SHANGHAI -- On Jan. 6, a leaked photograph of an official notice from China's internet finance regulator began to circulate on Twitter. The statement, released by the authorities two days earlier, told local governments to stop subsidizing companies that create new bitcoin, the digital currency, and ensure they make "orderly exits" from the market.
To those outside the opaque world of cryptocurrencies, it appeared to be little more than a routine request from China's sprawling bureaucracy. But inside the bitcoin community, including the investors who had piled in as its value skyrocketed in 2017, the message was alarming.
How far the Chinese authorities, who have already banned the use of bitcoin and so-called initial coin offerings, will extend their crackdown on the mining industry is yet to be seen. But it is clear that Beijing is aware of the importance of bitcoin's underlying technology, known as blockchain, and its potential to disrupt the worlds of banking, insurance and securities trading.
"Whenever I talk to them, regulators say they encourage development of blockchain-based technologies in the country," said Kevin Guo, co-founder and co-chairman of Dianrong, a Shanghai-based peer-to-peer loan startup.
China is hardly alone in taking steps to control bitcoin and its peers. French and German finance ministers said in mid-January that they would propose a global regulatory framework on cryptocurrencies at a G-20 meeting in March. South Korea's Financial Services Commission, perhaps alarmed by the "kimchi premium" in the country's cryptocurrency markets, banned anonymous cryptocurrency trading from Jan. 30 by enforcing a "know your customer" requirement at banks. Even regulators in Japan, who have taken a more welcoming approach to the technology, were forced to launch an industrywide security check following the sudden $500 million hack of cryptocurrency exchange Coincheck in January.
