The majority of Bitcoin exchanges happen in China's currency, the yuan, but no one's quite sure why.
One theory is that people see it as a way to evade the country's rules restricting money flowing out of the country. But it may be simpler than that — Bitcoin might be popular in China simply because everyone's talking about it.
Jerry Brito, a scholar at the Mercatus Institute, said that it might have started with a CCTV documentary on Bitcoin that aired all over the country. In the U.S., this is a common pattern: The media reports on Bitcoin, either its usefulness in black-market transactions or its skyrocketing price, people become more interested in it, buy some, the price goes up. Rinse and repeat.
Bitcoin fever is China is so strong, there's even a magazine called BTCMAN. And Chinese social media, especially the Twitter-like service Weibo, is positively lousy with everyone's opinion on the digital cryptocurrency.
Bitcoin has even spawned its own publications, like those that have popped up in the U.S.
China's embrace of Bitcion hit a hurdle when the county's central bank, the People's Bank of China, said Thursday that banks and other financial institutions could not trade in the digital currency.
The price of Bitcoin on BTC China, the largest Bitcoin exchange in China and the world, was hovering at right below 7,000 yuan, or about $1,150 before the announcement, and then immediately crashed to 5,500 yuan, or about $910, before recovering to 6,150, or $1,010. The price bounced around again today, with reports that a music service operated by Baidu, the Chinese search engine, would no longer accept Bitcoin because of the volatility in price. It's now at 5,527 yuan, or $908.
And with the central bank coming out with restrictions on Bitcoin, China's libertarians had a totally measured reaction.
What the PBOC's new rules don't do is particularly interfere with individual trading in Bitcoin, converting renminbi to Bitcoin or the other way around, among individuals. It's this activity in Bitcoin exchanges that has driven Bitcion's remarkable rise in China, including the price of Bitcoin in renminbi having a premium over its price in dollars.
In a research note released before the new Chinese rules were announced, a team of Bank of America Merrill Lynch economists wrote, "China has also seen a sharp increase in Bitcoin activity and now accounts for a majority of transactions when broken down by currency."
Matthew Zeitlin is a business reporter for BuzzFeed News and is based in New York. Zeitlin reports on Wall Street and big banks.
Contact Matthew Zeitlin at firstname.lastname@example.org.
Comics Editor + Chinese-English Translator.
Contact Kevin Tang at kevin.tang+DONE@buzzfeed.com.
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