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15 Nov, 2013 15:31

China's 'boundless' bitcoin boom is driven by savings ethics

China's 'boundless' bitcoin boom is driven by savings ethics

The opportunities for Bitcoin in China are “boundless” as the Chinese, famous for their big saving, are now using the cryptocurrency to save and invest, according to the co-founder of country’s largest exchange.

"The main reason why Bitcoin has become big in China is because Chinese people are savers, and more people are seeing Bitcoin as a way to store and invest their money," Linke Yang, vice president of BTC China, China’s largest Bitcoin exchange founded in 2011, told AFP at a conference in Singapore.

Famous for currency manipulation, investors wonder if the Chinese government will step in and restrict Bitcoin trading. The yuan is under strict government controls to keep economic risk low and control flow in and out of the borders.

So far, virtual currencies are banned in online and gambling sites in China, because of the dangers of anonymity.

Chinese demand has widely been cited as a main driver in Bitcoin’s increasing value. At the time of publication, the e-money was trading at its all-time high of $451.20 (2,479 yuan). Access to Bitcoin trade on BTC China is currently limited to Chinese traders.

The platform has $709,038.04 in Bitcoins.

"The 'yuppies', or upper middle-class in China will drive demand for Bitcoin especially with the amazing uptake of e-commerce going on now," Zennon Kapron, director of a Shanghai-based a financial consulting firm, told AFP.

The extremely volatile virtual currency keeps rising, and has been on an extraordinary winning streak, with BTC China prices already up 100 percent since late October.

Yang thinks Bitcoin gained in popularity following a recent broadcast of a documentary on state-run China Central Television.

China has been especially optimistic about the new digital currency, which if it becomes a norm in currencies, could bypass banks and government-issued currencies.

Though it has no intrinsic value and isn’t backed by a government or bank, Bitcoin has become a hot commodity to trade, similar to gold as it’s a way to save and hedge against normal FOREX currencies.

BTC China, China’s leading exchange, recently surpassed Japan-based Mt. Gox in terms of global trading volume.
Since its inception in 2008 by a man using the alias “Satoshi Nakmoto”, Bitcoin has gone mainstream and can be used to buy coffee, pay for online dating services, and can even be retrieved from an ATM. According to Bitcoincharts, which follows the anonymous currency, there are nearly 12 million Bitcoins in circulation.

The re-emergence of the Silk Road, an illicit website that traffics drugs and is mostly powered by Bitcoin transactions, has prompted the US Senate to investigate the validity of the currency. 

On October 26, a Chinese bitcoin trading site suddenly shut down and up to $5 million in bitcoin disappeared.

"We focus on our own growth in China, and not on the negative news surrounding Bitcoin,” Yang told AFP.

On November 18 the Senate Homeland Security & Governmental Affairs Committee will scrutinize virtual currencies, including Bitcoin and hold a hearing entitled “Beyond Silk Road: Potential Risks, Threats and Promises of Virtual Currencies”.