Just under two weeks ago, South Korea activated regulations that would dramatically reduce the footprint of foreign and domestic cryptocurrency exchanges catering to its citizenry. Lest anyone thought this behavior unnecessarily heavy-handed, along came China to demonstrate what true authoritarianism looks like.
All cryptocurrency activity is now illegal within its borders, Beijing announced. But unlike South Korea’s crypto reckoning, which left a narrow, corkscrewed path for exchanges who wished to be deemed compliant and legal, China unequivocally shut the door on every starry-eyed dreamer hoping that unsanctioned virtual assets could coexist with the yuan. There can be no path to compliance when the destination is non-compliant.
Certainly, the writing was on the wall. While the government of every global superpower initially treated, and often still regards, bitcoin as an unwelcome dinner guest, China stood out in its hostility. Over the last decade, one finger at a time, China pried cryptocurrency’s tenuous hold off its sovereign ledge, most recently culminating in the scuttling of cryptocurrency mining facilities in May 2021.
From a political or philosophical viewpoint, maybe this ban was inevitable. Pardon the obvious, but one real outcome of a decentralized currency is… decentralized currency. Could such an aim ever be compatible with the aims of a centrally controlled regime that is practically defined by its resistance to free movement of ideas, political power, and people? It’s well established that China has in the past manipulated its own currency for various trade advantages in the global marketplace. It’s also a fair bet that China’s ban on crypto has been coupled with advocacy of their own digital yuan precisely because the regime would gain oversight of all monetary movement through a trackable currency.
A national currency is a critical thing. Like national culture, language, and borders, it comprises a part of sovereignty. Humankind has protected these things for millennia. How governments handle the proliferation of digital assets will likely be reflective of their philosophy towards humanity itself. Some, seeing inevitability in crypto’s rise, may reluctantly acquiesce and furiously work on the particulars of a fiat/crypto coexistence. Others, like China, would rather view decentralized exchange and recordkeeping as an existential threat, akin to conventional, shoreline invasion.
There may be a paper thin, silver lining to China’s decree; valid clinical studies require both a treatment group and a placebo group. Perhaps this will result in a teaching moment for the rest of the world. China is positioning itself as one group within this massive experiment. Everyone would do well to watch with an observational mind and witness what unfolds.
