Make no mistake, a major crack down on crypto is underway.
And it’s not just the regular FUD at work here. China is coming down hard this time.
In the past few weeks:
- China ordered more than 90% of local Bitcoin miners to shut down their facilities
- Local banks/payment systems were no longer accepting trades in crypto assets
- The biggest crypto exchange Binance supposedly “lost” their USD gateway into the fiat world.
In the Bitcoin world where 65% of the mining hash rate comes from China, this is a kind of a big deal. Reasons cited the prevention and control of financial risks, facilitation of illegal activities, and the often used electricity over-consumption.
Top 5 exchanges by volume (source: CoinMarketCap)
But can’t say we didn’t see this coming.
Because to long Bitcoin is to actually short the fiat system. And in a country which doesn’t have an open capital account and freely traded currency, this poses a threat to the financial system.
Hooray! Central Banks Digital Currencies (CBDCs) have arrived!
Leveraging off the China’s fiat ecosystem, people have been incentivized to adopt this new programmable money.
Those who downloaded the government’s e-wallet app on their phone and linked it to their bank accounts could transfer up to 10k e-yuan at a 1-for-1 rate (airdrops anyone?). In addition, participating merchants also offered discounts when customers pay with the e-yuan.
But it’s not just China. Several nations are also gearing up for the CBDC race.
Central Banks and their DCs (Source: theasianbanker.com)
Who cares if it’s Centralized or Decentralized?
Bitcoin, which was created after the Global Financial Crisis of 2008, was born out of the mistrust of governments and the large oligarchical institutions.
Here was the very essence of a decentralized monetary system, which for the first time, did not have the fall back of a central body. What started as an experiment blossomed into something truly on a global scale, with whole countries now accepting the Bitcoin standard.
President of El Salvador just made Bitcoin legal tender
Money typically has a few notable characteristics – durability, portability, divisibility, uniformity, limited supply and acceptability. However, what has come to define acceptability has changed.
Acceptance used to be defined by a central body of (oligarchical) people, represented by governments, and/or others who wield considerable influence from holding important resources (eg. media, energy, wealth)
However, in an increasingly decentralized economy, the Internet is king. And the good thing is, no one actually owns the Internet (duh).
That’s why acceptance is increasingly driven by communal purpose instead of a regime:
Fiat Money is defined as legal tender by the powers that be
It’s the same reason why cigarettes are used as currency in prison, or why kids use baseball cards to swap stuff. When it comes down to it, community is the only thing that matters,
Try asking 16-year-old Charli D’Amelio and her 101 million followers on Tik Tok. If you find yourself regularly
face palming shaking your head and asking wtf is wrong with the current generation, then you’re probably also scoffing at her paltry $8 million net worth.
Because what does Bytedance know? They’re only a $400 billion dollar company.
Charli definitely knows the importance of community (source: Tiktok)
We are slowly drifting away from the traditional framework in the fiat world. The form of money is now one and the same as the technology it’s built on:
- We can use Bitcoin to pay, or as a form to process payments
- We can choose to spend Ether, or build something/transact on the Ethereum network
In the world of digital money, it pays to design and develop the network so that it brings about the most adoption. Because if not, who the heck will want to use it?
On the Internet, acceptance is driven by a communal purpose
And that is why engagement is so vital for success with these crypto communities. A top down approach will no longer work as it becomes less relevant to the people on the ground, In the same way, trying to enforce an archaic fiat framework will not lead to adoption.
On one hand of the spectrum we have CBDCs, which are no doubt are backed by infinite resources, and all the necessary infrastructure in place.
And on the other we have digital assets driven largely by the community, such as meme coins like Doge and Shiba Inu, which serve no purpose other than to be a joke or participate in the crypto bull run.
The sweet spot of adoption has to take both into consideration, and that infrastructure is not fully in place yet. Which is why some claim that Bitcoin has no intrinsic value.
Form, not format
It’s not difficult to understand why demand for the e-yuan was lackluster, with citizens citing the obvious privacy concerns.
So apparently, the Chinese government can also target user behavior and have things like expiration dates inbuilt into the programmable money, leading to instant and 100% controllable monetary policy with just a keystroke.
I mean I wouldn’t be worried at all about programmable money that spawns from a black box of undefined and unverified parameters. After all, everyone has total trust and faith in their governments, riiiiiight? ðŸ‘€
CBDCs have their merits, but unfortunately it’s not a simple case of swapping fiat to a digital format. User behavior matters if you want adoption.
But hey if the carrot doesn’t work, why not try the stick?
What is your opinion on CBDCs? Do you think they will still be relevant in 10 years from now?
P.S. Nothing in this post is to be considered legal or financial advice. All of the writing here is meant for information and entertainment purposes, so DYOR and make decisions based on your own beliefs.
P.P.S. If you like what you read, you can check out more of my stuff here.