\'\'Why China\'s Ban On Bitcoin May Be Temporary\'\' in your opinion summaries t
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Question
''Why China's Ban On Bitcoin May Be Temporary'' in your opinion summaries the article.
China's ban on Bitcoin and other cryptocurrencies may be temporary, to appease international agencies and hardcore communist members ahead of the upcoming Communist Party convention.China's big government and banks cannot tolerate Bitcoin. It threatens their very existence, as it was previously written in a piece here.That's in the long term, though, when Bitcoin has the potential to replace the yuan in everyday transactions, and as a monetary asset.At present and in the immediate future, however, the size of the Bitcoin economy is far too small to be a real threat to the Beijing government and the banking system it owns and manages.That’s why something else must be at play behind the Bitcoin ban. Like an effort by Beijing to demonstrate to international agencies, such as S&P Global, that it is in good control of the financial system and the credit conditions of the country.
If that was their aim, it didn't work. S&P Global downgraded China one notch last week.
Then there's the upcoming 19th Communist Party Convention, where the party leadership will be grilled by hardcore members on any innovation that threatens the party’s grip on the economy.Actually, this isn't the first time Beijing is going after innovations that threaten that. Back in 2011, a few months before the 18th Communist Party Convention, the party leadership at that time went after a controversial Chinese corporate structure, Variable Interest Entity (VIE). This structure had allowed Chinese companies to list their shares in US exchanges through “reverse mergers”—a strategy that drew the scrutiny of US regulators, due to a string of accounting irregularities among these companies.
Explanation / Answer
Bitcoins are crypto currency that none of the governments including China want as it threatens and challenges the traditional banking channels and the control governments have. Chinese government have therefore banned Bitcoins.
However, it is said that this ban is only temporary and is to appease international agencies such as S & P Global, International Monetary Fund (IMF) and World Bank who do not want Bitcoin phenomena to spread . Besides, the government does not want to take on the hardcore communist leaders in the upcoming communist party convention by allowing Bitcoin transaction which goes directly against the communist ideology of state control in all aspects of governance including banking. The Bitcoins threaten the formal banking channels of China.
The critics though say that this ban is only temporary since Bitcoin economy is too small at present and also not likely to grow to any significant levels in the foreseeable future to cause any concern to Chinese banking channels.
There is also a precedent to this wherein the Chinese government just before the 18 th Communist Party convention had taken action against Variable Interest Entity (VIE), another innovative attempt that threatened government channels as it allowed Chinese companies to list their shares in US exchanges using "reverse mergers".
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