Dr Alessandro Arduino is the co-director of the Security & Crisis Management programme at the Shanghai Academy of Social Science (SASS) and was a visiting senior fellow with the China Programme at the S Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore.
In this article, Arduino addresses China’s role in the global digital currency markets and how domestic investors and regulators could impact its development. 2016 began in China with two sequential market crashes that forced the regulators to intervene in the Shanghai and Shenzhen stock exchanges. As they did in response to the stock bubble that burst in 2015, Chinese regulators intervened to organise a centrally planned recovery. Despite a stimulus of US$20bn that the People’s Bank of China (PBoC) pumped into the market during the 5th January market crash , the yuan kept weakening.
Gold, as the usual commodity of refuge for investors during uncertain times, started to gain momentum.
At the same time, the virtual currencies that employ heavy cryptography and blockchain technology, such as bitcoin, have increased in value thanks to Chinese investments. Cryptocurrencies and capital controls
Cryptocurrencies – bitcoin in primis – are poised to increase vulnerabilities and uncertainty in the Chinese economy during 2016.
The security concerns for China are a broad threat spectrum. The immediate one is associated with increased capital flight that relies on bitcoin as a tool to avoid strict Chinese capital controls.
Another concern is over the possible collapse of virtual Ponzi schemes , based on the promise of easy profits in virtual currencies, which are increasingly attracting a cross-section of Chinese society along with their savings.
The collapse of one of these virtual pyramid schemes, that take advantage of the grey area in the Chinese financial regulations, could start a domino effect that within a few hours could consume the […]
