Weiwu notes the recent Caixin report that the PBoC is “angry” with banks and third-party payment processors, most of whom took no action to close bitcoin-related accounts prior to the still-unconfirmed April 15 “deadline.” Weiwu sees the report differently.
But actually the news was amusing. It’s amusing because PBOC criticised the Bank of China and China Merchants Bank for not closing Bitcoin trading accounts. This was an unusual action for a matter as small as Bitcoin, and it reveals an interesting issue about size in China. … Size issues are often overlooked by people from small countries (like the US). We have the highest population in the world. Our government has four major tiers (while western countries have only three). When we speak of a small city, we mean that it merely has 3 million residents.
Weiwu notes that the news is relevant because the PBoC attention to bitcoin, which is still an insignificantly tiny part of the Chinese economy, is completely disproportionate. “In China, when something happens, it affects other entities with similar magnitudes,” Weiwu said. “The latest news is amusing, because its effect skipped magnitudes.”
Given the scope of the actions by the PBoC, Weiwu tries to put the most recent actions by China’s banks in context.
Considering the magnitudes at work here, I never believed that some of the Chinese Bitcoin exchanges had the government support they needed to survive. You have someone in Shanghai government? He won’t be of any help when an order comes direct from PBOC. You have someone in PBOC? No chance, he won’t be interested in supporting a paltry Bitcoin exchange – and even if he is interested, it is actually difficult for him to help you. Think about holding a needle to help an ant to fight another ant. Or, considering the magnitudes at work in China, consider helping one bacteria to swallow another.
Weiwu believes that the Chinese banks have been relatively slow to enforce PBoC rules largely because none of them considered it a priority. While the PBoC is clearly interested in putting controls in place for what could eventually become a significant economic force, from the banks’ perspective the sum total of all bitcoin activity is barely worthy of notice.
The two banks’ leaders must be feeling silly and resentful, as PBOC passed the tiny, tiny, tiny issue of Bitcoin down to their level, when their everyday issues are magnitudes higher than the miniscule market cap of Bitcoin. PBOC never before issued a command as small as closing 15 start-up companies’ bank accounts. Each level must have attempted to pass down the order, but the chain of command broke somewhere – they have no experience in carrying out such small things, sent down from PBOC’s level. Should the banks check if exchanges have one or two companies? One or two accounts? Should the banks register as clients on the exchanges to get the account list? Should a blacklist be set up across banks? Bitcoin is tiny in the financial sense, but it is revolutionary in its essence. The banks are bowing to their master, asking for pardon whilst thinking the master a complete weirdo. PBOC, in a serious tone, has delivered this message: ‘Yes, I take this tiny, tiny, tiny issue seriously.’
As Weiwu notes, the PBoC found it “surprisingly difficult” to close the account of the 15 bitcoin exchanges doing business in the country, largely because the organization had no appropriate level staff to handle such a small-market issue. Instead, it had to bring in two of its second-highest-ranking officials to force the banks to take action. If it seems like the PBoC is overreacting to the threat posed by bitcoin, that may be because even the least regulatory action it can take is still hugely disproportionate.