No Bitcoin for you!

Episode 19




Shownotes

The big news today is China has declared transacting in cryptocurrency illegal in China.

China’s central bank said all cryptocurrency-related transactions are illegal, reinforcing the country’s tough stance against digital rivals to government-issued money.

In a statement posted on its website on Friday afternoon, the People’s Bank of China said the latest notice was to further prevent the risks surrounding crypto trading and to maintain national security and social stability.

Cryptocurrencies weakened following the statement. The price of bitcoin fell more than 8%, compared with its level at 5 a.m. ET Thursday, before paring some of those losses. The cryptocurrency fetched just under $41,370 per bitcoin, according to CoinDesk. Ether tumbled more than 11% to trade at about $2,795.

Naming bitcoin, ether and tether as examples, the central bank said cryptocurrencies are issued by nonmonetary authorities, use encryption technologies and exist in digital form, and shouldn’t be circulated and used in the market as currencies.

China Declares Cryptocurrency Transactions Illegal; Bitcoin Price Falls – WSJ

I’ve been paying attention to cryptocurrency news and Bitcoin for the better part of a decade. I thought Bitcoin was a nifty idea and the blockchain a cool technology. I immediately saw blockchain could be a great technology for secure transactions for almost anything. Bitcoin I never understood as money. Without a government behind a currency there is no value to it. China has fired the first shot. Will other governments follow and if they do will Bitcoin, and other cryptocurrencies, become almost worthless?

I’ve been paying attention to cryptocurrency news and Bitcoin for the better part of a decade. I thought Bitcoin was a nifty idea and the blockchain a cool technology. I immediately saw blockchain could be a great technology for secure transactions for almost anything. Bitcoin I never understood as money. Without a government behind a currency there is no value to it. China has fired the first shot. Will other governments follow and if they do will Bitcoin, and other cryptocurrencies, become almost worthless?

Here are the top ten traded currencies in 2019 across the world according to Wikipedia.

1United States dollarUSD (US$)44.2%
2EuroEUR (€)16.2%
3Japanese yenJPY (¥)8.4%
4Pound sterlingGBP (£)6.4%
5Australian dollarAUD (A$)3.4%
6Canadian dollarCAD (C$)2.5%
7Swiss francCHF (CHF)2.5%
8RenminbiCNY (元 / ¥)2.2%
9Hong Kong dollarHKD (HK$)1.8%
10New Zealand dollarNZD (NZ$)1%
Global %88.6%
Template:Most traded currencies – Wikipedia

China represents only 2.2% of all daily traded currencies so it’s small potatoes right now. But imagine if the European Union decided to do the same. Suddenly almost 20% of the world’s traded currencies would be shut off to Bitcoin. And, forget about it if the United States made the same declaration. Bitcoin would be dead. The fact that no government, other than El Salvador (they’re actually using the US Dollar), is using Bitcoin as money should tell you something. Yes, I know, no one can stop a Bitcoin from being traded. But what does that matter if you suddenly can’t convert it to the currency your country uses? Bitcoin can’t take over a nation’s money unless that nation allows it.

I see Bitcoin as I see any other private currency. I could create a cryptocurrency for the State of Georgia. Let’s call it the Peachcoin.

I had no idea at the time of recording that some people already started on cryptocurrencies called Peachcoin. They don't have anything to do with a State of Georgia cryptocurrency. Go figure. 

Georgia says you can use it to trade for anything within the State of Georgia. Buy your groceries, gasoline, or any other good or service within the state. It’s all good until someone tries to use Peachcoin outside Georgia. If Alabama uses the US Dollar you would have to first convert your Peachcoin to dollars. Then you can spend it in Alabama. But, if the United States government says it is illegal to trade Peachcoin for dollars then what do you do? It’s as valuable as trying to spend Confederate money. It might still be worth something as a novelty but it certainly would be worth only a tiny fraction of a real dollar. Why? Because the US Dollar is backed by the US military.

I think in 10 or 20 years when the United States and maybe the European Union create cryptocurrency versions of the Dollar and the Euro Bitcoin will be toast. I won’t like it because then the governments of the world will really be able to control every aspect of your life. People who want to live without government control will have to go back to the barter systems and trade chickens and produce. I can see this coming though and I think it’s just a matter of time. Private banking will be a thing of the past.

KJB


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Contact

For questions or comments e-mail me at mail@kevinbae.com

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