The world’s biggest totalitarian regime just banned crypto, and here’s why the rest of the world should be paying attention.
At 5 years and counting in the Bitcoin space, I’ve been around a long time, comparatively – which is why it wasn’t a surprise to me to read that China had yet again decided to ban cryptocurrency ownership, transactions, and services for its 1.4 billion citizens.
At least once a year, the Chinese Central Bank has made similar announcements, but Chinese investors still had a major role in the growth of Bitcoin. While self-reported investment figures are difficult to find due to fear of government sanction, its estimated that the country’s citizens were responsible for 80% of Bitcoin’s trading volume in 2017, with high popularity among millennials seeking a path to the middle class.
This latest proclamation against Bitcoin, posted on the People’s Bank of China website, was unambiguous: “Virtual currency derivative transactions are all illegal financial activities and are strictly prohibited.” Additionally, the new rules said that overseas exchanges that service Chinese investors online are committing illegal activities, which will be a major challenge for these companies to comply with.
The Central Bank’s language is the harshest to date, and with the country’s eviction of Bitcoin miners and prosecution of 1,100 crypto investors for supposed money laundering earlier this year, it seems like Party leadership is getting more serious about cracking down on digital currencies. So why is China make such a major push against crypto this year?
While various reasons have been put forward, including China’s climate change targets and the upcoming launch of its digital yuan, I think the answer is more straightforward – China is a totalitarian, repressive regime that fears losing control of its citizens above all else, and Bitcoin provides a kind of freedom that dictatorship’s can’t withstand.
Bitcoin allows anyone, anywhere to store their wealth and transact free of government censorship and oversight. Financial freedom is the ultimate key to personal liberty. China wants to know every detail of its nationals’ lives so it can rank them, restrict them from economic activities, and control their lives via its dystopian social credit system.
“Cryptocurrency is such a powerful concept that it can almost overturn governments.”
– Charles Lee
In fact, spying is the cornerstone of why China is pushing so hard to launch its Central Bank issued digital currency. According to Yaya Fanusie from the Center for a New American Security thinktank, who published a shocking report on the digital yuan earlier this year, the government has found it challenging to get information about its people from major retailers and tech companies, and needed a solution that allowed for complete surveillance.
“The status quo is that the government has struggled to get the data from these companies, hence why you see the crackdown on fintech companies,” he said. And once China has this information, it becomes a critical part of its nightmarish Social Credit program, which builds profiles of citizens to gauge how supportive they are of the ruling regime, then punishes them if they disobey the Party.
Here are some of the ways that China attacks citizens if their Social Credit score is too low:
- Restricting access to the internet
- Banning from purchasing train tickets or flights
- Inability to qualify for loans
- Disallowing property ownership or renovations
- Sanctions against family and related businesses
- Restricting the ability to leave the country
This is George Orwell’s 1984 come to life – we’re watching it happen right in front of us, and it’s terrifying. Of course, China (and other oppressive governments) are frantically trying to prosecute people who own Bitcoin, because it’s the one method of economic expression that they make difficult, but can never truly take away.
“Bitcoin was created to serve a highly political intent, a free and uncensored network where all can participate with equal access.”
– Amir Taaki
What other governments have banned crypto? China is in good company with Turkey, a repressive regime that has been accused of murdering journalists, just withdrew from an international accord to protect women’s rights, and is ruled by an authoritarian dictator through fraudulent elections.
And Indonesia, another repressive, authoritarian government which recently launched a plan for China-style internet censorship and has a horrific human rights record. In the case of Bolivia, where opposers of the current government have been tortured and executed, and corruption is a way of life, banning Bitcoin has been a means of political control.
These corrupt, violent and controlling leaders should be scared. Across the world, Bitcoin has been a means for free expression and economic growth for people in countries like Nigeria, Iran, El Salvador and others. Within just a few weeks of El Salvador’s adoption of Bitcoin as a currency, 2.1 million citizens – 70% of whom previously had no access to a bank account – had a crypto wallet and joined the global economy.
In Africa last year, Bitcoin adoption grew 1,200 as more and more people began using it as a way to gain freedom from forces outside of their control, like government repression of financial access and currency devaluation in unstable economies. When Nigeria tried to ban remittances from abroad, which are essential for survival for many families, in response to public protests against corruption earlier this year, US $6 billion in remittance funds migrated to cryptocurrency.
Bitcoin is building a better future for countless people across the globe, and I know that millions of Chinese citizens will find a way to keep their financial security despite the crypto ban. John McAfee once said that: “You can’t stop things like Bitcoin. It will be every where and the world will have to readjust. World governments will have to readjust.”
We’re seeing now, despite China’s crackdown, just how right he was. The thing that the world will have to readjust to is a new era where the balance of power is back in the hands of the people, and no government, company or institution can take away the freedom that is rightfully ours.