On this episode of China Uncensored, is China gaming bitcoin? Hi, welcome to China Uncensored, I’m your host Chris Chappell. Bitcoin! The money of the future. Maybe. Or it could all crash and burn. Depends who you ask. For those of you unfamiliar with it, Bitcoin is a peer-to-peer cryptocurrency. Which is not how this guy pays you for dinner. Cryptocurrency uses cryptography to secure its transactions and to create more of the currency. Cryptography secures information in code, like the famous Enigma machines used by the Nazis during World War II. Nowadays, cryptography is done by computers using incredibly complex math. Which unlike the Enigma code, can’t be solved by Britain’s greatest minds, Sherlock Holmes and Elizabeth Swann. Modern cryptography lets Bitcoin operate independently from a central authority, like a government or a bank, because you don’t need a third party to validate the Bitcoin transaction. And transactions can be done anonymously. Bitcoin has been described as the world’s most democratic currency. So obviously it’s been thriving in— you guessed it— China. According to Coin Telegraph, “the majority of Bitcoin trading, estimated from 50 percent to 98 percent, takes place in China.” This creates a problem. In theory, Bitcoin can’t be controlled by any government. But in practice, the Chinese Communist Party can have a huge influence on the global price of Bitcoin. So if you own Bitcoin, well, the value of your money can be heavily influenced by the whims of the world’s largest authoritarian regime. Take that, democratic currency! Take what happened in 2013 as an example. In early September that year, one Bitcoin was worth around 100 US dollars. By late November, that price had skyrocketed to more than 1,000 dollars per Bitcoin. And then overnight, it came crashing down. China’s central bank, the People’s Bank of China, told financial institutions in China to suspend trading in Bitcoin because it “doesn’t have ‘real meaning’ and lacks legal protections.” Funny that those same things didn’t stop the Chinese regime from encouraging people to speculate in China’s stock markets. But back to Bitcoin. In two weeks, Bitcoin lost over half its value. It took a full year before the price bottomed out. Something similar happened again in February this year. The People’s Bank of China met with three of China’s biggest Bitcoin exchanges, BTC China, Huobi, and OKCoin. The exchanges then stopped Bitcoin withdrawals for four months. The exchanges recently lifted the ban, but during the suspension, the global price of Bitcoin dropped again, though not as much as in 2013. So why has the Chinese regime been targeting Bitcoin? Besides it being a democratic currency? There are a few reasons. First, Chinese people can use Bitcoin to get their money out of China. You see, the Chinese regime has limits on the amount of foreign currency people in China can buy— because they’re worried about rich Chinese people moving their money out and then fleeing the country. But Chinese investors can buy Bitcoin in China, and then later exchange that for foreign currency in any amount they want. Huge fortunes that might have been made through, I don’t know, corruption, could be safely stored out of reach of pesky Chinese investigators. And that was why China’s central bank started investigating Bitcoin exchanges back in February, and threatened to shut down exchanges that violated rules on “foreign exchange management, money laundering, and payment and settlement.” But it’s unclear how much money is actually being moved out of China through Bitcoin. Bitcoin transactions in China are not anonymous, since you have to link a Chinese bank card to your Bitcoin account. You could move a few hundred thousand yuan into Bitcoin, but larger amounts would attract attention. So why is there so much Bitcoin trading in China? Well, that brings us to the second reason the Chinese regime is so interested in Bitcoin. Earlier I mentioned people speculating in China’s stock markets, and since those markets have cooled down, guess where people are putting their money now? You see, in China, there’s not a lot of places people can invest their money. Which leads to things like real estate bubbles. Stock market bubbles. And, naturally, fish bladder bubbles. It’s like Chinese investors looked at the Dutch tulip bulb craze, and thought, what a great idea, but it needs more fish bladders. Putting your money in an online cryptocurrency stored on something called a blockchain that can do something called forking doesn’t seem so crazy now, does it? Hmmm…Bitcoin or fish bladders? Which will be the money of the future? Anyway, speculation, no matter the medium, has the same result. And many of the same things that led to China’s stock market collapse are now happening in China’s Bitcoin exchanges: People dipping in and out to make a quick buck, leading to wild market fluctuations, and risky margin trading. Which is to say, this will all end really well. One of the Bitcoin investors interviewed in this article even says he can’t lose money on Bitcoin the same way he did on the stock market, because Bitcoin’s not controlled by the Chinese regime. Uhhhh….about that. The third reason the Chinese Communist Party has been targeting Bitcoin is control. You see, the CCP is not out to kill Bitcoin— at least not right now. They just want to bend Bitcoin to their advantage. But first, let’s talk about Bitcoin mining. Simply put, people can run powerful computers to solve complex math problems that validate Bitcoin transactions– that’s the cryptography I was mentioning earlier– and they’re rewarded with Bitcoins. This is how new Bitcoins are created. But nowadays Bitcoin mining requires powerful computers, custom chips, and lots of electricity. And it turns out China is home to 50 to 70 percent of the world’s Bitcoin mining operations. The Chinese government could, of course, restrict Bitcoin mining, but it doesn’t. Quite the opposite. In many instances the government is actively supporting it. According to Bitcoin Magazine, major Bitcoin mines in China’s northwest are being given, “access to government-supported, low-cost wind and solar electricity.” Powering the computer servers is one of the biggest financial challenges to Bitcoin mining. The People’s Bank of China could also be showing favor to Bitcoin. A senior banking official just recently published a detailed editorial about all the advantages Bitcoin can offer China. Because if you look at it, since China can have a huge impact on the price of Bitcoin, why wouldn’t the Chinese regime use its influence over the market to its advantage? Here’s what the CCP could do. Let’s say the Bank of China makes it known they’ll be investigating some major Bitcoin exchange. Prices plummet. Chinese officials then buy up Bitcoin while the market is down. And then they release a statement that the Chinese government supports Bitcoin, and the market skyrockets. Again, that’s hypothetical, but very possible. Following China’s investigation earlier this year, the price of Bitcoin, “more than [doubled] to about $2,900 over the last three months.” And on top of that, the Chinese regime has the ultimate Sword of Damocles over all Bitcoin operations in China. According to CNN, “Chinese regulators could clamp down on
bitcoin by classifying it as a foreign currency, which would effectively limit individual Bitcoin transactions to $50,000 per year.” So a lot of people feel they should buy as much Bitcoin as they can right now. Which will, of course, further drive up the
price. Possibly making some officials very rich. Of course, China is not the only influence on the Bitcoin market, and there are also new cryptocurrencies like Ethereum, that are gaining market share. But the Chinese regime still has a pretty big effect on the global price of Bitcoin. Which makes me think, maybe the fish bladder market is the way to go. What do you think? Leave your comments below. And as you know, China Uncensored is made possible almost entirely through viewer contributions and support. A lot of viewers have asked us to set up a Bitcoin address for China Uncensored— and now we have. The money you contribute will go to improving the show, like hiring staff, buying props, renting studio equipment, investing in fish bladders and so on. The link to our Bitcoin page and address is
below. And after all, if you’re putting Bitcoins into our hands, it won’t be in the hands of the Chinese Communist Party. Once again, I’m your host, Chris Chappell. See you next time.