That China is a major player in setting bitcoin prices is already well-known. But Ripple CEO Brad Garlinghouse suggested yesterday that bitcoin's route to becoming the world’s primary cryptocurrency might falter due to China’s influence. (See also: Are Bitcoin And Crypto Prices Totally Dependent On China?)
“Bitcoin is really controlled by China. There are four miners in China that control over 50% in bitcoin. How do we know that China won’t intervene (in controlling bitcoin)? How many countries want to use a Chinese-controlled currency? It’s just not going to happen,” he told audiences at the 2018 Stifel Insight Cross Sector Conference in Boston yesterday.
Prominent figures have increasingly begun referring to bitcoin as a world currency in the making. For example, Twitter Inc. (TWTR) CEO Jack Dorsey told London’s Sunday Times in March that bitcoin could become the world’s single global currency in ten years. Apple Inc. (AAPL) co-founder Steve Wozniak echoed Dorsey's thoughts this month with the caveat that he did not necessarily believe that it would happen. (See also: Apple Co-founder Steve Wozniak Bought Bitcoin At $700). Garlinghouse called the idea of a primary world currency “absurd” and said that it did not make any sense. “I don’t think any major economy will allow that to happen,” he said.
How China Controls Bitcoin
China has two advantages as far as bitcoin is concerned.
First, it is home to a majority of mining operations for bitcoin. This confers it the power to control the supply of coins in the market and to raise transaction fees based on mining difficulty. As has been the case in the last year, high transaction fees could dissuade use of bitcoin for daily transactions and make it more cost-prohibitive for trading. Second, China is also home to some of the biggest cryptocurrency exchanges for trading bitcoin, such as Binance. These exchanges clock high trading volumes and attract international retail investors due to their cheap fees.
To be sure, the idea of a global currency is not new. Noted economist John Maynard Keynes proposed the idea for a global currency during the 1944 Bretton Woods conference. A central bank, called the International Clearing Union, would be responsible for issuing bancor, a global currency that would trade on par with national currencies. The bancor would be used for trades between nations, thereby removing imbalance in exchange rates and the inherent advantages and disadvantages that are associated with it. (See also: One World, One Currency: Could It Work?)
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