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
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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.