China’s economy grew 5.2% in 2023, but its stock market took a 10% tumble for the year. Meanwhile, some Chinese investors sought shelter in cryptocurrency despite the government’s Bitcoin ban.
These brave souls were not unpatriotic, nor was their investment in Bitcoin against the fundamental principles of Chinese communism. In fact, they are on to something that most of the world’s governments have been slow to grok: Bitcoin represents an ideal store of value beyond borders or political ideologies.
Here are three reasons China should repeal the Bitcoin ban:
Strong Chinese Demand Despite Bitcoin Ban
Chinese GDP grew by 5.2% in 2023, but its stock market was the worst-performing equity market in the world, with a 10% fall (while the U.S. S&P 500 Index soared 25%).
As a result, illicit Bitcoin trading in China surged to $86 billion worth of transactions last year. Chinese investors were ducking out of a troubled market for Chinese stocks.
Some Chinese view Bitcoin as a safe haven like gold. Dylan Run, a Shanghai-based finance sector executive, recently told Reuters, “Bitcoin is a safe haven, like gold.”
China Is Ideal For Bitcoin
Not only is China home to low industrial energy costs from coal-fired power plants, which is great for Bitcoin miners, but it’s also nearest to the sourcing for silicon chips used to make the ASICs (application-specific integrated circuit machines) Bitcoin miners use nowadays.
Strategic Rivalry / Partnership With U.S.
The U.S. and China are global strategic rivals and partners geopolitically, militarily, and economically. China cannot allow the U.S. and Europe to dominate Bitcoin ownership rates and hash rates without paying a heavy price in opportunity cost.
If the U.S. dollar loses its global hegemony to borderless cryptocurrencies over the next two decades, China will no longer enjoy the benefits of dollar hegemony for its export industries.
If it allows Chinese citizens like Dylan Run to invest in Bitcoin, some of that loss will be made up for by the disruptive industry that caused it.