Bitcoin's China problem: the government wants it gone, but entrepreneurs won't let it die

The Chinese government has built up a draconian regulatory system over the past decade to root out bitcoin trading and mining in the country, regarding the digital currency as a threat to the country’s financial stability.

A young Chinese entrepreneur offered to sell shares in a company that would produce hardware with chips dedicated to mining bitcoin and pay out dividends based on its earnings in August 2012, according to a post on the online forum BitcoinTalk.

Jiang Xinyu, also known as Friedcat on the forum, was one of the first people in the world to promote such an idea through his company ASICMiner, which used the acronym for application-specific integrated circuits. Accusations of fraud arose later when people claimed not to have received their payments or equipment, and the company went bankrupt.

The concept, however, persisted, and China's bitcoin mining industry flourished as a byproduct of the nation's status as the "world's factory." This was when the idea of bitcoin began to gain traction in China, as the nation became the top producer not only of mining equipment but also of bitcoin itself thanks to its affordable electricity.

“The idea of decentralised money never really got a lot of traction in China,” said Leonhard Weese, who founded the Bitcoin Association of Hong Kong and now serves as technical content lead of Lightning Labs in Vancouver. “But the idea of decentralised crowdfunding and start-ups was very attractive in China. I think people in China were just much more interested in gambling on future start-ups than speculating on what the money of the future looks like.”

The Chinese government has established a stringent regulatory framework over the past ten years to eliminate bitcoin trading and mining in the nation, viewing the digital currency as a danger to its financial system. Trump, on the other hand, campaigned on a crypto-friendly platform, drawing both the broader crypto sector and bitcoin true believers who view the digital asset as the future of money. Among other things, Trump promised on the campaign trail to establish a "strategic bitcoin reserve."