Why the US and China went opposite ways on crypto - Asia Specific podcast, BBC World Service

The US and China compete in many fields, but on cryptocurrency, they've gone in very different directions. The US President, Donald Trump, wants his country to lead the world on crypto. But China's government has just reiterated. and updated a ban on crypto trading. So how did two superpowers come to see the risks and benefits so differently? And what does that mean for the future of crypto? I'm Mariko in Singapore and this is Asia Specific from the BBC World Service.

Twice a week we bring you Asia Pacific stories. unpacked by those who know them best. And today I have Angela Ang, who is the head of policy. and strategic partnerships for APAC at TRM labs, which is. a blockchain intelligence company. I also have Sam Reynolds, who is a senior reporter. for CoinDesk, which is a global cryptocurrency media platform. Welcome both to Asia Specific. Thank you for having me.

I'm going to start with something very, very basic. So, Angela, what exactly is cryptocurrency? Because we've been hearing other terms like. central bank digital currencies and stablecoins. So can you just explain to our viewers. and listeners how different they are, what they are? You can think of it fundamentally as a type of digital money. that exists entirely online and isn't controlled by any government or bank, but instead, crypto runs on a technology called blockchain,

which is a public shared ledger that records every single transaction. in crypto in a way that's transparent and very hard to alter. So in practice, what this means is that crypto allows. value or funds to be sent globally on open networks, basically at the speed of the internet, i.e., you know, in near real time. And the cryptocurrency I think that most people are familiar with is Bitcoin, which was also the first cryptocurrency to see successful mass adoption.

It first launched around 2008, 2009, and it's still very popular today. But the thing about cryptocurrencies like Bitcoin. is that they do tend to be quite volatile. And just to give some context to this, in the last six months alone, we've seen about 40 to 45% fluctuation. in Bitcoin's value relative to the US dollar. So what happened is that about five years after Bitcoin first emerged, we saw a new type of cryptocurrency that aims to address this stability issue,

eponymously known as stable coins, which are basically a type. of cryptocurrency that is pegged to a traditional currency like the US dollar. And stable coins here basically seek to marry that promise. of blockchain technology, the value movement. at the speed of the internet, with the relative stability and familiarity of traditional currencies. So, Sam, can you just tell us who uses which ones for what purposes?

So can you, for example, use Bitcoin to buy something in real life. You really could. However, the question is would you want to. Because with Bitcoin, once you sell it, there's capital gains attached. to that in most jurisdictions. So Bitcoin is quite volatile. So do you want to price your house or your car in SATs or Satoshis, the measurement for Bitcoin, or do you want to sell it for US dollars. So typically we've seen the crypto millionaires, they get a loan against their Bitcoin holdings.

in stablecoins like USDT and USDC. Then use that to purchase their, you know, their house, their car, or any other kind of high net worth asset. because that is way more tax efficient. And also it's not volatile. So what's the point of it then? Because so, for example, if stablecoins are pegged to real currencies. like the US dollar, why don't you just use the US dollars. What's the benefit of using stablecoins instead, Sam?

It's much more efficient. So if you use US dollars with things like SWIFT... It takes about three or four days to actually settle. And also you have lots of fees. With stable coins, that's instant. So if I were a businessman, say in Thailand, wanting to do a deal with someone in, let's say Malaysia, I would likely have a lot of fees attached to that transaction. With stable coins, it's instant and near free.

A lot has changed in (the) crypto space, especially since Donald Trump returned to the white House in the United States. But let's focus on China first, because its policies are. quite different to that of the United States. So, Angela, can you just explain the Chinese government's policies. towards crypto and other technologies? The crypto ban actually dates back in China. to almost the infancy of cryptocurrency, because what we saw was. that the Chinese community was quite early adopters of cryptocurrency.

They were one of the firsts to embrace crypto. The first crypto exchange in China opened all the way back in 2011, which was really like the infant days of Bitcoin and crypto. The Chinese government did react strongly to that, starting with a ban on on Bitcoin specifically, and. then progressively more restrictions, finally leading up. to kind of like a total ban on crypto trading and mining in 2021.

And when we think about why this is, I think it's because, you know, how value moves in crypto, which is in this decentralised peer. to peer manner that is without the involvement of a central bank. It is fundamentally opposite to how China runs its monetary policy, which is in a very centralised way. with strict capital and foreign exchange controls. So that's crypto. I think it's important to remember. that China banning crypto doesn't mean that they've banned blockchain technology.

The currency and the asset and the technology are two different things. And in fact, quite to the contrary, China has actually embraced the underlying blockchain technology on its own terms. with a central bank digital currency or CBDC. for short, called the digital RMB or the digital yuan. And like crypto, CBDCs also run on blockchain technology, but. unlike crypto, as the name implies, they are issued and backed by a central bank. Yeah, I want to get to the digital yuan.

and who's using them in our conversation. But Sam, in terms of why the Chinese government hasn't been so pro crypto, do you agree with Angela's assessment? Because, you know, not just in Asia, but many critics of crypto would have argued. that the volatility of especially Bitcoin, but other cryptocurrencies, that is a huge risk to investors as well. It certainly is. But remember, we're talking here about mainland China. So with Hong Kong, part of China, but its own jurisdiction, they've embraced crypto.

because Hong Kong is seen as China's sandbox for things like fintech, things like experiments in finance, that kind of stuff. For instance, the stock market in Hong Kong. has been there since, well, since it started. But in mainland China, they looked at Hong Kong. to actually learn lessons about stocks and how it works, then invited up the key stakeholders in Hong Kong to teach them about. how to, you know, embrace capitalism, embrace the stock market. So I do see parallels here right now.

in the modern era with crypto, where China is looking towards Hong Kong. to experiment with crypto, to see how it works, or doesn't work, before deciding to introduce that to the mainland. In terms of the US policy, it's not always been so pro crypto until President Trump came back. to the white House. Under the Biden administration, it was quite skeptical, wasn't it? So I want both of your opinions on this. Why do you think the Trump administration. has really embraced crypto?

I guess a lot of the initial innovation in. crypto, in the crypto ecosystem, really was born out of the US. And that, I think speaks to its top kind of. like crypto adoption ranking today. So I think the administration is looking to capitalise that. as a way to anchor those business activities in the US, but also as a way to kind of establish itself.

as a leader in this space alongside. other emerging technologies such as artificial intelligence. I think he's very much positioning the US. to be at the forefront of emerging tech. First of all, they want crypto to be a US dollar asset. If you look at every trading pair out there, Bitcoin, Ethereum, what have you, it's measured in US dollars. And that's pretty important. Stable coins, the biggest stable coins out there are in US dollars. In fact if you look at stable coins versus global forex, right?

Stable coins in US dollars are oversupplied compared. to the broader TradFi forex market. But also it gets votes, right? So crypto bros, people who are into crypto are a niche group. They're kind of small, but they're people who are disenfranchised, who, you know, typically lean conservative, but not entirely who feel that the government is not to be trusted. And while they might vote Republican in the US, not always, And so I think the White House's voter research saw this.

as a group that was not being reflected in either side. and can be approached for just that - votes. President Trump's family. they've released their own digital token as well as stable coin, haven't they? And on paper, they've reportedly made more than $2 billion, though much of that is locked away for a fixed period of time. But it goes to show how much President Trump is embracing this technology. But when it comes to China, I mean, they compete in everything.

with the United States except for crypto trading. Do you think this ban, this crackdown could could affect. China's influence and competitiveness? So I think it's very much reflective. of how China wants to compete with the US in this space. So China is obviously not trying to establish itself. as a hub for Bitcoin trading or Bitcoin mining. But it doesn't mean that it's not looking. to leverage, you know, digital assets and blockchain.

And you know, as Sam mentioned, we also have to look at how China is allowing. that ecosystem in Hong Kong to develop as a sort of sandbox. You know, in contrast to the ban that we're seeing on the mainland, Hong Kong has been very vocal about establishing itself as a crypto hub. And many people, including the US, recognise this. In fact, recently when Treasury Secretary Scott Benssent, he was asked. precisely this question about whether China might be using digital assets.

and blockchain to compete with the US. He acknowledged that possibility. And he actually said, you know, I would not be surprised if they were building digital assets potentially, you know, backed by gold rather than the yuan, given how active Hong Kong is in the crypto space. And Sam, what's your view on this in terms of this China's ban? Do you think this could affect China's, I guess, competitiveness. against the US in this sphere? I mean are they trying to compete? That's the question. So in the case of Hong Kong, I hosted the Hong Kong market regulator on stage a consensus last month.

And they had some great announcements about rules in Hong Kong that. on paper, should make Hong Kong quite competitive globally. That being said, though, Hong Kong is still a very small market. and it still hasn't attracted the capital that the US has. Let's think about this, right? So with stable coins right now, they are a US dollar-backed asset. in the global South, in Bolivia, in Chile and Argentina, which are massive targets for Chinese exports,

things like BYD cars or appliances. You buy those not in the local currency, not in yuan, but in US dollars, USDT, that kind of stuff. So, you know, I think China via Hong Kong is trying. But I don't think they can win this competition. I think the US has pulled ahead of the world, pulled ahead of Europe. And it's a US market right now. There's not really a way for them to close that gap.

Do you sense a difference in risk appetite between the West and Asia. when it comes to both the government's attitudes and investors attitudes, Sam? I do. So in Korea, they love to trade what's called meme coins. These are kind of silly coins, a joke name, a thing like that. that is not based in much, but just it's popular. So Koreans love to trade these high risk assets. because I think that their stock market itself is a bit boring. You know, Samsung, LG, these giant chaebols,

they don't move that much and people want something that moves. So they go to crypto. So overall, I feel that, you know, in parts of Asia the risk appetite is higher. But regulators don't want that. Because they don't want. people to lose their entire retirement savings on a meme coin. So the question will be how do you give people access to some kind of risk, Some kind of yield, but still protect them from a crypto crash? What do you think, Angela? Yeah, I think consumer protection has been very much top of mind.

for regulators, especially in the last three years. If we, three or four years, if we look back to 2022, we saw, you know, basically the collapse. of a major cryptocurrency exchange at the time, FTX, due to internal fraud. And you know, the knock on effects of that. on several different financial ecosystems around the world, I think made regulators realise the kind of linkage that.

the crypto ecosystem had developed with the overall financial ecosystem. and the importance of then regulating it there. There was quite a lot of hype surrounding crypto a couple of years ago. Now it seems to have calmed down, settled a bit. Where do you see crypto is generally, you know, is there still a bit hype driven. or has it kind of gone mainstream and settled down, Sam? The thing is, right now, crypto is a risk asset like tech stocks, like AI stocks.

And so this year will likely have an IPO of OpenAI, of SpaceX, these massive tech companies, which will drain the markets of liquidity for risk assets. People say, I want to invest in OpenAI, I want to invest in space X, and they'll take their allocation of money. that would go to a cryptocurrency and put it into these companies. And as a result, we do see volume for trading a bit compressed right now. within the region, just because people are focused on AI and not crypto.

I think in the crypto industry, there's a lot of excitement. as we're starting to see some level of mainstream adoption. And this includes interest from, you know, traditional financial institutions. But in the grand scheme of things, if we take a longer term view, I think. we're just at the very beginning. If I were to draw an analogy to the history of the internet, we're probably at the point in crypto. where Google Chrome hasn't been invented, we're using Netscape. Maybe Internet Explorer, but we still have a long way to go.

There's so much more in store. We're just at the very beginning. I haven't thought about Netscape in so long, Angela, that's such a good example. Thank you both, Angela and Sam, for explaining a rather complicated topic for our audience. Thank you. Thank you so much for having me. It was great fun. You've been watching Asia Specific from the BBC World Service. with me, Mariko in Singapore.

If you have any questions or thoughts on what we've covered in this episode. or any other stories from the region, please leave us a comment below. You can also get in touch with us on email: AsiaSpecific@bbc.co.uk. and click like and subscribe so you never miss an episode. See you next time.