What will the government do to bitcoin?Short answer: it will not declare a war against bitcoin but cripple bitcoin operations in China.
The recent 31st Jan ban is resulted in a typical Chinese way, a funny way to many of you. As reported in Chinese (source forgotten), the central bank organized a meeting with online financial service providers, and say: "we (and the government - central bank belongs to the government here) are concerned, please tell us what you are going to do to make sure our bosses are not worried' and the result is the 31th Jan ban. It is like a result of a negotiation, but unlike business negotions where people reach agreement through compromise, this one is a competition of obiedience, of willingly doing something without having to be ordered so, of good understanding of the government's intention. And what is government's intention? The government representatives perhaps had no intention from their bosses at all, except that they should see players docile (and they did). They want players evaluate the situation and do the right thing, despite they lack the knowledge of what is the right thing to do. Taobao's ban of 'anything related to bitcoin' was not required - Central Bank's opinion hasn't changed from considering bitcoin a tradable commodity yet - but a powerful man like Ma Yun wouldn't run away from this little docility contest, knowing the government reward most-docile players with a listening ear and free hand.
So no itention of our government is revealed through the meeting, only the intention of online e-commerce players are revealed: they intend to follow the no-ideaness of the government.
Although we do not know the government's intenion at the moment, it is more or less predictable in the future. Our government is not skillful at deliverying the right message to financial market. Its messasge towards bitcoin is now mis-interprated as "strong opression", like it was mis-interprated before. The market follows and shifted away from bitcoin. This has the effect of driving away the good money (bitcoin) and introducing the bad money (Chinese imitation coins, see
my last post). Following the crash of a few bad moneies, the government identify crypto-currency as weed ('weed' is used in my
other post, read it for culture background), and strongly oppress it. But, gov't won't declear a total war against Bitcoin - by listing something as enemy and not being able to crash it, goverment risk losing authority, and our government isn't sure about this "enimy" yet - when they do, they find it difficult to kill an idea. Anything that makes it insignificant, e.g. crippling the trade or forcing it into black market, would be their choice of action.
Bobby Lee of BTC China is trying two things. First is to stablize the market to buy some time for the government to make their decision (when the government is probably not least concerned with that!), and second is to do everything appear docile, hopefully more docile than online e-commerce companies, by self-regulating without regulation rules: "we are not bad seeds, let us grow, we will show that we are not weed". He for example introduced liquidity rebate for both purposes. He won't be successful on the first goal, because Huobi and dozens of Chinese-imitation-coins are doing the opposite, using the opportunity to take turf and keep it burning high (huobi means "fire coin"). He probably will achieve the second goal, and he hopes huobi's odorous marketing becames its bane, bad enough to make huobi insignificant but not that bad to beget a procrustean rule that cuts himself too.
So when will the government make a new decision? It probably is made. Recent news towards bitcoin are hasherer and hasher, as 5th Dec ban interpreated each time stricter than before. This often happen when a higher leader makes a different decision. I am not sure if it is easy to understand for western audience, so I will go through the trouble this time and explain with an mini drama I just improvised:
Improvised mini-drama
Officer: You can take the poverty data for your study, once you have a result, let us know, we want to have such academic output to our knowledge.
Poverty Researcher: Yes.
Another day;
Researcher: The data was missing for the last a few years. Can I get it?
Officer: I cannot give you any more data, because as I said, you can have limited data for your study.
Researcher: But yesterday you said I can take the poverty data.
Offier: Yes, I said you can take 'THE' proverty data, which is what I gave you already.
Another day;
Officer: I must explain that you are not allowed to publish your finding.
Researcher: Why?
Officer: The data is within the poverty management office, so is the result. I explained this in the very first time you asked for it, that we want the result. We will decide if we publish it. I informed your research institution that this project is strictly within our office and they replied they will follow whatever rules and regulation that we improvise.
Another day;
Officer: I am sorry to let you know, the data is fake.
Researcher: What???
Officcer: You heard it right. It was collected by an officer who is no longer on the post. His method have faults and we ordered the survey to be redone in the same years. What you have is the first batch of data, and we cannot offer you the correct data. As I well-explained the first time you asked for the data, I am not authorized to release any data I am managing. I cannot do anything more and this project ceases.
What really happened is each time a higher level offier came and rewrite the decision, but that higher level officier decided not to meet you in person. You may think it is a joke if it is put on TV news, but I was having fun for lots of years watching ths drama from TV News channel. For a news reader with good memory, news reading is rather entertaining.
So is the same thing happening? Is the current news brooding a new decision that overwrites the previous one? I am speculating by saying yes, but even if it is not, it merely put more time between now and a disappointing new government action.
