Why China’s Bitcoin ban gives US and Europe a competitive advantage
Beijing’s ongoing Bitcoin crackdown may be a bummer for China’s crypto industry pros, but abroad the ban presents opportunity.
By banning crypto mining, the vast Bitcoin hash rate once housed in China has been essentially up for grabs.
Industry insiders reckon this gives crypto professionals in other countries a “competitive” advantage.
“All potential or additional computing power that existed there is now an opportunity for miners outside of China,” QuantifiedCrypto consultant Anthony Fiorenza told Protos.
China’s politics are also a factor. So long as a country is tolerant of decentralized finance (DeFi), the better it is for miners in other countries, Fiorenza explained.
“China is also communist, which is undesirable relative to decentralized computing being located there,” he said (our emphasis).
“You wouldn’t want them having the power to manipulate mining and the Bitcoin network as they please, rather let the free market continue to dominate.”
China’s Bitcoin ban ‘hostile’ to economic freedom
China’s most recent action against crypto-related services was just the latest in a string of efforts over the years (see: the official statement from Chinese regulators.)
US Senator Pat Toomey went so far as calling Beijing “hostile to economic freedom.”
China is unable to “tolerate their people participating in what is arguably the most exciting innovation in finance in decades,” Toomey said via Twitter in late September, having cited Bitcoin by name.
Yet, it endows the US with a “huge structural advantage,” he added.
Podcaster and notorious Bitcoin evangelist Anthony Pompliano agrees.
“China is making a massive geopolitical mistake here. Now it’s up to the United States,” Pompliano told Yahoo Finance. “If someone is going to benefit from this technology, we better make sure it’s us.”
Toomey and Pompliano neglected that Beijing claims its crypto ban stems from Bitcoin mining amounting to over 1% of the country’s total electricity use.
China says it had to restrict crypto partly due to its ongoing power crises resulting from rising coal prices and stricter emissions norms.
A raft of US-based Bitcoin mining startups have positioned themselves to benefit in the wake of China’s ban, but North America is still a ways away from becoming the world’s number one crypto economy.
Europe is the world’s top crypto economy
Europe has actually surpassed East Asia as the top cryptocurrency economy, thanks to major players in DeFi.
Europe’s Central, Northern, and Western regions received a whopping $1 trillion in cryptocurrency value in the past year, according to analytics firm Chainalysis.
The region also sent at least 25% of the cryptocurrency value received by the rest of the world.
Not to mention, the US has plenty of regulatory challenges in its own right.
The Securities and Exchange Commission (SEC), for instance, is exploring the economic impact of stablecoins like Tether under the guidance of Treasury Secretary Janet Yellen.
After all, the Federal Reserve’s goal is to maintain cash’s relevance. By digitizing the US dollar, the Fed thinks it can keep up with a high-tech, cashless world.
And SEC chair Gary Gensler — who likens stablecoins to “poker chips” — remains very focused on greater federal oversight. And like Chinese regulators, the SEC has expressed concerns about criminal activity.
“The Wild West” is Gensler’s go-to analogy for the $2 trillion cryptocurrency market.
Read more: [SEC chief: Crypto exchanges need a regulator for market manipulation]
Meanwhile, reports indicate that illicit activity in crypto never exceeds 1% of global on-chain transactions.
And while most crypto transactions occur off-chain (generally untraceable), a majority of illegal on-chain activity involves outright scams.
Still, Gensler urges Congress to up its regulatory efforts. But whether those efforts wind up being similar to those taken by the People’s Bank of China remains to be seen.
If the US follows a similar path, the region could easily forfeit whatever advantage Beijing has served up with its anti-Bitcoin stance.
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