Hello!
First things first: Yes, this is yet another newsletter in a bottomless barrel of newsletters. Why this? Short answer: Self-fulfilment.
I have spent over a decade rewriting the works of others at news publications. I lend my craft to others these days—writing for companies and executives. It 💵 pays the bills and keeps the lights on. The flip side: A deep gnawing feeling of losing my voice. So then, I decided to start a newsletter. So that’s where we are at. A newsletter to feed my ego.
What do you get out of this? I don’t know yet. Maybe we’ll find out together? 🙌
Now, let me get to the subject: China and Bitcoin. This week, the world of crypto threw up unusual and intriguing news: The People’s Republic of China—official names of countries are full-on 1984—hold more BTC than even MicroStrategy.
The discovery was made by Ki Young Ju, CEO of CryptoQuant.
Cue the hype cycle!
News publications jumped onto the story. The irony was hard to ignore: China had banned crypto, yet held more BTC than the company of the most famous BTC maxi, Michael Saylor.
Apparently, China loves Bitcoin!
Except that, this conclusion is a fallacy! Yes, China—or the Chinese treasury, to be specific—may hold 194k BTC and 833k ETH, but those are seized assets.
Let me take a quick detour. In 2021, China seized 200 kg of cocaine from a “foreign cargo ship”. Now, a kg of cocaine, depending upon its concentration and market, could be $200,000. The value of illicit cocaine China seized could, thus, be roughly $40 million. Does this mean China secretly loves cocaine? Anything but.
Seizures of illicit drugs and counterfeit or smuggled goods are fairly common at international ports and airports. Authorities seize them, record the haul, sometimes announce a rough estimated value, and then… destroy them. Seized Rhino horns? Burned in public.
But what if the illicit asset is crypto? How do you seize it? Crypto assets lie on public blockchains, and therefore cannot be seized in the manner the word implies. Nor can it be shredded like counterfeit notes or burned like Rhino horns.
“Seizure”, when it comes to crypto assets, implies the authorities have gained access to the private wallet of the accused and have moved the assets to a wallet in their control.
Now, let me get back to the China story. As per Ki Young, the Chinese authorities seized 194k BTC, 833k ETH, and others from the PlusToken scam in 2019, and forfeited these $6 billion-worth assets to the national treasury. This is to say, the enforcement officers gave control of the assets to the national treasury. Presumably, the Chinese national treasury has set up crypto wallets to hold such assets—and presumably, the control of the wallet is with a really, really high-ranking official(s).
In Beijing’s point of view, these assets are proceeds of crime, and by seizing them, they have taken them out of the market and placed them in their custody.
None of this implies China believes in the crypto story or considers these assets are of a great store of value. China has simply seized them and taken custody of the proceeds of the crime.
To the question of whether China loves Bitcoin? All signs point in the same direction. The Communist Party of China absolutely abhors any form of currency outside of their control floating around in their closely-controlled nation.
BTC is about freedom from government. Communist China is about absolute government control. They don’t mix.