Recognition of Bitcoin as a Commodity
The ongoing debate about which financial class cryptocurrencies belong to remains a subject of contention. The only point regulators have agreed upon is the classification of Bitcoin as a commodity. Commodities, as you know, encompass assets that are not tied to a specific center and belong to everyone, such as precious metals. Bitcoin’s decentralization allows it to carry this attribute.
However, the recognition of Bitcoin as an international commodity is a completely different issue. Regulations enacted by a single country hold no significance for international recognition. Bitcoin needs to prove itself as a useful asset like existing commodities and demonstrate its sustainability over a long period.
The agreements signed by China to establish Bitcoin mining centers in Ethiopia create an environment where Bitcoin can prove itself as a commodity. Previously, Russia’s similar plans indicate the seriousness of this strategy.
Geopolitical Positioning
When commodities are mentioned, BRICS countries stand out in the global economy. While Western countries stand out with capital dominance and having a global currency like the dollar, the main power of the countries referred to as the Eastern bloc relies on cheap labor and the power brought by natural resources like commodities. On paper, it might be thought that production and natural assets will bring absolute victory. However, the capital accumulation to purchase these products continues in Western countries, and they continue to maintain their capital dominance by continuing to produce high-value-added products.
Regarding Bitcoin, various initiatives exist based on the strengths of both sides. For example, the United States’ free-market economy leads the cryptocurrency market, and the dominant currency in the market is the dollar, which is not surprising. The EU, on the other hand, typically refuses to be part of serious integration without imposing strict regulations. Therefore, for now, it makes more sense to look at the Western bloc through the United States.
The state-focused growth culture in the Eastern bloc has actually led to the blunting of the cryptocurrency-focused private sector, which was previously more developed compared to the West. While China’s cheap resources and labor continue to embrace mining activities, the intensive use of resources has also led to the blunting of this sector. China aimed to use the resources used by miners to promote the electric vehicle sector, which I believe can be said to have been a correct decision when we look at the current results.
The expulsion of miners from China has led a significant portion of the sector to move to the United States. Some of them continue their activities in the Eastern bloc, particularly in Kazakhstan. Each miner can be considered as a reserve for Bitcoin. When China expelled miners, they also gifted reserves belonging to a new commodity class. Perhaps initially they really thought that this sector had no future. However, fortunately, their reversal of this decision did not take too long.
Africa’s largest dam was built on Ethiopia with Chinese companies and Chinese capital. China is Ethiopia’s largest foreign investor and creditor. Therefore, the cooperation between the two countries represents more than just a dam. China’s strong influence naturally facilitates the acquisition of certain privileges. For example, the mining agreement that led to the writing of this article…
Ethiopia had legalized cryptocurrency mining some time ago. Chinese miners have actually been in the country since then. After the dam, there is an agreement between the ministry and 21 mining companies, 19 of which are Chinese mining companies. It is expected that miners will use the newly built dam as an energy source. Thanks to Ethiopia, Chinese companies will be able to compete with American companies by obtaining cheap electricity.
We see that China has made a significant investment in such a mining center, including a dam. It’s not limited to just this. We also shouldn’t separate the sudden cryptocurrency expansion in Hong Kong, which is described as “one of the government’s top priorities,” from this strategy. The establishment of the mining center, the assets to be obtained from here, and the infrastructure being established in Hong Kong for these assets to compete in global markets are all part of the strategy. Otherwise, there would have been a mandatory reliance on US-based markets.
China’s current cryptocurrency strategy closely resembles the structuring of modern global companies. For example: Uber is the largest taxi company but owns no taxis. Airbnb is the largest real estate agent but owns no properties. You must have seen similar sentences on social media. The main idea behind these strategies is to coordinate existing resources without using indigenous resources. Thus, existing products are utilized without the need to produce new ones.
Looking at China through this example, China bans cryptocurrencies but tries to adapt the Yuan to the market through Hong Kong. It bans mining but tries to establish a massive center through Ethiopia. In other words, it minimizes the use of its own resources while coordinating existing resources and consolidating them. Just like Uber or Airbnb. Of course, the influence accumulated over the years makes all this possible.
We said we could interpret the Western bloc through the United States, but it wouldn’t be correct to interpret the Eastern bloc solely through China. Since Russia’s concerns compared to China are more focused on sanctions, we see that Russia is more focused on its commercial security and considers using Bitcoin as a commodity in this field. Before attacking Ukraine, Russia already had strategies for both supporting cryptocurrency mining and expanding mining abroad due to the expectation of a possible war.
The idea of establishing mining centers abroad was quite unusual and logical. Guarantees given by countries to each other for large-scale commercial activities may not be possible today due to economic sanctions as they are. Therefore, Russia planned to establish Bitcoin mining centers in important trading partner countries to use the Bitcoins produced there as collateral and to bypass sanctions. We do not know how well this plan has worked or whether it is still being kept in the background as a last resort.
I had written an article on this topic before;
In conclusion, the moves made by the Eastern bloc (or BRICS countries), which are clear leaders in commodities, provide the necessary infrastructure for Bitcoin to present itself as an international commodity.
Unfortunately, today the cryptocurrency market is being marketed as an ‘easy money-making place’. Countless shitcoins, meme tokens, and airdrops lead to a decline in overall quality, while influencers making descriptions like ‘useless-bulky-old-fashioned’ about Bitcoin. The developments mentioned above show that if the cryptocurrency market is indeed to be the technology or financial infrastructure of the future, it cannot be independent of Bitcoin.
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