China

China's War on Crypto

China sees the value in a digital currency, but only if the CCP has full control of it.

|

In El Salvador, you can now use crypto-currency to pay for your Big Mac. In Kazakhstan and Russia, crypto mining operations have taken off. In China, however, the Communist Party is bent on destroying every form of cryptocurrency except a still-to-be-developed digital yuan that isn't really a cryptocurrency at all.

The Chinese government has spent years enacting regulations designed to thwart the enthusiastic adoption of cryptocurrency on the mainland. But a new regulatory action announced on September 15 is different, says Karman Lucero, a fellow at Yale Law School's Paul Tsai China Center, because its language is "somewhat scarily broad."

The regulatory notice promised to shut down both cryptocurrency mining—a process through which computers around the world maintain and secure the network—and foreign cryptocurrency exchanges. Domestic exchanges have been illegal in China since 2017, and the Chinese Communist Party (CCP) has long indicated its hostility to crypto. So it's not exactly shocking that the government is getting more aggressive. But the new rule's language is vague and hard to parse.

"One reason this is potentially different," Lucero says, "is the actors that are involved in this most recent crackdown language." The new regulations will be enforced by "the most powerful regulators with the most clout," who "can force people to change their behavior or lock them up for violating certain rules." The Ministry of Public Security is mentioned multiple times, Lucero says, and so is the term public order, "one of those typical clauses you'll see in Chinese law" that "gives the government a good amount of leeway to come in and enforce the law in whatever way suits their interests."

Years ago, China had a thriving mining scene, measured via the global hash rate, which conveys the computing power used to extract cryptocurrency. As crypto's liberatory potential was being realized around the world, an estimated 60 percent to 70 percent of global cryptocurrency was produced in China each year from 2017 to early 2020.

Now China sees the value in a digital currency, but only if the CCP has full control of it: The new regulations allow for a CCP-issued digital yuan, currently in development, that would "give Beijing power to track spending in real time," according to The Wall Street Journal. Instead of the privacy promised by bitcoin and smaller, more radically anonymous cryptocurrencies, a digital yuan would empower China's authoritarian regime to surveil transaction amounts, senders, and recipients.

Some international observers have suggested that the clampdown is due to the high energy cost of crypto undermining China's ambitious clean energy goals. But controlling markets was a CCP priority long before the party cared about China's carbon footprint.

The government is also working to stifle Big Tech companies by targeting them with strict privacy laws ostensibly designed to protect consumer data from private firms (but not from state agents) and piling new regulations on ride-sharing and messaging platforms. Late last year, the Chinese state sabotaged the initial public offering of Ant Group, a finance giant helmed by Jack Ma, China's equivalent of a Silicon Valley billionaire.

China's grand plan remains shrouded in secrecy. But it appears to be driven by the CCP's insatiable appetite for control over the economy and its insistence that government policy should determine private investment. As it has made clear time and again over many decades, the party is hostile to sharing power, even if—perhaps especially if—Chinese consumers find the proposition appealing.

In contrast, America should be a place where these technologies can thrive. Unfortunately, many American politicians are mimicking the CCP on crypto and on tech industry oversight more broadly. President Joe Biden wants to appoint crypto foe Saule Omarova as currency comptroller, and new Securities and Exchange Commission Chair Gary Gensler has promised to increase crypto oversight while simultaneously claiming the technology has little "long-term viability."

Good crypto policy is not quite as simple as "do the opposite of China." But it's also not a whole lot more complicated than that.

NEXT: Brickbat: Party Poopers

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. If China wants to control cryptocurrency they should just use Charles Oliver's commenting system over at the Brickbats, nobody can get past that shit. You'd think somebody might notice he's getting zero comments on his posts and wonder why he's suddenly so unpopular.

    1. You assume people at headquarters pay attention to the comments. Like they give a shit about "Fuck Joe Biden!" "You wanted this!" "Unreason is a commie rag!" and the rest of the brilliant commentary from the idiots on this forum.

      1. We all know the best form of discussion is muting.

    2. Start earning today from $600 to $754 easily by working online from home. Last month i have generate and received $19663 from this job by giving this only maximum 2 hours a day of my life. Easiest job in the world and earning from this job are just awesome.BVx Everybody can now get this job and start earning cash online right now by just follow instructions click on this site...

      For more info here.........VISIT HERE

  2. FJB and Let's go Brandon!!!!

  3. Since when has China cared about its carbon footprint and privacy for citizens?!?!?

    1. Start earning today from $600 to $754 easily by working online from home. Last month i have generate and received $19663 from this job by giving this only maximum 2 hours a day of my life. Easiest job in the world and earning from this job are just awesome.YJk Everybody can now get this job and start earning cash online right now by just follow instructions click on this site...

      For more info here...........Earn-Opportunities

  4. The CCP members know where they get their money, and it's from government control over commerce that restricts competition against CCP members. It's easy to make a lot of cash when you have a government created monopoly. Xi's problem, is that a lot of those CCP members are also cheating by doing things like borrowing lots of money they don't intend to pay back to the bank (which is a problem for them and Xi if it's a CCP controlled bank). in which case Xi institutes some form of discipline such as making Evergrand invest capital in the CCP banks from which it borrowed a lot. No doubt many CCP members are moving capital outside the country in hopes of escape before there's a run on the banks.

    Further, you see pronouncements from Chinese authorities that move markets, where I'll bet the CCP guys in the know have placed bets in the market on the expected outcome. That's another method they use to steal from the citizens.

    The smart move is to not invest in China, because they'll get your trade secrets and company DNA before they start a competing CCP owned business, and put yours out of business. I wouldn't loan them any money either.

    1. This is pretty much what I have observed as well.

      Xi is realizing basically what every Top Man realizes as they assume dictatorial control over the markets- you might be principled but the people enacting your policies have their own principles (if any). On top of that, everyone is fallible even if they are aligned on your vision.

      The housing market here in southern california is heavily driven by these rich chinese businessmen buying property here in order to get their capital out of China's economy. Crypto is a similar play.

      1. *looks into taking out loans from Chinese banks to buy BTC with*

  5. "China's grand plan remains shrouded in secrecy."

    Um, only for the stupid and willfully ignorant.

    1. Good point. Reason and all of their writers are stupid and willfully ignorant. Stupid, willfully ignorant Reason writers. What a bunch of morons, right?

      1. So drunk, So sad.

      2. You got it. Took you long enough.

  6. China sees the value in a digital currency, but only if the CCP has full control of it.

    In other words, the CCP is just like the politicians that Reason authors support (even while occasionally paying lip service to the theoretical benefits of cryptocurrencies).

  7. "the party is hostile to sharing power"

    I'm not convinced it's "the party" who isn't into sharing but it's pretty clear that Xi is a power hungry megalomaniacal narcissist. Not unlike Brandon actually save the incompetence.

  8. When did China start caring about its carbon footprint and residents' privacy?

  9. All digital currency is controlled by a button. A button that the "owners" of this phoney ass currency..., do not control. U don't play ball with whatever the current set of societal "rules" r. Then bye bye to "your" money. Control folks... That's the ONLY thing this is about. Stupid be as stupid does.
    The Phucko Knows

Please to post comments

Comments are closed.