With China’s onslaught on the bitcoin/cryptocurrency industry, and increasing reports about wholesale bans on cryptocurrency related business, conspiracy theories are emerging. One of those theories, the most worrying of them all, sustains that there will be a Chinese bitcoin mining takeover. That is, official China, the government and its agencies or companies, will take over bitcoin mining equipment and operations in the country to operate it themselves. The alleged aim of this operation to nationalize mining through prohibition and a subsequent takeover, is all about “weaponizing” bitcoin.
Chinese Bitcoin Mining Takeover Conspiracy 101
A post on LinkedIn, translated from Chinese and with some additional contributions by the author, outlines how the government will implement the Chinese bitcoin mining takeover. After articulating broadly how the takeover will happen, the post delves into the reasons for doing so. The Chinese bitcoin mining takeover conspiracy according to this post will take place as follows:
- The crackdown on exchanges and the ban on ICOs, will be followed by a complete ban of bitcoin trading outside of China. Supposedly, it is possible to fence Chinese transactions off so that users there will be unable to broadcast transactions outside of China.
- Miners will automatically get fenced off as well, and will be unable to push their blocks through or confirm transactions.
- Chinese officials could then control mining operations through electricity supply or territorial control, since bitcoin miners look for cold places to set up shop.
Chinese Bitcoin Mining Takeover Conspiracy: Beyond the How
But why would the Chinese government be interested in doing this, when China accounts for up to 70% of the bitcoin mined around the globe? The answer to this is apparently obvious: A Chinese bitcoin mining takeover will enable the government to take direct control over the international transaction aspect of it. Additionally, the government might want to use that mining power to attack bitcoin to hurt US and Japanese bitcoin holders – according to the post, 80% of the coins are held by people in Japan and in the US. The Chinese government could even be more sinister than that. It might also want to throw its weight behind bitcoin cash, using the mining power to attack bitcoin.
Is This How China Behaves?
After hurting Japanese and US bitcoin holders by making the price plummet and putting its weight behind bitcoin cash, the Chinese government will have achieved an unprecedented degree of leverage over bitcoin users. This would in theory allow them to “weaponize” bitcoin completely. But is this how China behaves? Maybe. The Chinese government has been repeatedly accused of industrial espionage to develop its own industrial prowess. But is it really worth it to go after a coin that is worth around $65 billion dollars, for which substitutes are readily available?
The Chinese Bitcoin Mining Takeover Makes no Sense
Maybe this is too far-fetched. Crashing the price of bitcoin to then control it at a lower price, while making it blatantly clear that the currency has been effectively centralized, doesn’t seem like a clever idea. If anything, the Chinese bitcoin mining takeover conspiracy would stop at the nationalization of some mining outfits, to provide enough cover and confusion for the price of each coin to bring in “free” money into government coffers. After all, China is chasing the US but it is lacking a printing press that can spew the currency that dominates international markets. But bitcoin is far from the status it needs to become an international reserve currency on par with the USD.
This makes the whole point moot, and brings us to the point of origin. A Chinese bitcoin mining takeover only makes sense if the government can effectively reinstate capital controls that bitcoin helped Chinese citizens to breach. Bitcoin is an unlikely “weaponization” candidate, because it doesn’t have the market cap, market penetration and degree of adoption necessary to make it a significant weapon. There is no doubt that the Chinese clampdown will hurt bitcoin prices in the short term, but it is difficult to believe the “weaponization” conspiracy theory will ever materialize.
