China could shut bitcoin down, warns an American strategist.
During a debate with Morgan Creek Capital’s Anthony “Pomp” Pompliano, Michael Green, a partner at investment advisory firm Logica Capital, said China’s bitcoin mining dominance should alarm Americans, Cointelegraph reports.
The debate between Green, a bitcoin skeptic, and Pomp, a prominent hard-money advocate, was hosted by investment legend Raoul Pal’s Real Vision digital asset media outlet.
Green said China’s dominant share of hash rate, the amount of computing power devoted to running the network, makes bitcoin “incredibly vulnerable.”
“The vast majority of the mining activity is occurring in regions like China, Russia and Iran, and if we incorporate the participation of mining pools, they control in excess of 90% of the hash rate. This is not a decentralized system,” said Green.
“The current estimate of how much it would cost to shut down the bitcoin network […] if, for example, China were to decide simply to start mining empty blocks […] is around $7 billion a year. For a nation-state, that’s nothing.”
He added, “It’s completely absurd that the US government would put itself into a situation in which the control of the monetary system was outsourced in the same manner that we’ve chosen to outsource our iPhone production.”
However, Pomp said his reasoning was flawed because he failed to take into account the fact that bitcoin is “the strongest computing network in the world […] by every measure.“ He pointed to the recent “diversification” of the Chinese centralization of hash rate, highlighting significant increases in the hash power commanded by US-based entities.
Pompliano also challenged Green’s inference that the geographical distribution of bitcoin’s hash rate is representative of the capacity of a nation-state to exert control over the network, stating, “Just because there is any sort of capital flow elsewhere does not mean that those governments control it.”
Green also described bitcoin as a criminal medium of exchange and a tool used by America’s enemies to bypass and undermine the dollar. Green predicted that the US government will eventually ban bitcoin.
“In terms of a ban of ownership, I’m not advocating for that,” he said. “I’m actually suggesting that I think [a ban] is the eventual outcome. Whether that is good or bad will ultimately be decided by the future.”
Pomp said such a ban would be a costly strategic mistake that would undermine the country’s ability to compete globally.
He added, “We should embrace [bitcoin] and ensure that the United States stays the leader on a global scale.”
SWIFT and the clearing center and the digital currency research institute of the People’s Bank of China (PBoC) have joined forces to start a financial gateway company in China, The Block reports.
The new entity, called Finance Gateway Information Service Limited, was registered in Beijing on January 16 with 10 million euros ($12 million) as incorporation capital, according to public records.
The global interbank settlement organization contributed 55% of the capital via a Hong Kong subsidiary. Notably, China National Clearing Center, a fully-owned domestic settlement subsidiary of the PBoC, owns 34% of the new entity.