Transcription
China, the Middle Kingdom, an economic world power that presents itself not only through its far-reaching culture, but also through its forward-looking technology. In many areas of industry, China is one of the leading countries.
But the country does not seem to be open to all new technologies. The crypto industry with its miners seem to be a thorn in the economic power side. China has banned all crypto transactions and also announced that it will stop the mining of digital assets, the most severe blow to the industry so far.
The People's Republic of China is not enthusiastic when it comes to the cryptocurrency stars, and especially the number one Bitcoin has had a long, intense dispute with China since its invention. Trading the world's odest cryptocurrency is not welcome in the People's Republic of China. After all, it was China that helped Bitcoin achieve its current fame. Finally, it is thanks to the numerous pioneers and miners from China that countries like Salvador or Venezuela offer Bitcoin as an alternative means of payment.
Nevertheless, the Chinese government's negative attitude towards cryptocurrency has become increasingly clear and incisive over time. But the Chinese authorities are going even further in their efforts to suppress crypto trading. Crypto transactions are considered illegal financial activities, including services offered by offshore exchanges. The People's Bank of China reported on its website. It added that cryptocurrencies, including Bitcoin and Tether, are not a real fiat currency and thus cannot be in circulation. Bitcoin crashed after the announcement, falling 8% to around $43,000.
Fraud, money laundering, and excessive energy use are all associated with cryptocurrencies. The enormous energy consumption of crypto mining is also a reason why the entire crypto industry is under scrutiny. The Chinese Economic Planning Authority explained that it was their job to take tough action and stop crypto mining in order not to jeopardize the government's set climate targets. China is facing a severe energy crisis that has already affected commodities such as aluminum and steel. The country hosts about 50% of the world's crypto miners and had a 46% share of the global hash rate, a measure of the computing power used in mining and processing.
Will Bitcoin and the crypto industry succeed without China? What do the analysis and crypto industry experts have to say about the latest development in China?
Let's get back to China's increasing crackdown on crypto. It looks like they've gone absolute at this point, saying on the PBOC website they will ban all transactions or that all crypto transactions are illegal. We do see, um, Bitcoin's price falling down below 44, uh, thousand, down below 43,000 right now at 42,912.
Let's get to Joanna Oinger, our Asia Cryptozar, for more on what this actually means.
"Um, Joanna, it seems like from now on, everything that you want to do besides simply holding crypto, if you already have it, is illegal. Is that the, am I reading this correctly?"
"Hi, Matt. That's kind of what it looks like. But the question always with these things from China is, what does it mean in practice? You know, we've had the crackdowns before over the years, and people have been able to do workarounds and able to, say, keep exchanges going even though they crack down on exchanges. There are a lot of people who still hold crypto. Um, so you'll see even for Bitcoin and the crypto complex generally, the drop that we've seen is actually not that big. So, it tells you that it's not that much of a surprise, but it's definitely not being, you know, it's definitely not increasing the prices either, right?"
"So, Jenna, why are they doing this now? They've been wanting to do it. Do they feel emboldened by everything else? Is it a distraction because of what's going on with Everrand?"
"It might be that they're seeing, you know, the SEC in the US is cracking down on things as well. Well, they are seeing other regulators taking steps, but you know, China does things when it does them, right? So, it's a little bit hard to tell exactly. It could be that they're concerned about something with Everrand, but it could just be that they're looking at crypto overall and saying, "This is the time when we want to take this step," because they've been going at it, you know, since before Everrand was really getting people's attention."
"Yeah. Is there concern, by the way, that, um, retail investors are going to get burned speculating in this, uh, asset, or is there concern that wealthy Chinese people are going to use it to move, um, wealth offshore?"
"There's probably some of both in there. And again, you know, I don't have firsthand knowledge of this, but there is, um, speculation that it's both of these things. And actually, one thing to watch with this would be Tether, which is seen as key in terms of flows into crypto from China, and recently it was looking at prices. It's about 99.1 cent, and it's usually a dollar. So that will be interesting."
With insight and analysis, let's get straight to Eddie Vandervault, our great crypto watcher, Bloomberg Mive Strategist.
"So, Eddie, good morning. First of all, we're trying to figure out exactly how f-how much further this goes, right? China had already declared a war on Bitcoin."
"Absolutely."
"And this seems to be a step further and trying to ban it completely."
"Look, it does feel like an escalation, doesn't it? If they are really saying no transactions, I would like to know exactly what that means. Does that mean I cannot buy with it, or does it mean that I can't transact with you? I cannot send you Bitcoin from my phone to your phone in, you know, so that I can no longer trade it on an exchange. So, I'm still a little bit vague on what it means, uh, what a transaction is in this particular circumstances and how strictly they'll enforce it, but it is confirmation. China doesn't like this, and Bitcoin at the moment still needs China and Chinese investors. You know, there's a lot of Chinese investors that have been long Bitcoin and have been using it and have been building it up. So, it's an escalation, and we shall see how much, you know, crypto prices respond to it.
Yeah, I think it's interesting. Um, Francine makes a good point that they've incrementally been fighting against; they banned exchanges, they banned mining, but it looks like what they're saying is, and the emphasis is on the word 'all,' all cryptoreated transactions are illegal. To me, that means anytime you want to trade it, be it for goods and services or trading with friends, um, any kind of cryptoreated transactions are legal. And I mean, just looking at the price, it doesn't seem to have hit Bitcoin that hard. Right now, we're looking at a drop of 3% of still 43,351. How important is the Chinese market to Bitcoin?"
"The Chinese market is extremely important, and you know, the question is how, how, how well China will be able to enforce this. I do wonder, though, Matt, whether this is where we, whether we are talking about a ban of transactions or a ban of ownership, because if ownership is still legal, then effectively you will have to be able to trade it somehow. But if it's about transactions, and I won't be able to pay for goods and services with it, then it's an escalation, but not as serious as it had been, right? Because then it is no longer a financial instrument either, which it, for the most part, let's face it, Bitcoin is not used that much for transacting in the financial system. It is used as a financial asset, as a store of wealth.
It puts it, it puts it really in a gray area. This is like in the US, this was the issue with marijuana a lot. Um, in a lot of states you could own it, you could hold it, but you weren't allowed to buy it or sell it. So, the question was, how do I get it? Well, um, the law didn't make that clear. They just said you cannot buy it or sell it, but you can hold it. And that may be the same, uh, case with Bitcoin here.
Well, it's clear, it's clear which way the direction of travel is here in China, right? I think that for me is the message. We know that China is not keen on cryptocurrencies in general, particularly ones that they don't control. So, you know, central bank digital asset will be a completely different thing. But for the wide spectrum of cryptocurrencies, I don't think that they have made it clear that this is not something that they like."
"Eddie, the crackdown in China is not, unfortunately, limited to cryptocurrencies. They've been cracking down really, as our Tom McKenzie put it to us, on risk across the board, and that includes in the property sector, which raises the Evergrand question."
"We have no idea what happened with the dollar coupon bond payment yesterday, whether or not they actually met that deadline. What happens in the next 24-48 hours from China in general?
I think we have to wait and see. We have to wait and see whether there is any contagion that comes from this. And yes, I think, you know, the Chinese system, it's uncomfortable bedfellows with, uh, with capitalism in general, and therefore, you know, it's a hard case for them to make, um, in general, that, you know, trading and free markets and letting people speculate as much as they want. So, some sort of crackdown is possible. But for the Evergrand fallout, I think it is possible that, you know, China contains this. It is not something that they cannot prevent the spillovers if they wanted to. So, you know, whether the particular bondholders will lose money, that isn't but one question, but they can stop the financial system from seizing up."
China is well aware of the potential of blockchain technology and has even introduced its own digital currency, the digital yen. Also, the Chinese company Tencent had already launched a program called Cocoin in 2007, which was used in its own messaging service QQ and also open its own secondary market. As a result, in 2009, the Chinese government banned the use of digital currencies for the purchase of real goods and services. Bitcoin was one of them, but was not explicitly mentioned in the ban.
However, the fact that the Chinese population already has experience with digital currencies worked in their favor. China has therefore became the center of the young crypto industry over the years. Meanwhile, the Chinese government decided to wait for the development of digital coin, which in turn opened up opportunities for crypto companies to explore in new ways.
The first Chinese Bitcoin exchange, BTC China, was founded in 2011, followed by the crypto platforms Hui and Bitmain in 2013, with companies such as BYU immediately accepting Bitcoin payments. This in turn attracted the attention of China's currency regulators. In December 2013, they announced that Chinese financial institutions would no longer be allowed to process Bitcoin transactions. They declared Bitcoin an illegal means of payment.
This announcement came at a time when Bitcoin trading had already taken off considerably, and the Bitcoin price exceeded the $1,000 mark for the first time almost 10 days before the ban. After the announcement, Bitcoin's value on the world's largest Bitcoin exchange at the time crashed by over 30%. For crypto industry insiders, China's cryptoban did not come as a complete surprise. Bitcoin mining, however, was excluded from the ban. This was still allowed, and favorable conditions quickly made China an El Dorado for Bitcoin mining companies. Although the regulator did not prevent individuals from trading Bitcoin, they advised those involved to be aware of the associated risks.
We know that China has been taking steps in this direction, but this is incredibly dramatic. I mean, what is your take on this? What does this mean for even a company like Falcon X?
"Sure. So, you know, I think China has been banning cryptocurrency for a number of years now. First in 2013, 2017. This is not the first time they've done so this year. And for an authoritarian regime that's trying to promote their digital wan, and keeping in mind that the China national holiday is next week, their crackdown on crypto is what I would really align with Senator Pat Tumi. A big opportunity for the United States and a reminder of our structural advantage over China in terms of, you know, just what we've seen historically to what Ed mentioned. This definitely wasn't as large of a move as we've seen, uh, you know, prior times in market movements. We see a red candlestick down, um, and panic initially, uh, followed by a quick buyback and market recovery, uh, for BTC largely buy side, uh, led by Asia-based hedge funds, and for US, um, institutions across a number of personas. And for ETH, we're seeing a much larger hit with a much slower buyback, uh, driven by proprietary funds."
"Who are the winners and losers here? And if you could get into some coins specifically, you know, that would certainly help us better understand the situation."
"Yeah, that's a really, really good question. You know, I think, uh, what we were seeing, it was, you know, a slower last two months historically, uh, for us on the volume side. We saw seven times more volume today, um, than we had seen across, you know, a number of weeks where we had a lot of conferences both in traditional finance and cryptocurrency. Uh, layer ones are definitely top of mind. I know, uh, you have spoken, um, you know, about, uh, layer ones historically in the past, you know, Ethereum, but also, uh, things like Avalanche, Salana, uh, Atom, as well as Luna, um, in addition to Bitcoin, uh, and then some tokens outside of that, uh, primarily looking at, uh, renewed interests in some of the play-to-earn tokens like YG or Axi Infinity."
"And you know, China is saying they're going to investigate anyone working for overseas cryptocurrency exchanges as well. Would any Falcon X employees fall under that umbrella? I mean, what does this mean for your employees and the way that you operate as a company?"
"Yeah, so Falcon X today, uh, we do have offices, uh, in the US, as well as our Asia office, uh, in India. So, uh, not a direct impact to our business. Uh, but I think that's definitely top of mind for any business, uh, that may have, um, any employees sitting in China, as you mentioned.
Now, if, you know, obviously this is happening in Asia, which used to be sort of the center of crypto innovation. We're preparing for tougher regulation here in the United States. We're preparing for tougher regulation on crypto in Europe. If that's the case and you see a broad-based crackdown, then where do you think the growth is going to come from?"
"Yeah, that's a really good question. And I think, you know, if we use just China mining as an example of this, uh, we saw China ban mining, and we actually saw a number of those miners come to the United States. So, hash rate is almost 70% to what it was prior to the ban. So, we've almost had a full comeback, uh, from that, and a lot of the miners today are in the US. And so, uh, we really saw that innovation come to the United States, and again, going back to that, really an opportunity for the US to show that we're at the forefront of working, uh, with this industry, uh, to spark innovation. Um, I think across the board everyone's trying to protect consumers; that is top of mind for any company in this space. How do we do so without stifling innovation?"
In 2015, Chinese Bitcoin mining companies made up half of the Bitcoin hash rate. The first additional cryptocurrencies to be exchanged through so-called Initial Coin Offerings (ICO) were those of the digital currency. In autumn 2017, Chinese ICOs has raised over $400 million, alerting the Chinese government.
In an attempt to support the weakening UN and prevent the illegal outflow of money from China, the country's central bank began investigating the activities of crypto exchanges in January 2017. As a result, the investigation focused on the stock exchanges' approach to foreign exchange management and anti-money laundering. The PBOC considered ICOs to be an illegal fundraising mechanism. It banned ICO platforms from issuing ICO tokens and ordered that the funds raised through ICOs should be returned to investors. Among other things, the regulator found that ICOs threatened the stability of the country's economy and pose a risk of business failure. The order also stipulated that financial institutions and non-bank payment companies may not offer services that support token-based fundraising activities.
While China's crypto community was still processing this new reality, regulators issued another directive. Only two weeks later, crypto exchanges that allowed the exchange of fiat to cryptocurrency were definitively banned. As a result, many Bitcoin platforms moved their activities abroad, while others were forced to close their platforms completely.
"What did you think when you heard about China's move?"
"I think, you know, we've seen the resiliency of the crypto markets, uh, to sort of changing regulation, uh, and specifically changing regulation in China several times before. Uh, it's very hard to eventually predict, you know, how any change impacts the gatekeepers or the various players in the market, but it's very clear that it's impossible to regulate Bitcoin itself as the protocol and people's usage of sort of the decentralized protocol, whether it's Bitcoin or others.
I think in general, there's a lot of discussion about the fact that, you know, in September 2017, there was also sort of a big China ban on crypto on exchanges. And after that, we saw sort of the first big crypto rally of 2017, of Bitcoin reaching back then the records of, uh, 2017. I think, you know, sometimes when you think about regulating Bitcoin, it's like, you know, a multiple-headed monster. You try to cut its head, and then you get five additional heads. So, it's very interesting to see that resiliency of the protocol itself.
Yeah, you definitely just called Bitcoin Hydra, but that's cool. We'll just go with that. Um, but to your point, that's going to be the bull's point that there's going to be lots of different avenues and lots of different people who want to wind up trading Bitcoin. If China really cracks down and says you can't own it, which they didn't say, but say they say you can't own it, you can't use it at all, and you can't trade it, how does that not have a material impact on the price and the volume that it can trade with?"
"You know, I think the global economy as a global economy is much bigger than any single state. We're seeing a transition globally, by the way, in capital markets as well. From capital markets being hyper local, where people only trade locally, to capital markets being global, and then obviously crypto markets are hyper global, the opposite of local capital markets. Uh, there's definitely, you know, there's always going to be impact of various regulations in the crypto market, but I think we'll also see again the resilience of a global monetary decentralized system. And there's going to be a shift that we started seeing, you know, an exciting shift this year more towards DeFi, to decentralized finance, to various protocols. I think this will shift the industry more towards DeFi."
"Of course, the potential, potential bigger risk for cryptocurrencies. Uh, and I think we may agree that other cryptocurrencies are the bigger threat to, uh, to central banks rather than Bitcoin, which is kind of in a class of its own for better or worse. But the risk is the other central banks, notably the Federal Reserve and certainly the ECB, weighing in and actually deciding how and when and in what form these things can trade, and whether the central banks want their own fiat-based digital currency, which could happen. How big a risk is that? And is that some of what we're seeing priced in here?"
"So, you know, as always, I'm an optimist, so any risk is an opportunity. There's no doubt we're seeing, you know, the genies out of the bottle. We're seeing the digitization of money. We're seeing digital transformation happening to money, which is the biggest digital transformation of everything. And I think the blockchain technology represents that shift. Bitcoin represents a new type of global commodity. Uh, and regulators will look for ways to regulate and governments to innovate. Uh, I think we'll see a lot of central banks and governments launching their own digital currencies. I think this will run in parallel to what we call today the crypto markets at a different, it's a different type of an asset. Uh, but I think, you know, this process of moving the entire monetary system into the digital realm is definitely something, sort of an arms race between a lot of different countries around the world."
"Last question here, quickly. Um, since China made that announcement, what kind of trading have you seen on your platform?"
"Well, we generally see, uh, trading patterns sort of really reflect with volatility. So, as volatility is higher, we see more trading activity. Uh, and as price goes up, so, you know, we've seen in May that correction that lowered prices of Bitcoin from all-time high after the mining ban. Then we've seen an awakening on a lot of the DeFi protocols in the beginning of August, which sort of revived a lot of, uh, new protocols, as well as Bitcoin price and ETH reaching almost 4,000 again. Uh, and I think now with that correction, we're seeing markets that are a bit softer than they were a month ago."
As a result of such developments, some China-based exchanges relocated their operations to other countries, while others had to close their businesses.
In April 2019, China's National Development and Reform Commission (NDRC) identified Bitcoin mining as an undesirable industry in its preliminary list of sectors that should be promoted, restricted, or eliminated by local governments. Bitcoin mining, a computerintensive process of validating Bitcoin transactions in order to receive newly coined Bitcoin as a reward, built into the catalog of industry that the agency deemed particularly harmful to the environment.
As might be expected, this move caused some panic given that a significant percentage of Bitcoin mining rigs were made in China. Moreover, more than half of the world's Bitcoin mining power was located in China, as operators there had access to cheap electricity. Although the NDRC eventually dropped Bitcoin mining from his final draft after much deliberation, the whole episode was an initial step of what was to come.
"Talk us through some of these latest lines coming out from China. How is this different? Why do you think the market was quick to shrug it off?"
"Yeah, good morning, Ivonne. So, good to be back. The latest ban is just an extension of further tightening of the crypto policies in China. Uh, this has been rumored since the summertime that China will eventually get cut off in terms of the crypto exchanges market. As people may know, four years ago, the PBOC and the regulators banned domestic exchanges in China. And then what happened was many of the exchanges just moved offshore, but yet we're still servicing people within mainland China by requiring them to go through VPN access and so on.
So, this ban, when they talk about crypto transactions, I think there's a slight mistransation. It's really emphasized about crypto buying and selling, the crypto purchasing, the crypto exchange transactions that happen on the exchange platforms. So, I believe that private exchanges, private buys, are still allowed. It's just that the enterpriseled exchanges, that action is now deemed, um, you know, illegal, and they will prosecute. So, this is why recently, in the recent last two days, the major exchange platforms around China have all announced the stopping of registration of Chinese users."
"Why do you think China continues to double down on this, Bobby? Is it still concerns about money laundering and what, you know, crypto can actually, the risk that it could bring, or is it more broaden now? Is it about energy consumption or even the threat of a digital, a threat to the digital remn? What do you think is motivating Beijing?"
"Yeah, I think it has to do with the controlled currency, as you know, in a controlled regime with, uh, with forex, uh, you know, controlled foreign currencies, they really don't want any loopholes where people can use a digital currency vehicle to move assets abroad. So, I think that's the main reason is just to retain the control over the economy, the control over the finances, uh, and the outflow of money, the inflow and outflow of money. But in the end, it's not about energy. I think they banned the mining of crypto earlier this year for the purpose of alignment with all of the crypto, the tightening ban. But as I've said before, this is actually not the file final nail in the coffin, which would be the so-called making crypto assets illegal to hold as well. So, that clearly has not happened yet."
"We've reported for weeks and months now about miners in China that are just packing up their bags and going. Are you able to track? I mean, you're on the ground in Shanghai. How much activity has actually shifted out of the country now?"
"So much of the traditional, what they call proof of power, uh, cryptocurrency mining that has moved abroad. So, this would be like the Bitcoin, the Litecoin, and the Ethereum. Uh, there's a new category of mining where it involves proof of stake, where it involves like storage, uh, the likes of Filecoin and other derivatives. Uh, those are still happening in China because it's much harder to detect. These are machines that are regular computers with, uh, storage, you know, solid state drives and so on. And a lot of that activity is still happening in China, but it's hard to really classify that as traditional proof of power, proof of work, uh, mining."
"So, Bobby, just talk us through in terms of what your outlook is right now. You talked about, you know, similar crackdowns we've seen from Beijing has led to a boom when it comes to Bitcoin prices. Is this time very much the same, you think?"
"Yeah, it's kind of like, you know, when the rumor, when the rumor is, uh, so what is it? Sell on rumor, buy on news. That's kind of what's happening right now. The rumor has been in the works for several months now that China will have a very tight crackdown on Bitcoin this year, and, you know, the hammer finally dropped. Uh, the timing is reminiscent of what happened in 2017 when the crackdown came in September, in early September, and then, of course, we knew that the Bitcoin prices rallied to a multi-year high, uh, at the end of 2017. And this year, no different, that, uh, with the crackdown now announced, sort of the bad news is now out of the way, uh, the market is reacting and processing, digesting that information. And I think I'm very bullish on Bitcoin, especially for endofear rally, a FOMO rally this year. So, I expect Bitcoin prices to break out again, uh, in the next few weeks and months."
"All right. We're still hovering around that 43,000 level. We tumbled below that kind of level there over the weekend. The all..."
"Yeah. I'm just wondering what, what, you know, and we're still far from that all-time high around 60, 63,000. I mean, where do you think prices are really going to go if you're talking about year-end rallies now?"
"So, I, uh, I think it'll easily go over $100,000, and then depending on how sharp the rally is, it's also likely to even touch 200 or even go above that. Now, obviously, going above $200,000 is a huge milestone.
So, there'll be a lot of, uh, media coverage, and that's what leads to a what they call a 'fear of missing out' rally. So, generally that happens every few years, and I think, uh, you know, FOMO rally for Bitcoin has been due for a long time now."
"I mean, Bobby, maybe just as an end, we've seen this regulatory crackdown in China from everything from fintech to cryptos. Does it change in any way how you operate now, uh, and your business with Ballet?"
"Yeah, my business is selling hardware wallets. So, we are not impacted by this. And also, you know, for this being my second startup from the outset, I knew to position our business to not rely on the China market. So, after the earlier crackdown, our sales in China have indeed come down. But for me, it's not a big issue because we've always relied on the international global market for cryptocurrency. So, for wallet makers and other businesses that don't concentrate their activity in China, this crackdown doesn't make a difference. However, for those companies that are focused on the China market, I think this is tougher for them."
Following the State Council's declaration, provincial governments began taking proactive measures to stop crypto mining. The regulators justified the new action mainly on the grounds that Bitcoin is very energyintensive and poses a threat to the country's environment of goals. The fact that the crypto industry is intensively searching for a more environmentally friendly version of Bitcoin has already been presented with the China green token project.
Chia has been dubbed the green altcoin.
"How exactly is it greener than Bitcoin?"
"Well, first of all, instead of relying on, uh, electricity and, uh, custom hardware to prove that you're correctly validating the chain, we instead rely on unused hard drive space. And what you do is you fill your space with what is the equivalent of a bingo card, and you just store it on your drive until you happen to win that challenge and get the chance to validate a transaction. And hard drives use significantly less power. Um, if all the hard drives that we're going to ship this year, a whole zetabyte worth, uh, were compared to just, say, Ethereum, that's like onetenth the total energy usage per year."
"So, if Chia really takes off, though, then doesn't that create a need for more storage, a need for more hard drives, which ultimately creates more waste, and then that's another problem for the environment?"
"Well, look, there's two things that are important here. Thing one is, you know, better than what? You know, a bicycle is much more efficient than a Tesla, but that doesn't mean that we don't want Teslas to compete with SUVs. Um, we are a much greener alternative with more security, in fact, than both Bitcoin and Ethereum. We have about 500,000 nodes compared to Bitcoin's 40,000 nodes. But actually, what we're doing is we're putting used hard drives back in service. You, when Facebook or Box, uh, gets to the four-year end of life of those drives, they get sold to recyclers. And what's been happening is farmers been buying those, and instead of them going to a landfill, are farming them."
"So, you just announced plans to go public, and as I understand it, the plan is to become an exchange, a broader payment system. Can you talk to us about what the overall ambitions are?"
"Yeah, we believe that blockchain should have gotten product market fit in 2017, but there were regulatory problems, and the functionality that was available on most chains really wasn't yet ready for enterprise or government adoption. Our new onchain programming environment, CHISP, is very much designed to support things like central bank digital currencies, uh, distributed exchanges. So, things like carbon credit markets, later equities.
And one of the things we did very differently is we've taken the company form to, you know, drive the adoption of a blockchain. Uh, we expect to build kind of a Red Hat business where we're supporting the adoption of blockchain infrastructure for the people who need it. And our strategy to go public is very much a product strategy for a lot of companies. Going public is an exit for us. It actually, uh, helps clarify the regulations. It kind of makes it more clear that this is our equity versus these are our coins, which are a commodity, and it also, uh, allows our users to, for example, use our equity to, uh, shield themselves from some of the coin volatility that these coins often have."
"Now, there's been some backlash against Chia for being a for-profit company. Backlash around the timing of the IPO. Um, Chia's founder Bram Cohen, also the inventor of Bit Torrent, recently tweeted, "I'd like to emphasize we aren't selling any tokens, have raised money under normal investment terms, and Chia is not a security. Some community members are being obnoxiously entitled, and should knock it off." What's your response to the push back?"
"Well, we are trying, we are trying to build a real community of civility and actual interest in the technology. You know, this is a 30-plus-year opportunity, and we're no rush to try to be there first. What we want to do is to actually go and solve the real problems people have. Things like being able to transfer money between banks in two different countries. Uh, things like sending money home to Guatemala. You know, these things should be easier to do than cash. They should be cheaper than they currently are. And those are the things we're really focused on.
You know, there certainly is a bit of a gold rush effect where people want to get in and get in early for Chia farming, and Chia farming is very approachable. Um, it's not super easy, not yet. We will make it easier, but I think there's some frustration, and especially around, uh, detail, which is pooling, allowing people to kind of share their rewards, but we're going to have that for people very shortly."
"You say it's greener than Bitcoin. Is it greener than Ethereum 2?"
"So, the thing about Ethereum 2 is that, well, it's going to be available in three months for the last two years. Uh, we don't think proof of stake is actually secure when you start talking about inner government kind of, uh, competitions. Uh, proof of stake has all sorts of problems that really Nakamoto consensus, which is what Bitcoin is and which we are evolved from, really fixed. Um, you know, there are problems like every proofofstake chain is available for 50.1% of the value of the chain, and if you were to buy it, you own it for the future. Uh, where like Bitcoin or Chia can recover from a 51% attack and keep going.
Now, obviously, there's been a lot of volatility in the crypto market in general, but there's been the Chiacoin itself has been super volatile since launch. What do you make of that?"
"Well, I think it was trying to find a price. Uh, and you know, I think it has now found a price. If you kind of look at over the last two weeks, it's been in a, call it, $600 to $1,100 range. In crypto, that's a narrow range. For other folks, that's not as usual a range that they're used to."
"So, I do want to ask you one last question about Elon Musk. You mentioned Tesla earlier, and obviously Elon Musk has had a lot of influence on price fluctuations over the last several weeks. Do you think that's a good thing, or is that unhealthy?"
"Well, you know, I think at least Elon was looking at the right issues, which are that cryptocurrency is, uh, the way of the future, but that there are real concerns around the carbon footprint that Ethereum and Bitcoin have today. Um, but, you know, I will say it this way, celebrities will be celebrities. You know, we're very much more focused on actually getting this blockchain adopted by real users."
"So, you think he's just a celebrity?"
"Well, certainly not in the rocket business or in the car business or the solar business, but in the blockchain space, uh, you know, I like to joke, uh, he once tweeted that, uh, he wanted blockchains to be 10 times faster and 10 times cheaper. And I'm hoping that my Plaid Model S is going to be 10 times cheaper, too.
But the answer to the question of environmental sustainability is not the only key to success. China keeps providing environmental reasons to introduce more regulations, and above all, which countries are leading in this respect."
"Is finding an answer to the environmental sustainability part of the piece really crucial here?"
"Good morning. Thanks for having me on the show. It's great to be here, honey. And, you know, I think this is a really important question for all industries. Uh, and, you know, crypto is not excluded from that set. Uh, you know, we don't stand alone. So, you know, I think the really interesting thing about, uh, crypto is that it's an almost kind of, um, marginal efficiency, uh, maximalist. So, it is seeking the lowest sources of power, and we know that renewables are. So, you know, the latest stats that I've seen are that, um, crypto miners, uh, in particular Bitcoin mining, which has the most impost, um, is in the 50 to 60% range for use of renewables, which is well above, you know, industry averages. That being said, it is a long way to go there.
And I think it is a key part of the story for crypto because, you know, this latest, uh, ban from China, which you mentioned, one of several that we've seen, um, it's, you know, that's driven, I think, from, but maybe they're tied up, but I think, you know, the China van has, it's part of a bigger story, uh, for China in general, and it's something that we're, you know, obviously not happy to see. But from the energy point of view, um, what that has meant, and the previous bans in China for mining, you know, earlier this year, has meant that mining has moved offshore. It's now, you know, accounts for only 45% of mining is in China. And that will likely, uh, likely reduce over time. And the more that mining moves offshore out of China, and the more that it moves into places where there's faster and faster uptake of renewables, uh, and, uh, that the US is one of those local, uh, we'll see that energy mix change for crypto.
Uh, and the last thing I'll say on this is that, um, the different blockchains that exist out there, you know, Bitcoin is one of them. Um, you might have heard of Ethereum, I'm sure. Um, these are, they're looking at alternative ways to, uh, secure the network. And so, proof of stake, which is a, it's a different method for, uh, securing these transactions and securing the distributed ledger, it, a lot of new technologies, new coins, and existing coins are transitioning to this type of methodology, and I think that will have an impact."
"Yeah. I was going to ask you about proof of stake because even with the proof ofstake blockchains, they're not created equally, right? Ethereum actually ranks pretty poorly out of some of the others. Is it really kind of the environmental savior here?"
"Uh, it's part of the story. I think the main, uh, the savior here is, uh, generation needs to change to renewables, and, uh, crypto will move even faster because we know that, uh, renewable energy is the cheapest source of energy now. Uh, and every new project, in fact, there are some Australian projects that are really quite interesting modular mining projects; they're part of the, they can actually empower the energy transition. I think, you know, crypto being something that, uh, can be located, crypto miners, that is, can be, um, located on site. Uh, we're seeing projects that are, you know, uh, setting up on site dealing with excess, excess supply. You know, we've got excess supply issues in Australia when it comes to peak, uh, peak solar in the middle of the day, and you can, um, leverage some modular consumption here. So, Bitcoin is not just the enemy. It's part of, it's part of a transition, and it's quite an interesting tool in that. But the real issue is generation, and we're seeing that change, and I think crypto will follow.
We have seen this new experiment of, uh, crossborder, uh, digital currency by the Bank of International Settlements, not to mention the monetary authorities of China and Hong Kong. What will digital currencies do to other crypto assets?"
"It's a really interesting question because, you know, we've seen the announcement recently that, you know, uh, platforms like Twitter, uh, have added crypto to their network. Um, you can tip people on the platform using Bitcoin. Uh, and there were some really interesting videos showing people, uh, tipping, uh, crossber. So, all of a sudden, you know, Twitter is now a crossber, uh, payments platform as well as a social media network. And that's the power of blockchain and crypto. It's native to the internet, and it can plug into any app.
So, I think that the rise of central bank digital currencies is also something interesting that what has been proven over the last 12 to 24 months, um, by the rise of, uh, stable coins and the use of crypto in crossber flows, is that it's a superior form of money. It works better in that context. And so, you're going to see, uh, central banks take use, make use of that technology. You know, uh, it's a new internet. It's a new rail. So, these things will coexist. Unfortunately, in a place like China, they're trying to enforce, uh, one type of currency. We've seen the attitudes to tech in general. Uh, and that's unfortunate thing for, I think, for emerging businesses and in the Chinese community there who are so quick to embrace new technology, right? So, you know, crypto and central bank digital currencies will coexist in the future.
When it comes to embracing new technologies, uh, developing their digital currencies, and perhaps the development of regulations as well, which countries are leading?"
"Uh, I mean, look, we're a Kraken's a really proud US doicile business, and we have a footprint here in Australia. We've got a local footprint here and in many other countries, and different countries have different flavors, and the regulatory framework is something that's, um, that shifts and changes. And so, that has a big part to play in terms of adoption.
Right now, if you're going to tell me who the most, um, advanced crypto bit countries are, you can't not mention, um, countries that have adopted it as legal tender, like El Salvador. But, you know, there's so much innovation coming out of Europe, coming out, um, of Switzerland, where there's a lot of, uh, doiciled foundations for some of the most interesting technologies. The US has a huge amount of vibrant and exciting projects. It's a global technology, and where the people are, where the people are, is what matters. And interestingly, there's some really fascinating projects coming out of Australia as well."
For most of 2020, the Chinese government was tightening its grip on cryptocurrency exchange activities within its border as part of an ongoing campaign to fight money laundering and fraud. In August, the PBOC announced its intention to block over 100 foreign websites offering crypto exchanges.
The problem facing China's crypto industry in 2021 began in May when the State Council doubled down on previous crypto policies by calling for restrictions on crypto mining and trading. Previously, provincial authorities in the Inner Mongolia, Shing Jang, and Suchan provinces, all of which were major Bitcoin mining hubs, had begun to introduce measures restricting the operation of Bitcoin miners. Similar to the prosecution of crypto exchange in 2017, Bitcoin miners were forced to either permanently stop operating or relocate to other crypto-friendly countries. Since around 50% of the world's Bitcoin mining output was generated in China before the ban, the global Bitcoin economy felt the impact of China's Bitcoin mining ban as expected.
"Just give us your take about Beijing walking away from crypto assets."
"Well, good morning, and thank you very much for having me. Well, even if you take it aside from the whole crypto issue, I think as a soft power move, this may perhaps be a misstep from China. Um, as countries, uh, you know, that are trying to be within its sphere of influence. If you look at the likes of El Salvador, if you look at Laos, if you look at Afghanistan, those are all countries that are moving towards the use of cryptocurrency just as China is pulling back. Now, where that's concerning for the Chinese is that they've put so much effort into their soft powers, um, you know, their outreach that they've been conducting globally, particularly if you look at their efforts that they've done in Latin America. And as they're pulling back in these countries and regions are moving in, that's going to cause a problem for them down the line."
"Yeah, we have seen even FTX, the exchange, uh, decision to move its headquarters from Hong Kong to the Bahamas, uh, those moves to LATAM, as you mentioned. What does this mean practically speaking for all of these companies that have relations with China, Chinese users as well?"
"Oh, that's true. If you look at, um, both..."
Horby and OKX, OK Exchange, two well-known behemoths from China that trading crypto, we saw the impact on their token in trading over the weekend. Both experienced considerable drops in value, and certainly for companies that have that exposure to China with Chinese clients, they will be scrambling over the weekend and onwards to try and withdraw their positions. It is of deep concern for anyone with that level of exposure.
But I think what's important is to frame it within the crypto industry itself. The industry has proven its robustness time and again. This is the second time this year that China has effectively tried to ban crypto, and the fourth time since 2013. Yes, absolutely. The industry saw a drop-off in Bitcoin price in June when the last ban came through, but we can see what happened in the months subsequent. And if you look at trading over the course of the weekend in Bitcoin, yes, there was an impact, as you would expect, but we're also reading off the back of what's happening with Evergrande and the wider implications there.
What instead this tells us is further proof of the robustness when it comes to cryptocurrency, particularly as it takes its place on the global stage. So I think that, um, for us, we're looking at what happens in China with great interest, but equally and with certain measure, we're looking at what's happening out of the US and where they're taking their regulation, particularly considering how, you know, the pivot that we've seen over the course of this year westward towards Bitcoin mining and regulation overall. So yes, absolutely. If I was a company that had exposure to China and I was related to cryptocurrency, I would be concerned. However, for the rest of this wider industry, we're rolling with the punches.
And Caroline, you take a look at the long-term trend direction when it comes to Bitcoin, right? We're still pretty far off the all-time high of above $60,000. Do you see that market recovery, and how much of it has really priced in the news out of China, given, yes, it is more severe, but we have been hearing variations of this sentiment since about 2019?
Yeah, absolutely. I think, you know, I think the price dip that we saw is probably indicative. I mean, there was, it was less than 10%. I think, I think it was between 5 to 7% drop-off over the weekend in the price. But counter that then with the other news that came out with regards to Twitter, which has said it will now allow its users to send and receive Bitcoin. So while you've got the negative coming out of China, you also, on the other hand, have got 330 million Twitter users who will now be able to use Bitcoin as part of their social media transactions. So it's certainly, you know, kind of climbing in its ascendancy. Do I think we're going to see the $60,000 price point again? The trend would suggest that that's a direction that we're heading in. Do I think over the longer term that we're going to see the use case for Bitcoin? Absolutely. But I think anyone would be, um, rather foolhardy to say that this is it. This is the one and only. I think that time has shown us, and history and human civilization has shown us, that we like to change what we use as a method of value exchange. And certainly, I would imagine that for Bitcoin, there's going to be many pretenders to its crown.
So when it comes to Australia, of course, there's been lots of criticisms from within the crypto industry that regulation, or I guess a nurturing ecosystem, has fallen behind compared to other places like Singapore or even parts of the Middle East, right? Do you expect there to be a more fruitful conversation about cryptocurrency, or is there a chance that we'll see some of these jurisdictions taking China's lead?
Well, this is the real opportunity for Australia, and this is certainly a message that the industry has been trying to deliver to both government and regulators. Um, and we wait with interest to see the report that's due to come out from the Senate this month, actually, sorry, in October, next month. This is the real opportunity with China retreating from the field. There is a chance now for countries such as Australia to really step forward. We've also got the opportunity when it comes to, kind of, the green mining of Bitcoin with all the green energy solutions that are available here. If you look at the opportunity, for example, that Iran has taken, it now contributes 4.5% of Bitcoin mining globally, according to figures released from Elliptic. That shows the opportunity that is there that other nations are stepping forward. But we then have to ask ourselves, do we want this to come out of countries such as Iran, El Salvador, etc., or do we feel as though there's an opportunity for Australia to step forward, particularly when you look at other local countries to us here in Asia Pacific? You look at where Singapore has been going, um, in particular, which has been very much a beacon for the industry. I think there's there's an opportunity for greater partnership, collaboration, and supposed to find the Australian way forward with this, um, and certainly, you know, that's something the industry is very strongly pushing forward.
>> China also trying to hammer down on some of the crypto mining. How do prices respond?
>> Um, it has been an incredibly volatile week for for Bitcoin, and this latest news from China just really hammered it again. Um, it's the second time this week that news out of China has really impacted the cryptocurrency. Um, first with it saying that it wouldn't allow financial institutions to use it and we're going to crack down on it more, and now with this latest news about cracking down on mining, and it's, it's really thrown the cryptocurrency for another loop.
>> Yeah, I mean, this is testing a lot of folks out there. Uh, and good thing crypto doesn't trade on weekends, right?
>> Trick question.
>> It's a trick question.
>> I wish that.
>> Go ahead. Oh, I just, I, I wish that, uh, that cryptocurrency took a break on the weekends, but yeah, it's, uh, continues to trade. And so this weekend, we might even see, um, more volatile moves, just given that usually on weekends, um, there is lighter volumes, and so sometimes we see even more volatility.
Then, Claire, we love though that it trades on weekends. That means that you as a reporter have a job on Saturday and Sunday, which we know that you love. Talk to us though about just in terms of how we think about this going forward. When you get comments from China, any little pause really makes the currency or the crypto space so volatile. What does this mean really going forward?
>> Well, it seems like the only thing that's certain is that, you know, volatility probably will continue for Bitcoin. Um, from what I've heard talking with investors is that around these movements with Bitcoin, it, it does impact the broader market in a way. Obviously, not the main factor, but I think it's hard for, um, investors trading stocks and bonds to see how wild things are with Bitcoin and not be impacted somehow. And so we have seen a bit of a, um, risk-off mood sometimes when Bitcoin is getting hammered. Um, and that could continue. I, I am curious though, we, I mean, we have seen the correlations, particularly this week and last week, really sort of move in lockstep with regards to crypto and then some of the other risk assets like equities. Here and there are a lot of people that used to talk about how crypto could sort of be a hedge to some of the normal equity market volatility here. If this correlation, if this correlation sort of persists here, is that going to create maybe a little bit further of a shakeout? Is anyone talking about that yet?
>> A little bit. I think the, the main thing people are focused on is inflation and are very much looking at signs of that. And, you know, there's a question of how does Bitcoin react when we see further inflation. Um, obviously, we know that tech doesn't like measures of inflation rising. Um, but it's, I, I think the idea of Bitcoin as a hedge is still sort of evolving, and people are trying to figure out, um, what its price movement is correlated with most often.
As if banning Bitcoin mining wasn't enough, Chinese regulators decided to ban crypto trading completely. In September, unlike previous bans on crypto transactions, the country's central bank, in cooperation with nine other government agencies, including the police and the Supreme Court, eliminated all doubts about the country's attitude to cryptocurrencies, leaving absolutely nothing for misinterpretation. The regulators have classified all crypto transactions, both from crypto to crypto and vice versa, trading and investments, as illegal, regardless of whether they were conducted through local or foreign platforms.
This includes all Bitcoin, Ethereum, and Tether transactions. Chinese nationals working in marketing or technical support for foreign exchanges may now face prosecution. The NDRC has outlined plans to exit crypto mining completely by seizing investment in the sector, increasing electricity costs, and denying new companies access to the industry. As Katie mentioned, we've seen this story play out somewhat before. Not too big of a surprise. Still, is this a, is a pretty big setback for the crypto community?
>> You're right, and thank you so much for having me on. This is not the first time that Chinese regulators have made such a statement. Previous attempts to outlaw crypto really went nowhere. I do think that it's notable because it comes not long after the miners fled Inner Mongolia. So there's a bit more dynamics at play, I think, in regards to price action and some of the, the deeply rooted fundamentals regarding the mining.
And so Stefan, I'm curious if you look at the price action today, you saw Bitcoin drop close to 9%, but you saw other coins really drop a lot more. I mean, if I look at Ether, I think it got close to around 11% or so. I'm curious why Bitcoin was the relative outperformer this morning. Is it somewhat of a haven at this point?
>> I think it's very reasonable to think that, uh, that Bitcoin is a haven. I also think that, uh, you know, there's much more of a fundamental thesis around Bitcoin. It's a more mature asset. So to see it find kind of fundamental support, you know, is more, is more understandable. People do have financial metric, sorry, fundamental metrics they apply to Bitcoin. So they have their levels, much more so than I think they do in some of these altcoins that are a lot newer. You know, they're based on, you know, highly speculative use cases, etc., etc. So, I, I think it makes sense in these sell-offs that, you know, BTC, which is, uh, you know, which I think you could make a lot more fundamental arguments for, finds support sooner.
>> And so, Leah, just again focusing on the price action. So, even though this wasn't new news, you did see Bitcoin and other cryptocurrencies react. We are heading into the weekend, and we know that the crypto markets are wide open during the weekends, and that it tends to be a volatile time. What are you expecting? What could we be waking up to on Monday morning?
>> Yeah, absolutely. Well, assets appear to have found a floor, but as you mentioned, weekends tend to be volatile, and how they react is definitely anyone's guess. But, you know, to your point, you know, Bitcoin did drop about 10% before finding resistance at about $40,000, recovering to about $41,000. As mentioned, ETH sold off about 10% as well, remains well below $3,000, and those other altcoins are down even more. However, Cardano did seem to surge higher on the news, which is quite interesting. So, I, I think that it's, it's maybe anybody's guess, but we'll have a fun weekend for sure.
>> [snorts]
>> Savannah, I'm, I'm wondering about what this means for the opportunity that other countries have. If China's cracking down, could this be a good thing for other countries?
Yeah, I, I mean, I think that there was, I think one of the confusions around the Chinese crypto crackdown is that a lot of, you know, about a year ago, there were a wave of crypto proponents that suggested due to China's move into the digital yuan and the fact that they moved that ahead very quickly that they were pro-crypto. I mean, I really don't believe that that's ever been the case. I mean, as, as we know, China has been trying to crack down on crypto since 2013. They're a country with strict foreign exchange controls, and for an asset class like cryptocurrency, which is promising more financial freedom, you know, they've always disliked it. So, you know, I don't think that this, I, I really don't think this is an incremental shift in terms of the opportunity set because China's never wanted to be in crypto. But perhaps it'll change the perception in the US, as you mentioned earlier, that hey, you know, this is something we can get ahead of China in, and maybe that will be something that, uh, that that pushes regulators to have, you know, more favorable regulation towards the crypto companies. Um, but yeah, I don't think that, I really think that this is a rehash of prior, of prior statements, regulations, you know, as Leah suggested. So, I, I, I'm, I'm not seeing this as changing the opportunity set. And in fact, you know, I think the bigger news of the day was probably positive, which was, uh, which was the Twitter launch.
>> Well, yeah, go ahead, Katie.
>> No, Tim, you go ahead.
>> Why, why Stefan? Talk a little bit about that. This idea that you can actually tip using Bitcoin and through your Twitter account.
>> Yeah. Well, I mean, I'll think if you, if you,
>> came yesterday, we should know.
>> Yeah. And exactly. Within last kind of 24 hours, it's been enabled. I mean, you're talking about if you're, we're thinking about fundamental incremental increases in Bitcoin usage, right? So, we're saying that, you know, people in China who have been finding ways to use Bitcoin haven't been allowed to. So, call that flat. No change there. And now we've got this, uh, you know, this very well-known, high-profile firm that's applying Bitcoin for a real use case. I mean, it's, it's definitely incremental to its utility value as somewhat of, and in addition to that, you know, there's the, there's so many different arguments for Bitcoin, the store, the store value, payment mechanism. This is kind of a, you know, a new concept, and I think it's very interesting. And, and, you know, as Leah mentioned, we, we seem to be finding some support here, and perhaps, you know, those, those positive thoughts will prevail.
>> And Leah, speaking of use cases, speaking of other countries, I want to quickly get your thoughts on El Salvador because Bitcoin is actually legal tender in El Salvador. And I'm curious if you have countries such as China really trying to ban crypto entirely. Clearly, it's another country's legal tender. How is that going to work?
>> Yeah, very nuanced indeed. I, I will just note, Stefan, I agree with you. I think it's very exciting indeed that, uh, that Twitter integrated not only just Bitcoin tipping, but also Lightning. Um, to your point, Katie, this is interesting, I think, because this saber-rattling from China comes at a time when the digital yuan is starting to gain traction. In regards to what you're saying about El Salvador and why that matters, um, again, the problem with declaring Bitcoin illegal is that it's El Salvador's national currency, and people who conduct business between the two countries may be doing so in Bitcoin. Um, so I think that following El Salvador's move to make Bitcoin its national currency, a number of other nations, including Costa Rica, have been making similar moves and statements. Uh, a number of other countries, including Ukraine and Cuba, have either passed crypto regulations or, in the case of Panama and the US, are signaling that those rules are soon to arrive. So, you know, I think what it comes down to is markets have been made, and there are profits to be had. I think it's very hard to outlaw cryptocurrencies on a global scale.
Despite China's severe crackdown, the country has remained an important global crypto market. Chinese crypto wallets have received coins worth around $150 million so far. This means China remains second in the ranking, following the US, according to a report by analytics provider China Analysis. Henry Arlanian, crypto leader at PWC, said most crypto exchanges overseas still do not accept customers from the US. Now, exactly the same exchanges may have to ban customers based in China as well. For most global crypto exchanges, accepting customers from China has always been a gray market. Now that ambiguity has been eliminated. But even if large exchanges are forbidden to China-based traders, the decentralized structure of the exchanges makes it very difficult to stop people from holding anything in any country, Arlenian said. The PBOC is also preparing to launch an official digital renminbi in this field. The currency is to be launched in a trial run during the 2022 Winter Olympics. Jason Guthrie, head of digital investments at asset manager WisdomTree in Europe, said China's attempt to ban cryptocurrencies is just a continuation of a trend, but they are intensifying the rhetoric ahead of the launch of the digital renminbi. Edith Yung, a partner at Race Capital, talks to Bloomberg Technology's Emily Chang about future strategies for investing in China as a country faces turbulence and how the recent crackdown can be a good thing for the crypto ecosystem in the long-term perspective. I'm curious for you as an investor, how this China crackdown is impacting your strategy and where you're putting your money.
Well, personally, I take a very long-term view on on China. And obviously, news, hearing all these crackdown news about China on a daily basis almost. But I do want all investors to keep in mind that China is the second, still like the second largest biggest market in the world, over 1.4 billion people, $15 trillion GDP. Um, especially what I focus on in the venture space. Just look at Sequoia China. They did 96 deals in the last 90 days. So things definitely are not slowing down per se. But having said that, of course, everyone in China needs to play by the rules. Doesn't really matter that you're Alibaba or Meituan or Didi or even the BBC or the CIC. Um, no one can really outsmart or outplay the Chinese government. But having said that, particularly on SPAC and exit, um, really great to learn what's the latest going on with SPAC. Um, actually, one of my portfolio company called DayCook, mainly operate sort of the taste mate of China, they are actually going on a SPAC on NASDAQ very, very soon, merge with Ace Global. Um, that is still happening.
>> So, in some sense, I think.
>> Go ahead.
>> Would you say, would you say have you changed your strategy at all given the China crackdown? Are you putting in just as much as you would have, or are you changing where that money goes?
>> Um, I really want to go back to China because of COVID. I've been here for two years now and not able to go back really makes it really, really tough for me to invest in China. Um, mostly from a Race Capital strategy is to focus on early stage, put in early and support on infrastructure software. Um, right now, the world is so big, and everybody really works distributed and remotely, so it doesn't really matter if they're in China or not. But I have to say that most of the reinvestment lately has been mostly in Silicon Valley. We invested in DataBricks, we invested in FTX. Those are all super global and go to market in both worlds.
>> Well, it's interesting that you mentioned FTX because they recently moved their headquarters from Hong Kong to the Bahamas, in part because of this crackdown. And so I guess I'm curious, over the long term, how do you see this playing out in China? I mean, do you see the Chinese government easing up on some of these restrictions, or, um, if this is, you know, the long-term strategy, how do you think that impacts the tech ecosystem there long term?
>> I think the tech ecosystem needs to play by the rules. It doesn't really matter how big you are, you have to comply by Chinese law. And especially recently with this year, the data privacy protection law is a key, key thing. I think as an investor, you need to be aware of that. I don't think we should drift our investment strategy just because what's happening in China, but it's something that we have to keep in mind. There is certainly still tons of upside because the market is so big, but then at the same time, there could be some ceiling because of what's going on. Um, I do think that there's certain industries, particularly more more interesting for venture, particularly on the semiconductor and healthcare, because it's not really as close to data, um, consumer data, which is very, very sensitive in China. So therefore, um, being an investor, you just, we just need to be super nimble and pay attention to what's going on in China.
>> And what about crypto in particular? I mean, you know, trading, mining in China has become illegal. So is crypto a more extreme example? How do you see the crackdown there in impacting the broader landscape and investing?
>> So China always has a love-hate relationship with crypto. Um, and in 2008, um, that's when I was still going back to China full force. China was the number one in terms of crypto mining and was the number one in terms of crypto trading. And since 2018, uh, 2017, they banned ICO. 2018, they banned fiat to crypto, um, trading, which then then you started to see Binance crypto-to-crypto trading. In 2019 until today, um, crypto mining is all banned. So in that sense, the biggest difference I do wanted to point out is that when the first crackdown happened, it really impacted Bitcoin prices to about $3,000. Today, according to, um, you know, CoinGecko, is about $55,000 equivalent for Bitcoin. So I think that the crackdown in China on crypto, in some sense, is rebalancing the crypto ecosystem, and longer term, is actually a good thing for the blockchain ecosystem because now China's influence is actually getting less and less.
In recent years, it has become clear how resolutely China is acting against Bitcoin and other cryptocurrencies. While the policy of the People's Republic with regard to BTC was characterized by waiting and watching in the first few years, the negative attitude seems to be manifesting itself more and more due to the increasing popularity of crypto. Numerous sources point out that this could have something to do with fighting possible capital inflow. In addition, it has been known for a long time that China is working on its own digital currency, which is centrally in the hands of the authorities and is supposed to function in principle like conventional fiat money, only electronically. As a news agency DPA reports, the digital yuan is far advanced in its development and is already being used in some areas. It is therefore not surprising that the Chinese government is doing everything it can to ban crypto competition. Even during the pandemic of coronavirus, the Chinese government continued its opposition to Bitcoin and other cryptocurrencies and intensified its crackdown on illegal crypto activities. It has always claimed the fight against fraud and money laundering as the reason for its intense action. More and more foreign websites have been blocked by crypto exchanges to prevent domestic investors from trading cryptocurrencies and thus protect them from the risks of unregulated trading in cybercurrencies. Even though cryptocurrencies always react to every event described here with strong price fluctuations, Bitcoin's rising trend seems to be unbroken. We will have to wait and see whether it continues to do so.