China is on the news again about cryptocurrency--this time in a not so flattering manner. The assertions made by the likes of a JP Morgan strategist who said the US dollar may not be the world’s reserve currency for much longer come to mind as you look at china’s recent activities. A brief look at history will tell you that world reserve currencies have always been determined by who was dominant. In the ancient times, African cowries were seen as the most valuable trade commodity. As centuries went by and the world of currency came upon us, the Dutch Guilder reigned supreme, followed by the French Franc, the British pound and now the U.S Dollar.
The US Dollar has been dominant for a few decades now, but as things stand the currency might just be losing steam. This is already being reflected by the amount of dollars being held by central banks. Central banks at the moment are holding less and less U.S dollars. This trend has remained consistent since 2005 which means that the dollar decline is approaching its two decade mark.
Asia is a different monster compared to what it was 40 to 50 years ago. The rise of Asian nations and china particularly is becoming a great concern for those who love the status quo. The JP Morgan analyst had this to say about Asia’s rising dominance.
“In the coming decades we think the world economy will transition from US and USD dominance toward a system where Asia wields greater power.”
China’s Blockchain activities in particular have raised eyebrows over the past few months. While American lawmakers and regulators seem to be blowing hot and cold about the matter, China has been moving fast and making consistent moves that have kept catching the eye of American analysts and crypto entrepreneurs.
China had gained notoriety in 2017 by being very tough on Bitcoin. Trading for Chinese people had been banned and blocked with exchanges not allowed to operate. It stayed pretty much the same in 2018 with state authorities blocking access to 124 crypto websites in the country. It went even further down the rabbit hole after the 2018 crackdown led to a ban on 88 digital trading platforms and 85 ICO projects. ICOs at the time were termed as “illegal” ways of obtaining funds from the people.
China’s crypto sentiment appeared to have changed late this year as reported by Monfex.com after President Xi Jinping made a statement calling for China to seize the opportunity presented by the Blockchain. His words caused a stir at the moment as we reported here at Monfex. Many thought that his words were an endorsement of Cryptocurrencies and it even had an effect on Bitcoin price. Some commentators such as Nick Carter were not about to get ahead of themselves with Jinping’s mention of cryptocurrencies.
The positives began to pile up after the Xi Jinping’s speech. The once negative and dismissive sentiment towards crypto was replaced by a less stringent attitude towards digital assets. Blockchain technology began to be touted as a progressive thing within the country. The financial sector in the country began to look at Blockchain technology and Artificial intelligence for international financing. We even saw the country’s most downloaded app introduce some crypto education material to expose as many people as possible to the technology. All that was left was for china to openly declare that it had accepted cryptocurrencies with open arms.
Unfortunately, this is not the case at the moment. In fact, quite the opposite is happening right now according to reports. It appears that the post Xi Jinping speech celebrations came a little bit too prematurely because China has gone full circle again. A 2017 like crypto exchange crackdown is now in full swing. This was highlighted by the closure of Binance exchange offices in Shanghai after a raid by local police. This raid came soon after a People bank of china (PBOC) notice that instructed people to report businesses engaged in virtual asset trading to its Shanghai headquarters. The notice outlined the activities that must be reported in a statement that read;
Virtual currency transactions in the territory; the other is to issue ‘xx coins’ and ‘xx’ in the form of ‘Blockchain application scenarios.’ Currency, fundraising or Bitcoin, virtual currency such as Ethereum; third, providing services such as publicity, diversion, agency trading, etc. for registered ICO projects, virtual currency trading platforms, etc.”
This is one of China’s most aggressive anti-crypto moves since the shutdown of Blockchain and crypto social media accounts back in mid-2018. Shutting down an exchange’s major offices is usually a huge setback, but Binance’s Changpeng Zhao is not losing sleep over it. In a tweet he put out soon after, he seemed to imply that the concept of physical offices was soon going to be a thing of the past. The markets reacted quite negatively to China’s sharp U-turn on crypto sentiment. Bitcoin (BTC) lost ground by 6% while Ethereum was set back by 8%. Other Altcoins such as Litecoin, EOS, and Ether have been having a hard time as well.
The big question for many is whether China’s renewed crackdown is just a temporary discomfort with exchanges or a complete backtracking from the sentiments given by president Jinping back in October as reported by Monfex.com. China has been known to be anti-crypto trading but that has not stopped them from examining the underlying technology.
A July report told us that China was ready to launch its own central bank digital currency in response to fears that Facebook’s Libra may become a global force. Though China has had a negative crypto sentiment for years, it has also been working on its own CBDC for years as well. The PBOC’s planned central bank digital currency has been in the works since 2014. With this in mind, is China really completely against the idea of digital currencies? You can read in between the line yourself. The fact is China has been making moves in this space, and its constant fencing opponent the US is getting worried.