The Chinese Communist Party is no fan of cryptocurrencies. Ten regulators have piled on in the People’s Republic, explicitly declaring all crypto activity to be illegal. It underlines the shortcomings of the asset class, but also – unintentionally – some of its appeal.
Beijing’s ongoing crackdown is partly about curtailing capital flight via digital assets, perhaps a heightened risk right now because of worries about losses at property group China Evergrande. It’s also about financial stability, a concern even in, say, the United States. Cryptocurrencies are less useful if using them makes people criminals. The market reaction, a fall in the value of bitcoin and similar tokens, also suggests a closer relationship with traditional financial markets than proponents like to admit.
Still, cheerleaders see the asset class as a challenge to government-issued fiat currencies. China’s wariness of the decentralized crypto model betrays the fear of losing control. In that sense, the ban burnishes the insurgent credentials of bitcoin and its ilk. That’s no reason for most people to love crypto, but it’s enough to keep believers believing.
