China’s crypto problem – a literal ton of it, in fact, recently-crushed crypto seized from all kinds of illegal activities. But here's the twist: this problem could be a solution for the Global South, or it could be a new kind of exploitation. Which way it tips is completely up to how China, and for that matter, the rest of the world decides to approach this game.
Crypto Windfall: A Development Lifeline?
Imagine China redirecting the billions earned from these crypto seizures into much-needed infrastructure investments. This investment would jumpstart equitable growth all over Africa, Latin America, and Southeast Asia. Now picture all those new schools, hospitals, renewable energy projects—all of them—getting built. Unlike traditional development aid loaded with conditionalities, they flourish off of digital assets confiscated from bad actors. This isn’t a left-wing wish list or far-away utopian fantasy; it’s a real, achievable possible future.
The Global South needs investment. We’re not just discussing countries looking to develop economic autonomy, to develop their own self-reliance. China's crypto stash could become the cornerstone of South-South cooperation, a powerful narrative of developing nations lifting each other up. One advantage to this approach is that the Western institutions’ predatory lending practices aren’t a concern. It creates a more level playing field internationally.
We shouldn’t be too seduced by the idea of a digital El Dorado.
Shadowy Deals: A New Form of Exploitation?
The lack of transparency around how China is disposing of their crypto is especially troubling. Local governments are reportedly using private companies to offload these digital assets, effectively circumventing the national ban on crypto trading. This hogpen of incompetence and cronyism invites all manner of corruption. It indicates that these backroom deals are set to benefit a privileged few, while the people of the Global South will see little or no benefits.
- Money Laundering: The anonymity of crypto can easily facilitate money laundering.
- Corruption: The lack of transparency can lead to corrupt practices.
- Financial Instability: Unregulated crypto transactions can destabilize local economies.
It’s a familiar story of privatizing profits and socializing risks. Investing crypto wealth into projects in the Global South without any rigorous forms of accountability and analysis could deepen existing inequalities. It poses the danger of establishing new dependencies in those areas. What happens when the crypto market crashes? Will these countries be the ones left holding the bag, burdened by debt and empty commitments?
The lack of clear guidance and regulation isn’t just a Chinese issue, it’s international. The decentralized, non-governmental nature of crypto technology makes it difficult to track and regulate. This creates significant opportunities for illicit activities to flourish.
Honesty and Transparency: A Necessary Safeguard
Here's where the "unexpected connection" comes in. Do you recall when the Trump administration was considering building a Bitcoin reserve? You might like that idea or not. What it does indicate, unmistakably, is that crypto is being adopted more and more as a legitimate asset class. If China indeed wants to take full advantage of its crypto stash, it should aim to use its powers for good. That will take honesty, transparency, and fierce regulatory oversight.
Imagine a publicly accountable, internationally audited crypto sovereign fund, perhaps based in Hong Kong, dedicated to funding sustainable development projects in the Global South. This fund could be governed by a board of representatives from China and the beneficiary nations. This structure would make sure that all projects are reflective of the needs and priorities of local communities.
China should team up with developing nations to create transparent guidelines and protections that prevent the harms attributable to crypto-related activities.
This isn’t solely an issue of what’s right versus wrong. It’s about establishing trust. If China can demonstrate continued commitment to using its growing crypto wealth responsibly and transparently, it will further strengthen those relationships with countries across the Global South. This strategy will further enable China to set itself apart as a true partner in development.
The alternative is a missed opportunity, a descent into another form of neo-colonialism where digital assets become just another tool for exploitation. The choice is China's. But the effects will be the most damaging within the Global South. What do you think? China’s crypto stash — A lifeline or a noose?
