So what is the Lord’s real intention?
Back in October 2013, when Bitcoin was in the sub-$200 range, I predicted the coming bubble on Bitcointalk. In that very article I also predicted the government’s attitude:
‘In China we have highly centralised political power. The odds of the Chinese government allowing Bitcoin to remain on the markets when it has caught their attention are like the odds of the US government raising debt in Bitcoins.’
The unfriendly attitude from government entities is to be expected. The exchanges used to think along these lines, too. The now-closed FxBTC, one of the first Bitcoin exchanges in China, operated its business without stating the company’s name, nor listing any address or phone number on their homepage. I wrote to them to ask for legal information back in 2013, and their reply was: ‘You don’t ask, we don’t tell. If you trust us, we can do business. You know what we mean.’ The other exchanges were cautious, too. BtcTrade, one of the five Bitcoin exchanges that announced self-regulation, was registered in Canada to begin with.
By the end of October 2013, zeal overcame fear. Bitcoin exchanges moved out of the shadows and started to date venture capital. The star was BTCChina.
Would China’s government see Bitcoin as the enemy of the state, or as a naughty kid to be tamed? BTCChina, by conducting business the way they did, bet the latter. They weighed the risk, and they did two things:
1. BTCChina provided suggestions for industry regulation, in case the authorities wanted to see them. They also sought to speak to the authorities.
2. In a pre-emptive move, they decided they could single-handedly influence market fluctuation and tame the market. Their new action was to implement a liquidity rebate.
Liquidity Rebate is a measure designed to remove the upward bias of the value of securities. Every time a security is traded, its cost is higher, thanks to the transaction fees. This creates an upward bias in security prices, and the more frequent the trading, the higher the price. BTCChina decided to charge those traders who created price volatility by their market orders, and give the fees to those traders who stabilised the price with limit orders. This method is professionally called a liquidity rebate, and it can help to calm an exuberant market.
BTCChina made no profit through their new feature. Indeed, every Yuan charged to traders was given to other traders. However, this method was too complicated for the traders, and soon it was considered a device to charge users for the service provided. The effect of the liquidity rebate on the whole Chinese market is not known, because the market share was soon given away to Huobi, and volatility continued. It is fair to say that in order to win favour from their Lord, BTCChina gave away their competitive edge to Huobi. Due to this competition, a single exchange cannot calm the market. But if all the exchanges banded together, perhaps it could be achieved?
This was the backdrop of the recent self-regulation announcement by the five major exchanges. If the Lord wants harmony, the Lord gets harmony. Can we live now?
If our Lord wanted to see the market calmed, regulated, he would say so. It has been four months and our Lord could have said this at any time. But he ignored BTCChina’s attempts to self-regulate the market. Read the news report – the word ‘regulation’ is never spoken by PBOC. In fact, in order to avoid misinterpretation, PBOC directly gave the order to shut down accounts, instead of tasking a regulatory entity (CBRC) with this, despite them being much better suited to the task. PBOC’s direct order has a clear meaning: This is final, because it’s from the top. Someone very high up wants Bitcoin to cease to exist. PBOC’s governor Zhou Xiaochuan¹ is the top candidate (for that one high-above), as the vice Chairman of CPPCC he is the one in PBOC who can deliver a decision signed by five ministries, such as the one deliverred in last December.
Whether or not this trick to obey the Lord’s will without obeying his order will succeed depends on what you are. Bitcoin is based on the ideal of decentralisation. It challenges the national control of money. Bitcoin is not a naughty child that must be tamed. It should never have been born in the first place.
The author is a Chinese entrepreneur. He has been doing IT business with German customers in China for 10 years. He believes bitcoin is the greatest invention in this decade, and is actively looking for opportunities and partners to establish new types of business with bitcoin. He can be reached via linkedin
Read more from Zhang:
Chinese Banks don’t know how to act appropriately, because Bitcoin is too tiny
China: If Bitcoin remains small, it will be allowed to live
‘It’s not a survivor’s game. It’s a loser’s game.’
Truth and Rumor