How could China stand idly by if the United States constitutes a strategic reserve of bitcoins?
Where is bitcoin in China?
The Chinese government banned ICOs (Initial Coin Offering) in 2017. The exchange platforms were closed four years later. It is still impossible for Chinese people to buy bitcoins with just a few clicks. The Binance platform was notably forced to pack up.
Even so, it is not illegal to hold bitcoins in China. The Beijing Arbitration Commission published in 2020 a report containing the following three clarifications:
-Bitcoin is not legal tender.
-Bitcoin is a “virtual commodity”.
-Prohibition of traditional financial institutions from offering their services to exchange platforms.
Despite these government decrees, several Chinese courts have established over the years that bitcoin is protected by property rights. Judge Sun Jie reiterated this again this week, arguing that bitcoin has the attributes of property and that it was therefore legal to own.
“It is not illegal for individuals to hold cryptocurrencies”he wrote on the official WeChat account of the Shanghai Higher People's Court.
All this being said, the Chinese government's hostility is less salient towards the bitcoin industry.
China, mining giant
The largest companies that design integrated circuits (ASICs) used to mine bitcoins are Chinese. The leader is Bitmain. Its market share was for a long time above 80%. The second largest company is MicroBT, also Chinese.
In other words, Chinese companies control most of the market and this domination does not stop there. Chinese miners once represented up to 70% of the Bitcoin network's computing power. This figure is now closer to 20%, neck and neck with Russia, far ahead of Europe and behind the United States (~35%).
If miners forge the consensus of the Bitcoin network with gigawatts of encrypted energy (the “proof of work”), pools are also an essential link. They are a type of cooperative allowing miners to pool their computing power in order to smooth their income.
Their importance lies in the fact that they are the ones who select the transactions in the blocks. And here again, China is in the lead:
It is certain that a good part of the bitcoins belong to Chinese entities who have every interest in the government lifting the anathema. The election of Donald Trump should help them move the lines.
Strategic Bitcoin Reserve
According to the World Gold Council (WGC), the Chinese central bank has purchased more than 500 tons of gold last year, more than all other central banks combined.
The following graphs show that the Middle Kingdom's gold glut is accompanied by a reduction in its dollar reserves which says a lot about the future of the international monetary system:
Chinese President Xi Jinping will sooner or later realize that bitcoin is an infinitely superior store of value than gold. It is a currency in addition to a payment system (two-in-one) that could help calm geopolitical tensions.
Beijing should not ignore it, and especially since Senator Cynthia Lummis is proposing to sell Fort Knox's gold to acquire a million bitcoins… Here's what she has declared this week, like a hand extended to the rest of the world:
“The dollar is the international reserve currency, but other currencies like the Chinese yuan also want to have this role. Oil could no longer be sold in dollars, but in other currencies. We may be heading towards a world where multiple reserve currencies coexist. And in this scenario, I am absolutely certain that bitcoin will be one of them and perhaps the most important. »
How could China not welcome this development suggesting that Washington is ready to trade on equal terms by embracing the Bitcoin Standard?
The lines move quickly. A return to favor of bitcoin in China could be the big event of 2025 that will catapult bitcoin towards the million dollar mark.
Don’t miss our article: “Bitcoin on track to suck up $4 trillion jackpot”.
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