China Could Push Bitcoin Up As Central Bank Tightens Its Capital Control On US Dollar
According to the latest report by South China Morning Post, Chinese banks have increased their scrutiny of foreign currency withdrawals. Amidst the ongoing nearly year-long US-China trade war, earlier this month, as part of tightening the country’s capital controls, the banks quietly reduced the amount of US dollars people are allowed to withdraw.
The issue came into the light when a viral video of a furious customer who was refused to withdraw dollar-denominated amount surfaced. Reportedly, the bank also insisted she could only withdraw her US dollar savings by converting them into the Chinese currency yuan.
A senior official from a state bank shared that the lenders are just following the latest instructions from the People’s Bank of China (POC), the central bank of the country.
The US dollar withdrawals have been cut to US$3,000 from US$5,000 while banks are required to keep a “watch list” of clients that makes frequent foreign exchange withdrawals.
SCMP further reported that yuan, China’s currency is non-convertible on the foreign exchange markets because the country keep its capital account closed. This allows the currency regulator of the central banks to maintain yuan’s exchange rate in a tighter range and “to stem capital flight.”
China Running Out Of US Dollars?
Recently, China had the biggest quarterly credit injection. Though the banks are flush with yuan loans, it is struggling with dollar-denominated assets. The WSJ has also reported that Bank of China, which had more net assets in dollar than any Chinese lender for many years, had $72 billion more in dollar liability ending 2018.
It is a possibility just like Turkey where the central bank has been borrowing digital assets from local banks to boost lira at the time of aggressive selling of its local currency, PBOC might be engaging in similar activities.
“The reason banks are so nervous is that China wants to closely monitor capital outflow against the backdrop of a prolonged trade war,” said Iris Pang, ING’s Greater China economist.
US banks say the strict capital controls and heavy govt. intervention in financial markets means Shanghai is not a global financial hub.
Bitcoin & Crypto In China
As the country tightens its capital controls, people might turn to Bitcoin in their pursuit for a censorship-resistant currency. And what’s better than a digital currency that is limited in supply, offers the benefits of the unconfiscatable, store of value and is the best investment option of 2019 than many traditional ones and if further on its way to next bull run.
Meanwhile, WeChat recently published a payment guideline announcing the banning of merchant accounts that are involved in Bitcoin trading. According to Binance CEO Changpeng Zhao, this is just a classic example of short term pain and long term gain.
“It is inconvenient for people short term, and they take a hit. But long term, it is precisely this type of restriction of freedom that will push people to use crypto. Not a bad thing.”