange dove by nearly 80%. While many people might have counted him out, the entrepreneur now says Bitcoin is stronger in China than in the US as he works to redefine his business and services.
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Speaking with Betty Lu on Bloomberg TV, Lee, a smile pasted on his face, countered the common wisdom that Bitcoin was banned in China. “China has not banned Bitcoin. I think there has been some mis-reporting in the media,” he said, pointing out that Chinese authorities had determined Bitcoin was not a currency and thus banks and financial institutions could not trade in Bitcoin.
China offers one-stop regulation, but investment capital still attracted to US
Lee noted that in fact it could be easier to set up a Bitcoin business in China due to the fact that entrepreneurs are required to deal with only one government regulator, rather than multiple state and federal regulators in the US. Despite this, the US is garnering most of the Bitcoin investments. Considering $117 million of venture capital investments in Bitcoin startups to date, $98.6 million has been funneled to 19 companies in North America, while just $13.3 million has gone to nine startups in Asia, based on a report from Aite Group.
Last month New York State announced it was actively open to Bitcoin businesses while earlier this week David Cohen, undersecretary for terrorism and financial intelligence at the U.S. Treasury Department, gave implicit approval to Bitcoin. Or, as Bloomberg Businessweek’s Josh Brustein observed, Cohen’s message was basically saying Treasury will leave it alone while it remains impractical. Cohen’s indifference is important as Bitcoin’s use to fund illicit activities, such as illegal drug trafficking or terrorist activities, has been a concern.
For his part Lee indicates that none of this matters. He says that Bitcoin is beyond the control of any one government. In a Bloomberg Businessweek article, he noted it is global, decentralized and is a disruptive force, yet is still in the very early stages of development. Comparing Bitcoin to the Internet in 1993, he noted that in the next five to 10 years he anticipates a wave of innovation and capital will shower the industry as happened with the Internet in the mid to late 1990s. That’s considerable growth to come if Lee is accurate.