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As you're all likely aware the crypto market recently experienced a major dip. The downwards trend was started by Mr. Musk, and his poor approach to communication, but the real downturn came from China. The Chinese governments decision to crackdown on Cryptocurrency is not a new one, but where before things were up in the air, now they're more certain. The Chinese central bank banned Cryptocurrency investments back in 2017, but now they've reemerged with the same message and a stern warning that they will take action if the transactions continue. Why is this a big deal?
China has the largest population out of any country in the world; a large population is a large market, and Chinese investors are likely dumping their crypto as we speak. Major sell offs explain the drop in price, but what does this mean for the rest of us? Well, crypto is essentially being sold at a discount right now. I say "discount" because the underlying value is obviously there. The Chinese government banned cryptocurrency because they know its potential. We are in the midst of a radical revolution, and it threatens those in power. Crypto brings with it the possibility of true financial freedom in the digital space. With crypto, individuals are given control over their financial decisions and the ability to spend their crypto in a newly emerging global market built on top of the blockchain.
Crypto transactions are not controllable, that is if the individuals utilize a decentralized approach. With the emergence of non-custodial wallets, decentralized exchanges, and other decentralized financial protocols, individuals are empowered like never before. They can spend their money semi-anonymously, (if someone knows your wallet is yours they can track the wallet address and the transactions it has engaged in by looking at the data on the blockchain) and they can choose to spend & use their money in anyway they like. As long as the service/individual accepts crypto currency, you can be sure that you can spend your currency. This may not sound all that shocking, but it should. Banks restrict what you can do, and fiat currencies are typically limited by borders. For many governments this allows them to control the flow of their currency, and also how their citizens spend it. Banks have a unique kind of power within a society, and if the bank is under the control of the government or working with the government, then the government essentially controls the financial decisions of its people. This is the case with china.
So why would China ban cryptocurrency if cryptocurrency is so innovative, and will likely replace traditional finance all together? Well aside from the freedom that cryptocurrency brings, a decentralized framework is not a given. The way cryptocurrencies and blockchains function currently is highly decentralized, but that's by design, rather than by default. The decentralized nature of cryptocurrency comes from the decision of projects to utilize a distributed network of validators where any individual can take part in the validation process, but this is not a necessary feature of a blockchain. You can design a blockchain that utilizes a select few validators that by default become the gatekeeper to cryptocurrency transactions. What does this mean? The validators can decide to include certain transactions in the blockchain (approve them), and they can decide to disprove other transactions; which effectively gives them control over what people can and can't buy with their cryptocurrency, and which effectively creates a centralized cryptocurrency. China has recognized the innovative nature of this technology, and they've also recognized that decentralization is not necessary to utilize these innovative ideas. This is where the Digital Yuan comes in.
China has designed its own cryptocurrency. China claims that their new state issued digital currency will allow for the crackdown on money laundering, terror financing, and other criminal activities, but will also provide semi-anonymity? That's an impossibility, and it will effectively give them gatekeeper status of chinas internal transactions, and if the digital currency is adopted abroad, it will effectively give them financial control over the worlds markets in a way never before seen. This is a problem. It is a big problem. So what can we do about it?
Commit to utilizing currencies that are designed to be decentralized. If you manage a business or online company, accept decentralized cryptocurrencies primarily. It is our future that we are talking about here, and the decentralized approach provides the individual with a new kind of freedom, and the possibility of a brighter future.
