China Could Trigger the Next Bitcoin Supercycle: What's Stopping It?
Key Summary
Former UBS banker Joseph Chee suggests China could trigger the next Bitcoin supercycle if Beijing allows its citizens to trade cryptocurrencies under tight controls. Chee notes that Hong Kong is being used as a testing ground for crypto regulations, and officials are using think tanks and academics to closely follow technology developments. However, two hurdles need to be overcome before trading can resume: understanding the market and managing capital flight, which is restricted by China's capital controls. The country's internal pressure, including record bank closures and bad loans, may prompt Beijing to reconsider its stance on crypto trading.
China's Crypto Regulatory Landscape
The People's Bank of China (PBOC) and seven other agencies restated their ban on crypto trading in February, keeping stablecoins behind prior government approval. However, former UBS banker Joseph Chee believes that Beijing may eventually ease its controls, paving the way for a potential Bitcoin supercycle.
Why China May Reopen Crypto Trading
According to Chee, two main hurdles need to be overcome before trading can resume: understanding the market and managing capital flight. The country's capital controls restrict outflows, which could be a major obstacle to reopening crypto trading.
Current Developments in Hong Kong
Hong Kong is being used as a testing ground for crypto regulations, with the government and Securities and Futures Commission (SFC) planning to introduce a bill this year licensing crypto dealers, custodians, advisers, and fund managers. Two bank-backed stablecoin issuers have been licensed in the city, and the first Hong Kong stablecoin went live in August. However, Beijing has announced no plan to extend these regulations to the mainland.