China Bans Bitcoin? Not so Fast

China banks about btc.
China banks about btc.

In recent days, the Bitcoin exchange rate has fallen yet again - by 200 US dollars, almost touching the 400-dollar mark per 1 crypto-coin. Once again, the drop was triggered by negative rumors from China, one of which was proven to be false while the remaining so far were unconfirmed. 

 
Rumors in the Wind 
 
On March 21 the Chinese information site, Sina Weibo, published an article stating that China is expected to completely ban all operations involving Bitcoins starting April 15, while the authorities have already issued this warning to exchanges. 
 
However, this information turned out to be disingenuous, as the Sina Weibo resource backtracked on its earlier statement, while Chinese authorities scrambled to announce: 
 
“In regards to the announcement by the Central Bank on the 18 March, allegedly containing information that the government is planning to ban all Bitcoin transactions, we affirm that the news presented by Sina Weibo is only half-true. While it is true that The National Bank of China will release a new document, it will not prohibit Bitcoin transactions, but only strengthen the vulnerabilities currently present in crypto-currency market regulations, which were not taken into account last time.” 
 
However, several days later, the Chinese Bitcoin exchange, BTC38, suspended conversion of Yuan into Bitcoin, citing political reasons for the move: 
 
“We have suspended the conversion of Yuan due to demands from the Central Bank. Meanwhile, the withdrawal of Yuan as well as the transfer and cash-out transactions of virtual currencies were not affected.” 
 
Unofficial sources likewise confirm that banks have received word regarding a ban on dealing with crypto-currency exchanges. This time around, the Central Bank of China has remained silent and has not commented on these events. 
 
Representatives from exchanges such as OKcoin, BTCChina, Huobi, and BTCTrade stated that they have not received any warnings from the government and have expressed doubt as to whether the aforementioned claims of an outright ban are true. 
 
The rumors of a ban on converting Yuan into Bitcoin but not vice versa were responsible for a sharp drop in the exchange rate. 
 
Jumping the Gun?
 
However, the fact remains the same - no one has received or seen any official statement from Chinese banks. Moreover, an announcement was already published on December 5 of the previous year forbidding all Chinese financial organizations from using Bitcoins in financial operations. 
 
China’s influence on crypto-currencies, nevertheless, remains fairly strong since it is the Chinese crypto-currency market, which has seen the largest trading volumes.
 
If China really does impose a ban on everything Bitcoin, then this would transfer most of its influence over the crypto-space to the US. This is due to the fact that the government’s stance on this issue there is relatively clear: at the end of March, the IRS has declared that Bitcoins are to be treated as property and decreed that owners of virtual currencies be subject to taxation. In fact, it is in the US where many states have shown the most loyalty towards Bitcoin in comparison to other countries.
 
Ambivalence and indecision related to the issue of crypto-currency regulation by governments is what gives birth to the majority of these rumors, and considering the far-reaching influence of the Chinese market segment, this can result in knee-jerk reactions from the Bitcoin community and the general public. 
 
Blessing in Disguise 
 
Until Bitcoin finally reaches the consciousness of the masses, any negative rumors or news will have a strong influence on its price. Any problems with exchanges, especially with the deposit and withdrawal of funds, will be painfully received by the public, even if the actual problems are just minor technical bugs. 
 
People are fearful of becoming dependent on still relatively unknown crypto-currencies while the Bitcoin price heavily depends on the opinion of these very people since it is precisely the public’s faith in crypto-currencies that influences the price. Thus, the result of a complete ban in China may actually be counter intuitive in the long run much like the collapse of Mt.Gox with the removal of its negative influence; after the initial drop occurs, the price could then recover to its previous levels with increased stability. 
 
All that is left now is to wait until the April 15, when, according to rumors, we will see whether the Bitcoin ban prophecy will be realized. And if the rumors hold true, the exchange rate is still expected to return to its previous position.