Op-ed: Impossible to de-Chinalize Bitcoin
Note: the blog is written by Huang Siliang, an opinion leader in Chinese bitcoin community, on 13th Feb. It’s an interesting read along with the tide of de-globalization.
Chapter 0 Introduction
PBOC has been strengthening the supervision to domestic Bitcoin enterprises. Companies related to bitcoin trading are paranoid and introduce a variety of restrictions on transactions. Harsher one prohibit Bitcoin withdrawal while easier company impose other policies to increase trade friction. On the other hand, PBOC still reserve abundant cards to play in terms of regulating Bitcoin.
It’s under such a background that topic of “de-Chinalize Bitcoin” is getting popular in the industry. My suggestion is to abandon the idea completely. It’s impossible to de-Chinalize Bitcoin.
Chasing profit is the nature of capital. Bitcoin is a product bred by capital. Therefore we describe Bitcoin as a speculative asset, form of investment or currency. It’s impossible to control such nature as it is the basic instinct of capital. The law can restrict, induce or divert (the flow of capital), but it cannot be prohibited. As Karl Marx says, if capital has a hundred percent profit, it dares to trample all the laws of the world.
It is a natural law, just like gravity. The government cannot prohibit capital from gaining interests, just as the government has no power to forbid gravity.
But what if the government decides to go against the law of nature? Say the almighty central bank decides to ban Bitcoin from being chased by capital.
Similar cases happened before if you look back in the history.
Before China implemented reform and opening up policy, the government legislation was written to prevent the peoples of the country to pursue capital profits. Any civil business behavior was treated as treason. However, the villagers in Xiaogang decided to act against the government policy. They even signed a life and death contract before implementing the household contract responsibility system, which eventually led to the opening up of China and ultimately became a symbol of revolutionary events. “Fool melon seeds” (snack food) was blasted by the whole society for its business model (first company to promote prize-giving sales, banned by authority later). But finally the factory fried all the sunflower seeds in the country and the country started importing sunflower seeds. The case eventually led to bestowing of legal status to the country’s self-employers.
The container was invented more than 50 years ago. As a revolutionary means of cargo transportation, container has greatly lowered the cost of transport, making the Chinese products far more cheaper than if they were manufactured in the suburbs of New York. The global economic pattern was reshaped. Standardized, automated container casts a direct impact on the livelihood of the dock workers. These established parties were trying to prevent capital from chasing higher profits. Workers resisted container in various forms such as rallies, strikes, and 21,000 New York dock workers gathered at Madison Square Garden to indict the evil of container. However, all this action was futile against the wheel of history. The trend of the new technology is unstoppable. The container soon prevailed in the shipping industry.
Last year the taxi driver resisted the Uber-like car service by violence. They went on strikes, petition in front of government, beating Uber car driver … … Does it stop capitalists from creating higher profit by integrating more advanced resources and technologies?
More brutal story could be tracked back to over one hundred years ago, the Qing dynasty believed the country had everything they would ever need and those foreign businessmen could make money through the mercy of the emperor. When the emperor wanted to stop them from doing business with the Chinese people, then the foreigners declared wars just to force the opening of business. This is the nature of capital.
Chapter 2 Tug-of-war between government and Bitcoin will continue
Now bitcoin has passed the most brutal confrontation period with government. Led by the US government, through the lobbying of American entrepreneurs, a number of states have clarified the currency and the commodity attributes from a legal perspective.
But like Uber, Bitcoin naturally disrupts the interest of large numbers of establishments related to fiats. The relationship between Bitcoin and government will not be clear. In the process of colliding with the old order, Bitcoin will have a rough time. But the adventurous instincts of human capital will play an important role in this process.
This year Chinese government chose to confront Bitcoin in a very aggressive way. Chinese bitcoin entrepreneurs have to tackle the situation arduously, hoping to reach agreement with the government and stumble a way out for survival.
The social benefits brought by Bitcoin is positive as a whole. It’s impossible for any liable government to take chances to protect the establishment’s interest by comprising the social good. The most logical action for a government to take is adoption of wait-and-see attitude.
We should realize that Bitcoin is no longer in its infancy, it is growing fast every day and has been welcomed by people. I want to say that it is still in a clumsy adolescent stage, trying to win the respect of others, struggling to face the challenges of society, always showing the world its strength. There is no sign of slowing down for its growth.
The relationship between Bitcoin and government is inextricably interwoven. Bitcoin industry needs government support while government can also use Bitcoin for the benefit of society. The currency properties of the Bitcoin have naturally hurt the interest of government. Therefore the gaming between government and Bitcoin will be sure to last in the coming days.
Chapter 3: Bitcoin will continue to survive in China, one of the most important economic nodes in the world
With the strong-hand of central bank, China’s Bitcoin entrepreneurs are giving away market shares step by step. Chinese exchange volume took a nose dive and had given away the first place to Japan market.
However, the price collapse did not happen as much people expected. Currently the normal price stands at 7,000 CNY. OTC trade flourish as obtaining BTC through exchange is getting more and more difficult. Demand for acquiring bitcoin will not vanish with the central bank’s attitude. Such demands used to be met by centralized exchanges and now shifted to OTC market, which is even harder to monitor.
in February 2014, Russia issued a direct order to ban bitcoin, which resulted in the booming of trading via localbitcoins. By the end of 2014, OTC trade in Russia had increased over 300 times. This ban is basically meaningless, but will push bitcoin trading activity into the OTC and underground market, where money laundering and capital flight are not being regulated.
Today I deposit 100 yuan to OKCoin to see if the exchange is still in normal operation. My bid and ask order are taken away smoothly. There is a 200 price gap between OKCoin and other exchanges that allow bitcoin withdrawal. As long as the price gap is there, people will take the risk of withdrawal suspension to realize profits.
Human law cannot defy the laws of nature. With enough profits, capital dare to fight against any legal sanctions. In other words, “if there is a hundred percent gain of the capital, it dares to trample all human law.”
China is now the center of the world, or is increasingly becoming one. China is somehow a rising country, which is not a pale patriotic remark. Why the Bitcoin mining chips and mining farms are mostly located in China? Because the manufacturing base of electronic products is located in Shenzhen and Dongguan. The deployment of hashing power in China is the option with lowest cost and the highest profit. There is not other way around.
It’s profitable to operate bitcoin-related business in China, which is the inevitable result of China’s economic development. Similar business in Afghanistan does not yield profits because it is a poor places. In China there is a profit, you can not prohibit the bit coins climbing capital in China to take root.
Therefore there is no way to de-Chinalize bitcoin, even if it is banned by the central bank unless China is no longer part of global economy, or Bitcoin is no longer a good investment and a good currency.
Chapter 4 the End
If there is a hundred percent profit, capitalist dare to trample all the laws of the world. If there is 500 yuan gap between OKCoin price and transferrable bitcoin, I am going to deposit in OKCoin.