China’s cryptocurrency ban could be a temporary move to appease international agencies and certain communist party members ahead of the upcoming Communist Party convention, according to Panos Mourdoukoutas, an economics author and professor at LIU Post in New York .
Mourdoukoutas observed that China’s government and major banks are threatened by bitcoin’s existence. The banking system stands to lose its relevance when bitcoin is able to replace the Chinese yuan for regular transactions and when the cryptocurrency becomes a money asset.In the near term, the bitcoin economy is too small to threaten Beijing and its banking system. Hence, another motivation is behind the ban, Mourdoukoutas noted, such as the government’s need to show international agencies like S&P Global that it controls the country’s financial system and credit conditions.
Had this been the government’s aim, however, it did not work as S&P downgraded China last week.
S&P downgraded China’s sovereign credit rating in a rebuke of Beijing’s recent regulatory fight to curb systemic risks. S&P triggered the downgrade after concluding that Beijing’s “de-risking” efforts aren’t moving fast enough to cool credit growth.S&P analysts continue to see corporate-sector credit at 9%, which is higher than the desired ratio. The U.S.-based credit rating agency said China’s deleveraging efforts are likely to be “much more gradual than we thought could have been the case early this year.”