Elon Musk: ‘Crypto is impossible to destroy’

Article Summary:

The Chinese government is fighting an unwinnable war against crypto, according to Elon Musk. But that’s not stopping them from trying.

Ten of China’s top financial watchdogs and state agencies stated in a joint notice on September 24 that all crypto-related operations are “illicit financial activities” and could result in criminal charges. However, Elon Musk doesn’t like China’s chances of victory. “I think it is not possible to destroy crypto,” said Elon Musk at the Code Conference in California.

Trading crypto-currency has been officially banned in China since 2019, but trading has continued online through foreign exchanges. The purpose of China’s latest move is to snuff out any trading and mining of crypto within the country.

“Virtual currency-related business activities are illegal financial activities, [that] seriously endangers the safety of people’s assets”. — Bank of China

China is one of the world’s largest cryptocurrency markets. However, exchanging cryptocurrency with fiat money, trade crypto and derivatives, issue tokens and providing market-making or technical assistance for crypto transactions could now lead to criminal charges. In addition, giving crypto services to Chinese citizens via overseas exchanges is also illegal.

Last Friday’s announcement is the latest move in China’s crackdown on crypto. “Virtual currency-related business activities are illegal financial activities,” said the People’s Bank of China, which warned that crypto “seriously endangers the safety of people’s assets” (source).

“It is not possible to, I think, destroy crypto, but it is possible for governments to slow down its advancement.” — Elon Musk

Global regulators continue to scrutinize the cryptocurrency industry. However, Tesla CEO Elon Musk thinks efforts to remove the currency from the global market have no future because it is indestructible.

The decentralized nature of cryptocurrencies will make it hard for the Chinese government to stop crypto.

“It is not possible to, I think, destroy crypto, but it is possible for governments to slow down its advancement,” Musk said at the Code Conference in California.

Elon Musk suggested China’s crackdown on cryptocurrency was motivated by the Communist Party’s efforts to maintain its grip on power and the country’s electricity generation issues.

“I suppose cryptocurrency is fundamentally aimed at reducing the power of a centralized government, and they don’t like that,” said Musk. […] Part of it may actually be due to electricity shortages in many parts of China. A lot of South China right now is having random power outages because the power demand is higher than expected. Crypto mining might be playing a role in that,” he noted.

The crackdown hit the Chinese crypto mining industry hard

The technology that runs cryptocurrencies relies on distributed computers that verify and check transactions on an enormous shared ledger known as the blockchain. Those that take part in this work are randomly awarded coins. This is known as crypto mining.

The Chinese crackdown has already hit the crypto mining industry. Before this crackdown, China has long been a major mining center of crypto because it has low electricity costs and access to cheaper computer hardware. In 2019, China accounted for 75% of the world’s Bitcoin hashrate. In 2021, that share had fallen to 46% (source).

What is hashrate? A crypto’s hashrate, also called hash power, is the measure of a cryptocurrency miner’s performance. The faster the hash rate, the more profitable the cryptocurrency miner.

Musk was also asked on Tuesday about what government regulators should do in response to the spread of cryptocurrencies. “I’d say do nothing. Just let it fly,” he answered. “There’s some value in crypto, but I don’t think it’s the second coming of the messiah. It will hopefully reduce the error and latency in legacy money systems.”

Key Takeaways

  • China has warned that any crypto activity could result in criminal charges.
  • Tesla CEO Elon Musk says cryptocurrencies cannot be destroyed.
  • Elon Musk suggests China’s cryptocurrency crackdown is related to the Communist Party maintaining its grip on power.
  • The Chinese government may also have issues with crypto due to electricity shortages in many parts of China.
  • The crackdown has caused China’s share of the world’s Bitcoin mining energy use to drop from 75% to 46%.