China’s Financial Channel (CCTV-2) aired a special bitcoin documentary this week to analyze reasons behind the recent price rally. The program invited Li Cangyu, financial columnist and Wan Zhe, chief economist at China National Gold Group Corp. as commentators who believe that Huobi has undoubtedly violated regulations on cryptocurrency services.
Does Huobi Violate the Spirit of the PBOC’s Document?
Earlier this November, CCTV journalist reported that many OTC platforms don’t have any KYC requests, which leaves room for illegal activities. The latest documentary exclusively mentioned that Huobi and Huobi.pro have no legal base to provide RMB-related OTC services.
Log-in to Huobi and one can see that they still use RMB to measure bitcoin and altcoins. At the front page of Huobi.pro, there are a large banner reading “buy coins with RMB, three steps only” along with a detailed guidance teaching newbies how to register and trade with RMB.
Commentator Li Cangyu believes that this is obviously a breach of the PBOC’s notice. “The PBOC had made it clear this September that crypto platforms must not provide services between RMB and tokens, including price bidding or middleman service for the exchange of tokens or cryptocurrency,” he said. “I really don’t understand why they put that on their websites.”
When the program aired, many users dashed to Huobi.pro to either withdraw coins or cash out, worrying that the platform will be shut down again.
Why People Buy Bitcoin?
Mainstream media tend to be negative about bitcoin. They often report bitcoin as a tool for money laundering and speculation. But as bitcoin price keeps rising, more people are showing interest in it. Wan Zhe thinks there are three main factors at play.
First, as the stock market is losing traction, people are looking for alternative investments to store their assets and thus switch to bitcoin. Second, though China is tough on the crypto industry, other governments like Japan, Korea and some small countries are friendlier. This makes investors optimistic about bitcoin’s future. Third, as more merchants accept bitcoin and big enterprises support the blockchain technology, users hold the belief that bitcoin will become a mainstream currency.
Uncertainties Hanging Over Bitcoin
The documentary ended with some big question marks regarding bitcoin.
Will bitcoin remain decentralized? Wan Zhe explained that mining has become centralized as top mining pools and miners are all based in China. And as individual mining is not so profitable, bitcoin mining might be monopolized by some giant companies in the future. Will users still support it if decentralization were weakened?
Will bitcoin evolve into a global currency? Though bitcoin itself is not a bubble, but it contains many bubbles, which makes it far less competitive to fiat money. Li Cangyu noted that the issuance of a national currency is a symbol of sovereignty and economic decision-making freedom. He believes that no governments will give up these to use bitcoin.
When will the bitcoin price crash? In the 1720s, Isaac Newton lost 20,000 pounds due to his speculation in the South Sea Company stock. He initially invested around £3,500 and sold out when he doubled his money. But he was induced to get back into the market at the height of the bubble. Later Newton said: “I can calculate the motions of heavenly bodies, but not the madness of people.”
Li Cangyu cited Isaac Newton’s story to warn bitcoin investors that nobody knows who will be the last participnats. “They think they are on a sure thing only to have it blow up.”