Chinese Merchants Jittery About Bitcoin In 2014
China was fueling the Bitcoin boom in recent months but the tide seems to have turned in merchant sentiment after authorities clamped down on the cryptocurrency. Kapronasia, a consultancy focusing on China’s financial services industry, has reported a drop in merchants accepting Bitcoin payments after the ruling by Chinese authorities in December 2013. Now it seems to have hit China’s answer to eBay – TaoBao.
For those who have not been in the loop, China has all but banned Bitcoin. It started with a warning about the volatility of Bitcoin – not an uncommon concern of many governments. Then it was an announcement that Chinese banks cannot partake in any Bitcoin business in anywhere. The final blow though was when the Chinese authorities clamped down on third party payment providers servicing Bitcoin exchanges in the country.
But it seems not to have stopped there. If it is not direct government interference then it is at the very least caution and possibly fear about staying with Bitcoin when the authorities are so against it.
TaoBao Wipes Hands Off Bitcoin
It is one thing not accepting Bitcoin payments from customers but TaoBao has gone a step further. It is not allowing its users to trade in Bitcoin or even buy and sell mining equipment and tutorials on Bitcoin mining. This move will no doubt make other merchants jittery about accepting Bitcoin when one of the largest online merchants in China is turning its back Bitcoin.
Remember that TaoBao is not a small business. Firstly, it is owned the Alibaba Group which also owns Alipay, a popular third-party payment provider. Secondly, TaoBao has more than 500 million registered users. The company’s move of shunning Bitcoin is due to government requirements as it stated on its website.
The decision will come into effect on January 14th, 2014. How long this will last remains to be seen. But the company is showing no mercy even on people who sell mining equipment and tutorials. So it is obviously serious about complying with government policy on the cryptocurrency and not taking any chances with related matters.
Shakeup Of Bitcoin Prices
As would be expected, the announcement had an effect on Bitcoin prices. Major Chinese Bitcoin exchanges showed a 10% drop in BTC prices within hours. Although there was some recovery, there is no doubt that there is apprehension in the market. The noose is tightening and thriving businesses do not want to be compromised by partaking in the Bitcoin trade now.
The knock on effect though is more worrying. It is unlikely that any Chinese merchant will now want to pursue the Bitcoin payment option if they have not done so already. It is a significant step back for Chinese Bitcoiners who probably hoped that big business will not bow to government warnings and actions.
This comes at a time when other Asian countries are getting tough on Bitcoin. But none are as influential as China when it comes to Bitcoin. We have seen how the Chinese shakeups of recent times almost decimated Bitcoin prices within hours and days. It is unfortunate to arise now, just when Bitcoin prices were recovering and crossed the $1,000 barrier again since last year.