It goes without saying at this point, but China is not a fan of Bitcoin. The country’s government has passed a variety of bans against the industry over the years, from bans on banks servicing crypto companies to bans on Bitcoin mining. However, no ban has been quite so expansive as China’s latest. Apparently the previous bans hadn’t worked out according to plan, so the government took the unprecedented step last week of completely outlawing all cryptocurrency transactions of any kind. Overkill? Definitely. Destined to succeed? Highly unlikely for reasons we’ll discuss later on.
In its latest ban, China has laid the FUD (Fear, Uncertainty, Doubt) on thick, citing the following reasons for why it felt the ban was necessary:
Bitcoin is not fiat currency
Bitcoin can be used for fraud and money laundering
Bitcoin mining uses a lot of energy
As we’ve discussed in other Letters, the above FUD is grossly exaggerated. But what China’s government hasn’t shared is the biggest reason of all why it doesn’t want Bitcoin to stick around: the leaders and their grip on the country’s social and economic ways of life are threatened by it.