China has seemingly gone full blockchain with a media blitz following a speech by president Xi Jinping.
Easily dismissible as a gimmick, especially their plans for a Central Bank Digital Currency (CBDC), further movements make one wonder whether there is something actually happening here.
“We are looking probably to be ahead of schedule to sign a very big portion of the China deal, and we’ll call it phase one but it’s a very big portion,” President Donald Trump said, adding:
“That would take care of the farmers. It would take care of some of the other things. It will also take care of a lot of the banking needs.”
Just two weeks ago NY Times reported the then tentatively agreed deal would “strengthen Chinese protections for American intellectual property and give financial services companies more access to China’s market.”
Now, there appears to be an agreement on currency manipulation too, with South China Morning Post stating: “China and the US would also agree to avoid allowing currency devaluations to gain trade advantages.”
China Unbans Bitcoin?
The trade war arguably opened with China banning crypto exchanges. It may well end with China reopening them.
This might not be a straight condition to the deal, but if they agree to no currency manipulation and if they agree to opening their market to financial services, then it is difficult to see why they’d not open the exchanges.
As you may recall the drastic decision to shut down crypto exchanges was during a period when China was experiencing huge capital outflows because it was devaluing its currency.
That sort of got out of hand, so they wanted to stop it from devaluing further, instituting very strict capital controls, but still tolerating loopholes.
One of them being bitcoin, yet as speculation intensified over devaluation, they moved in to close almost any avenue of taking money out. Hence their decision to shut down crypto exchanges.
A decision that had political ramifications because that became sort of the symbol of China’s protectionist ways, leading to a gradual turn of attitudes and thus to political cover for Trump to hit them with tariffs again and again.
In addition, there was an apparent power struggle in China making its appearance through contradictory decisions in that there were report bitcoin miners were told to leave, and then nothing happened.
Meaning this space may have been a sort of proxy in the trade war and perhaps a casualty they maybe thought they can afford, but it arguably backfired considerably because elders tend to underestimate support for this space due to maybe being in their own bubbles.
So presumably attitudes began to change in China, with some easing of sorts by tolerating OTC trading. Perhaps the beginning of the detente.
A New Partnership or Fool Me Once?
What exactly is going on at that highest level of politics we do not know, but it isn’t too clear Trump has secured that much although we all have to wait for the full phase one treaty.
It is obviously to the benefit of China to open its market, as it knows very well from its own history. Nor is there quite much of a reason for it to not do so. Yet where companies are concerned they’d need some sort of guarantees that they’re not just kicked out again or threatened with it.
There’s always been a very close relationship with China in this space at a non-political level. A friendship that benefited and benefits both and quite a lot.
Much of what is China now arguably was sort of built by the west, and as these past two years have shown, without that interconnection then China might not do too well.
That’s presumably something they know too. Yet they might not be too surprised there would probably be some reluctance initially as putting effort and investment into what can be great things, to risk them being interrupted to the point one needs to rebuild again, would require some significant gestures to restore trust.
Opening the crypto exchanges could be such gesture, if not a minimal requirement, as otherwise there wouldn’t be much of an incentive to take the risk of China closing its market again.
Now that they’ve agreed to no currency manipulation, then presumably there wouldn’t be much of a reason for them not to reopen the exchanges, but what they will do exactly, remains to be seen.
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