Freedom for crypto? China opens payments market to foreigners

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There appears to be a seismic shift with regards to foreign investment in China since the mainland government, via the People’s Bank of China (PBOC), has suddenly decided to open up the Chinese market to foreign investors. This will allow foreign companies to enter into direct competition with local Chinese firms—a significant development which sees a sea of change in the Chinese economy.

This development will also have excellent implications for the further boosting of the cryptocurrency markets. In fact, the new head of the Chinese Central Bank, Yi Gang, said Bitcoin provides freedom to anyone who uses it. Analysts have seen these comments as positive for the emerging cryptocurrency industry, although the onset of regulation could provide some limitations with which cryptocurrency is traded.

PBOC, which carries monetary policies and regulates financial institutions in China, likes to keep tight reins on the domestic cryptocurrency sector. Recently, the Chinese central bank implemented tighter regulations on overseas digital currency trading, and even extended its so-called “Great Firewall” to ban domestic and international websites that cater to Chinese residents.

In a Medium post, analyst Wei Chun Chew expected that the Chinese government would still want to control cryptocurrency activity in the country, although it has been showing a positive approach towards blockchain technology.

“In summary, the Chinese government has shown a positive attitude towards blockchain technology despite its enforcement on cryptocurrency and mining operations. China wants to control cryptocurrency, and China will get control. The repeated enforcements by the regulators were meant to protect its citizens from the financial risk of cryptocurrencies and limit capital outflow,” according to Chew.

Currently, homegrown Chinese companies operate a complete monopoly over the financial and internet service markets. According to reports, tech giant Alibaba holds no less than 70% market share making it a multi trillion dollar company, while Tencent Pay has control over the other 30% of the market.

But with overseas companies to now be allowed to operate in China, that dominance might change quite quickly. Large financial and internet service companies, such as Jack Dorsey’s Square and the South Korean-based KakaoPay, could also be allowed to operate and take a share of the Chinese financial scene, which has over a billion potential customers. These foreign firms need to register with the PBOC and obtain licenses to start operating.

Speaking to Bloomberg, Hong Kong-based economist Iris Pang said, “The domestic market is quite saturated with very strong domestic players, and it is relatively hard for foreign companies to get a piece of the pie. But there is a chance for them to compete in the cross-border payment market.”