Bitcoin hit a 3-year high of $830 today. The rise in the value of the digital currency has been attributed mainly to capital flight from China by many financial analysts and cryptocurrency experts.
At press time, bitcoin is trading on American & European exchanges around $820 per coin, but the digital currency is trading with a twenty dollar premium - ¥5846 per bitcoin ($842) - on Chinese exchanges. The poor performance on the yuan over the past three years - which has devalued about 15% against the U.S. dollar since the start of 2014 - has spurred an increasing drove of Chinese investors to look to bitcoin as a way to preserve purchasing power.
During the same 3-year period, Bitcoin has appreciated almost 24% against the yuan!
Chinese financial regulators have been trying to figure out ways to prevent capital flight via bitcoin since November of this year. Regulators began to notice that bitcoin-savvy Chinese were buying up bitcoin on local exchanges and then selling the acquired bitcoin on foreign marketplaces, thus circumventing existing cross-border fund flow limits, according to a Bloomberg report.
Yesterday, financial authorities in the Philippines echoed the Chinese government’s sentiments regarding bitcoin’s role in the remittance industry. In an interview in Manila, Nestor Espenilla, deputy governor at Bangko Sentral ng Pilipinas, said the volume of transactions involving cryptocurrencies is “rising very quickly” due to the cost-effective and speedy nature of the technology.
Espenilla also explained that more strict regulations may be needed to protect consumers and prevent money laundering from taking place, “We are studying putting virtual currency exchange operators under a more formal regulatory framework,” he said.
The Philippine central bank estimates that turnover in the digital currency space in the country now stands at $2 million on a monthly basis.
The Trump Effect:
Bitcoin’s meteoric price rise has been mainly chalked up to Chinese capital flight, but much less attention has been given to the many pro-bitcoin entrepreneurs, politicians and businessmen in the upcoming Trump administration; billionaire tech veteran and BitPay investor, Peter Thiel, is part of Trump’s advisory board; Republican Congressman Mick Mulvaney, an ardent supporter of digital currencies and blockchain technology, was nominated to budget director by President-elect Donald Trump.