By Yasin Ebrahim
Investing.com – Bitcoin fell Friday as China vowed to crackdown on cryptocurrency once again, but Beijing’s ‘whack-a-mole’ approach to crypto regulation is wearing thin and unlikely to severely dent broader demand just as Western adoption is on the up and up.
BTC/USD fell 4% to 42,971, but recovered some losses after a dipping below $40,000.
China’s central bank deemed all digital currency activities illegal and vowed to crack down on the market. But that doesn’t imply that there will be “ban on holding positions in cryptocurrencies,” Seamus Donoghue, VP of Strategic Alliances at METACO told Investing.com in an interview on Friday.
While China’s approach to cryptocurrency regulation “can have a good deal of success, it's a little bit of a whack a mole,” according to Donoghue.
“China's is going to be less relevant ... as the trend of Western adoption - given all the banks and other institutions building blockchain capabilities - is increasing dramatically and rapidly,” Donoghue added, pointing to a similar change seen recently in the cryptocurrency mining.
A potential exodus of crypto investors in China had sent shockwaves throughout the industry, as investors fretted about a potential hit to demand, but Beijing’s sway over crypto’s markets in terms of adoption isn’t as significant as it once was.
“Last year, China ranked fourth on our global adoption index while the U.S. ranked sixth. This year, the U.S. ranks eighth while China ranks 13, “ according to research published by Chainalysis.
China has suggested a clamp down on illegal activity is at the heart of its decision to step up regulation on cryptos .But Beijing’s regulatory efforts on crypto could form part of a strategy to lessen the competition amid plans to launch its very own digital currency.
“China's has been trialing and is in the process of launching their own digital currency,” Donoghue said. “That could be one of the reasons for them to focus on minimizing the potential penetration of virtual currencies.”
It wouldn’t be the first time that China has stepped up the regulatory heat on foreign tech - that threatens to gain a foothold in its markets - to buy time for the launch of its own rival domestic firms.
Looking at China’s historical reaction to overseas tech, “they've banned Facebook (NASDAQ:FB), Google (NASDAQ:GOOGL), WhatsApp … all to launch their own their own domestic versions,” Donoghue added. “Now, they're banning crypto to launch their own domestic currency.”