There is no doubt that China and its huge economy has had a tremendous effect on Bitcoin and its price fluctuations. On the other side of the coin, we also know that the Chinese are accustomed to testing their government and news came out earlier this week that an organization similar to the Bitcoin Foundation is taking shape in China.

The new organization dubbed the ‘Bitcoin Development Foundation’ was proposed by Ryan Xu on November 8, 2014 and posted on Yibite.com. The proposal was aimed at the Bitcoin community and covers five points:

1. The Chinese Bitcoin Industry is still in an early stage, companies in the space need support.

2. The Chinese Bitcoin community lacks solidarity. There needs to be more people who are dedicated to the development of the community.

3. The Chinese Bitcoin community has little voice in the mainstream media, which is dominated by negative news and commentary.

4. There was little communication between the Chinese Bitcoin community and relevant organizations. Communication with government and businesses needs to be strengthened.

The response did not appear to be as strong as Xu expected though and this might not be a big surprise. China was home to some of world's busiest Bitcoin trading exchanges until the People's Bank of China (PBOC) issued a warning for all financial institutions to avoid the currency, which caused an immediate 25% price drop in Bitcoin value a year ago.

The move is certain to be seen as a challenge to the PBOC, which has been decidedly unfriendly toward virtual currencies. It might be that Xu has a fundamental lack of understanding of China´s attitude regarding Bitcoin. Canadian born financial technology expert and owner of the Shanghai-based consulting firm Kapronasia, Zennon Kapron recently covered the issue in his book, “Chomping at the Bitcoin” that was published in late 2013. Kapron told one interviewer:

“We started covering Bitcoin in China around June of last year and so saw the massive run-up in Bitcoin price, the regulations, and then the subsequent fall in value. In our research, we met and talked with a number of industry people who had really interesting stories about how they had been involved with speculation, mining or actually accepting Bitcoin.”

Kapron explained that China has very strict policies about how much money its citizens can move in and out of the country each year and while they have increased it recently it is still capped at US$50,000. There were many people who believed that investors would use Bitcoin to skirt these regulations but Kapron said that the number of wealthy Chinese who would take the risk was probably exaggerated.

Xu is maintaining a positive attitude however, and says that he already onboarded five Chinese entrepreneurs and several volunteers adding that he will begin by conducting a study on the demographics of the Chinese Bitcoin owning population and their attitudes toward the currency.

It will be an uphill battle though, because registering a non-profit in China is a tedious venture, at best. The organization must first get a government agency to supervise the process and then it will be able to file its application for registration while fund raising of any kind is forbidden until the application is approved.

China may have a huge economy but government controls on money and other factors may make it an inhospitable environment for growing a Bitcoin infrastructure and Xu´s idea of an advocacy group could actually have the opposite effect if the Central Bank or the government views it as a challenge.

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