China, crypto and the dollar

The China Daily reported this week that a state oil company had completed a natural gas transaction with French energy giant Total and that the deal was settled in yuan. The deal, which was carried out on a Shanghai stock exchange, was the first of its kind and important enough for Chinese state media to highlight its importance. This news is not typical fodder for a crypto newsletter which, as regular readers know, is about topics like Bitcoin and US blockchain companies. But step back and you can see a connection.

In September, Foreign policy published an article titled “China Quietly Tries to Dethrone the Dollar” which explained how the country wants to establish regional corridors where global transactions are settled in a non-dollar currency. The goal here is not difficult to understand. China sees the US as its main adversary and wants to weaken the country in any way it can – including by diluting the dollar’s dominance, which gives the US power over the world’s banking systems and allows it to borrow money at rock-bottom prices.

China is not alone in this. Iran, whose vicious regime has made it subject to harsh sanctions, has for years sought to establish payment networks outside US control. Meanwhile, Russia – which is becoming a vassal state of China under the disastrous leadership of Vladimir Putin – is happy to embrace yuan-based payment schemes, while tolerating cybercriminals who rely on crypto to carry out ransomware and other hacking attacks.

All of this amounts to a form of economic warfare, and when it comes to crypto, there are two important developments to watch. The first is a recent decision by Beijing to support Hong Kong’s push to become a global cryptocurrency hub by encouraging state banks to do business with crypto companies in the territory. This is not a change of heart by China on the merits of crypto – remember it chased the crypto industry out of the country five years ago – but another effort to support transaction networks that do not rely on the dollar.

The other thing to watch is whether more US politicians will challenge the Biden administration’s current push to hobble the crypto industry. Biden’s crackdown is partly a response to FTX and other crypto scandals — but it also feels driven by the US Treasury viewing crypto as a financial network it can’t control. This may turn out to be unwise. The rest of the world is going to build blockchain-based payment networks whether Washington likes it or not, and the US should think about encouraging a domestic crypto industry rather than operating it from its shores.

Jeff John Roberts
[email protected]
@jeffjohnroberts

DECENTRALIZED NEWS

The value of digital land in the metaverse realm Decentralized country has fallen by 90% from a year ago. (WSJ)

Leaked documents indicate Binancewho withdrew from China in 2017, maintained a secret office in the country until 2019. (FT)

Winklevii is reportedly planning to launch an international cryptocurrency derivatives exchange through The twins. (The information)

Chicago-based crypto exchange Beaxy close after Securities and Exchange Commission accused it and its executives of registration violations. (Reuters)

The maker of the once busy NFT game Axie Infinity is trying to turn the page on a disastrous year by improving its Ronin blockchain and adding game studios. (Fortune)

MEME O’ MOMENT

Geopolitics and energy payments are so uncool: