Bitcoin on the Silk Road

A series of professional writing obligations have taken me to Xinjiang three times this year, and the single strongest impression from these trips has been the centrality of Silk Road heritage. Regardless of borders, ethnicities, and controversies, the Silk Road is the reason everyone is there, and the thing that has always come first. Derivatively, transport infrastructure connects settlements together, but primarily it is the great ancient thoroughfare that has deposited areas of habitation along its vast — and harsh — middle stretches, as if provisioning itself with the archaic equivalent of gas stations and traffic police outposts, distributed in whatever frequency necessary to hold open the road.

China is not very adept at international PR, and Xinjiang coverage in world media tends to be critical. This has resulted in a predictable touchiness, and even though the most cursory historical examination already shows that Han Chinese have a profound ancient presence in the area, no opportunity is missed to underscore this point still further. These efforts range from the genuinely illuminating to the comically incompetent. One especially interesting species of evidence, falling somewhere between these extremes — and passing between them at an odd angle — is coinage. Repeatedly I was told by museum curators and historical experts, always with the greatest earnestness, that the abundance of Imperial Chinese currency found in the area was an unambiguous indicator of demographic integrity and Han settlement. Certainly, Xinjiang is a numismatist’s paradise, even if these tangible commercial signs are dragged into stories they cannot confidently tell.

Coins have little affinity with settlement. ‘Portability’ is always counted among the essential features demanded of money, because its function is to circulate, or travel. Like droplets swept along by the currents of commerce, the coins of Xinjiang belong to the road before they belong to the place, eloquent about transactions, but mute about territories. They tell of flows, and passages, but when the topic turns to political geography, they fall dumb. What does commercial traffic care for boundaries and homelands? — Only what it is coerced into caring about, whether by toll barriers, or by uncontrolled bandits.

China was drawn into its Far West, well over two millennia ago, as the guardian of the Silk Road. It was legitimated as regional hegemon by its administrative capability and cultural cohesion. Apparently, in the present age of ethno-nationalist border squabbling and territorial irritability, recognizing this indisputable fact is either too much, or not enough.

Up until recently, Bitcoin was associated with a different Silk Road — although arguably not a very different one. As a partially-anonymized cryptocurrency, fundamentally immunized against political interference of any kind, it was naturally affiliated with the anarcho-capitalist markets of the ‘dark web’. The closure of this Internet Silk Road in early October propelled Bitcoin into a new phase of existence, as Tech Crunch explains:

Bitcoin’s recent price surge also comes after a 15% drop last month, following the FBI seizure of the underground ‘black market’ marketplace Silk Road — where billions worth in Bitcoin had been used to purchase various illegal goods and services since Silk Road was set up. The closure of the service blew a hole in Bitcoin’s valuation — but clearly only a temporary one. Bitcoin quickly recovered the lost value, and has since gone on this latest surge.

The removal of one of the most notorious pipelines linking Bitcoin to the buying and selling of narcotics and other illegal goods and services may actually have helped the cryptocurrency — by improving its reputation and thereby boosting its mainstream appeal.

Bitcoin supports near-anonymous transactions, which encouraged its use on Silk Road. But the cryptocurrency has many other characteristics that potentially make it interesting to a much more mainstream user-base — such as the fact transactions are irreversible, something of potential interest to online retailers wanting to avoid the hassle of chargebacks.

With the artificial Silk Road shuttered, Bitcoin was quickly plugged into the original. Less than two weeks after the FBI operation, China’s Internet giant Baidu announced that it would begin to accept Bitcoins. Whilst an obvious threshold event, this decision was also the confirmation of powerful pre-existing trends, which had raised the level of Chinese interest in the currency to the second highest in the world (after only the United States). For Chinese savers, trapped between negative real return RMB bank accounts and irrationally exuberant real estate markets, the prospects of Bitcoin as a speculative store of value can easily seem attractive. (A parallel rise in both private and public gold holdings reinforces this impression.)

The most radical interpretation of these developments, however, would connect them to intimations of a “de-Americanized world”. For American Bitcoin users, in particular, the currency is already embraced as a way to short the US dollar, and to practically express disgust at the global fiat money regime. Mere days before the Baidu decision, a commentary on Xinhuanet  suggested:

What may also be included as a key part of an effective [global financial] reform is the introduction of a new international reserve currency that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States.

That sounds like history in the making.

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