Of those figures, 36 per cent takes place in Xinjiang, the province where the Muslim minority Uighurs are subject to what the US considers to be genocide. Bitcoin mining is the energy-intensive process in which networked computers verify the cryptographic puzzle of the digital coin, earning a portion of the token’s value.
But bitcoin, a decentralised cryptocurrency, is designed to flourish outside the control of any government, including Beijing’s.
“China isn’t likely to support bitcoin, especially now that they’re ‘digitalising’ their own currency,” says Australia Strategy Group director Dominic Meagher. “It’s inimical to Chinese Communist Party ideology. They won’t support anything they can’t control.”
Such a wildcard technology could be considered a threat to state power whether in the West or in China.
Perhaps for that reason, in 2017, the People’s Bank of China closed bitcoin trading platforms and pressured, if somewhat unsuccessfully, local governments to force miners to exit the business.
The Chinese government “dislikes-to-hates” bitcoin, while the People’s Bank of China “loathes it”, says David Gerard, author of Libra Shrugged: How Facebook Tried to Take Over the Money.
“The only reason there’s bitcoin mining in China is because it has some of the cheapest commercial electricity prices in the world,” he says.
That leaves open the question of what political system, if any, benefits from bitcoin?
Carnegie says in a post-GFC world, cryptocurrency lets people get around “power relationships that have become subject to layer after layer of industry capture” – basically what feels like an insider’s game.
Before its most recent price spike drew in more mainstream buyers, bitcoin had been the preferred currency of what Meagher called “niche communities like tech enthusiasts, libertarians, and criminals”.
Gerard believes the last group, who he describes as “offshore players who are under regulatory investigation” have helped power up bitcoin’s value. Tech executives helped too.
On February 8, Elon Musk’s electric car company Tesla revealed it had purchased $US1.5 billion in the currency.
“Tesla buying bitcoins I think, from the data, finally kicked off the genuine retail asset bubble,” Gerard says.
China’s government, meanwhile, is leading the world through the development of its privacy-vaporising national digital currency. The digital renminbi is centralised, state-controlled, and designed to advance China’s economic influence, especially through the Belt and Road countries.
With bitcoin drawing ever-more investor interest, while China begins to trial a parallel and sovereign currency system, it may only be a matter of time before the disruptive power of crypto affects fiat currency.
For now, Gerard says bitcoin “is a bubble, pumped by gross and obvious market manipulation, and bubbles always pop”.
“The only way to make money from bitcoin is for someone to buy it from you for more than you paid for it.”
Carnegie, himself a late convert to cryptocurrency, plans to launch an unlisted cryptocurrency fund. He concedes the bitcoin price action is extreme, but says that “however nutty crypto is just look at fiat money over the last 18 months”.
The world’s four major central banks have expanded their balance sheets (effectively printing new money) by $US7.8 trillion ($10 trillion) since the pandemic began.
Whether or not bitcoin proves to be a bubble, the technology is likely here to stay, Carnegie says.
“It will change the world”.
Chris is Digital Foreign Editor.