The Great Crypto Crackdown


by Jim Rickards, Daily Reckoning:

It was another bad day for the stock market today. The major indexes were down big on fears of rising Treasury yields (I don’t believe they’ll continue to rise, but that’s a story for a different day).

Are you thinking of parking your money in cryptocurrencies like Bitcoin as an alternative to stocks?

I’m not here to tell anyone what to do with their money, but you might want to think twice…


China just made cryptocurrencies illegal in the world’s second-largest economy. No transactions in cryptos are to be allowed, nor is cryptocurrency “mining.”

The all-out ban is a departure from China’s previous attempts to simply regulate cryptocurrencies as a means to control them.

The People’s Bank of China (PBOC) said the ban is necessary to “maintain national security and social stability.”

China’s crackdown on cryptos is best understood in the broader context of the rise of central bank digital currencies (CBDCs).

Total Surveillance

China is very far along in its roll-out of a digital yuan: the Chinese CBDC. China will use the 2022 Winter Olympics in Beijing as a major showcase for this. They will try to cause all transactions for vendors, hotels, tickets, souvenirs, etc., to be conducted in the digital yuan.

The European Central Bank (ECB) is also working on a prototype CBDC, and the Fed is doing research and development work on its own CBDCs, in conjunction with MIT.

So CBDCs are coming fast.

The benefits of CBDCs are obvious, including faster transaction times and lower transaction costs. No more 2.5% merchant acquirer fees for Visa!

But the dark side of CBDCs includes the following: easy to monitor citizens’ whereabouts and buying habits, easy to impose negative interest rates, easy to seize and freeze accounts, etc.

This is why China is pushing so hard on its own CBDC. They want total surveillance of their people. They can then determine if they are buying prohibited books or supporting prohibited causes or traveling to sensitive areas such as Xinjiang.

In a U.S. version of this dystopia, your account might be frozen if you donate to the wrong political causes, groups or “extremist” political candidates (basically, anyone who disagrees with the preferred narrative).

If You Can’t Stop It, Control It

People will seek freedom from this digital-monetary dystopia by going to alternatives. What are they? The answer is cash, gold and cryptos.

Cash is already fighting for its life, thanks to people like Harvard Professor Ken Rogoff and his book The Curse of Cash. Cryptos are next to the guillotine. That’s the way to understand what’s happening in China.

If you want to push CBDCs (and the surveillance that goes with them), you have to eliminate cryptocurrencies first so people have nowhere to hide. Governments may have been planning that all along…

Here’s the thing: Governments don’t want to kill the blockchain; they want to control it.

Governments enjoy a monopoly on money creation, and they’re not about to surrender that monopoly to cryptocurrencies like Bitcoin.

But governments know they cannot stop the technology platforms on which the cryptocurrencies are based. Blockchain technology has come too far to turn back.

They have sought to do so using powers of regulation, taxation, investigation and ultimately more coercive powers, including arrest and imprisonment of individuals who refuse to obey government mandates with regard to blockchain. That’s what we’re seeing in China today.

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