China’s economy grew by 5.2% in 2023, but the stock market fell by 10% for the year. Meanwhile, some Chinese investors have sought refuge in cryptocurrencies despite the government’s ban on Bitcoin.
These brave souls were not unpatriotic, and their Bitcoin investments did not violate the fundamental principles of Chinese communism. In fact, they are tackling something that most governments around the world have a hard time understanding. Bitcoin is an ideal store of value that transcends national borders and political ideology.
Here are three reasons why China should lift its Bitcoin ban:
Strong demand in China despite Bitcoin ban
Although China’s GDP grew by 5.2% in 2023, the country’s stock market fell by 10%, making it the world’s worst-performing stock market (while the US S&P 500 index rose 25%).
As a result, illegal Bitcoin transactions in China soared last year to the equivalent of $86 billion. Chinese investors were trying to escape a difficult market for Chinese stocks.
Some Chinese consider Bitcoin to be a safe asset, similar to gold. “Bitcoin is a safe asset, like gold,” Dylan Lan, a Shanghai-based financial sector executive, recently told Reuters.
China is perfect for Bitcoin
China not only has low industrial energy costs from coal-fired power plants, which is a boon for Bitcoin miners, but China also sources silicon chips used to manufacture the ASICs (Application Specific Integrated Circuit Machines) used by Bitcoin miners. It is also the closest location. recently.
Strategic rivalry/partnership with the US
The United States and China are global strategic rivals and geopolitical, military, and economic partners. China cannot allow the United States and Europe to dominate Bitcoin ownership and hashrate without paying a high price in opportunity cost.
If the US dollar loses its global hegemony to borderless cryptocurrencies over the next 20 years, China will no longer be able to enjoy the benefits of dollar hegemony for its export industries.
If Chinese people like Dylan Lan are able to invest in Bitcoin, some of that loss will be made up by the disruptive industry that created it.