Zennon Kapron, a China financial expert and author of ‘Chomping at the Bitcoin’ gave a comprehensive interview to the media wherein he admitted that the virtual currency poses too much of a financial risk for Chinese regulators at present and this is a reason that they are apprehensive.
Responding to a question about PBOC’s claims that the digital currency carries unacceptable risk, he said that individual Chinese nationals are allowed to convert up to US$50,000 currency every year to take out of the country and invest how they see fit. He added that in terms of the capital control, whilst that could be a risk he didn’t see that as being a primary risk.
According to Kapron the problem with Bitcoin is that it introduces unnecessary systemic risk. Thus, in his view as the government pushes forward with reforms the financial industry is already facing a number of challenges and headwinds in terms of a shadow banking industry. This is why the Chinese authorities are worried about it.
In his opinion, decreasing deposits at the state owned banks and increased competitive pressures from both the domestic and foreign banks coming into the market is another concern. He also talked about the future of the digital currency in China in the next couple of years and how he looks at the issue.
Bitcoin Mining is being done in Large Scale in South China Says Kapron
Kapron in his conversation said that he thinks Bitcoin exchanges will continue to exist in China and a few of these exchanges have external funding and so they need to find a business model to move forward with. Despite the fact that there have been warnings issued by the national bank authorities, Bitcoin transactions are going unabatedly.
With the People’s Bank of China (PBOC) regulations a lot of the traditional business of using Bitcoins to buy goods or services has been cut out of the market as well as the ability of Bitcoin exchanges to fund directly from bank accounts. He believes that a lot of those exchanges are looking at opening US dollar businesses offshore and expanding internationally.
China is also emerging as a leading hub for Bitcoin mining and according to Kapron there is a huge concentration of Bitcoin mining equipment manufacturers and actual mining farms in the South of the country. According to him, the Bitcoin miners will continue because mining isn’t strictly illegal in China and very difficult to detect as well.
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