September 24, 2021

Not even a complete “dictatorship of the proletariat” can kill Bitcoin

Evergrande is being called China’s “Lehman moment” and overnight the PBC closed the loop on their clampdown on crypto with a total ban on virtual currency transactions.

For those paying attention, however, China isn’t just moving against crypto, they’ve been bringing their entire technology sector to heel. They also stated that it is time to redistribute wealth from the top tier of the nations wealth holders to the rest of the peasant class.

This isn’t a return to their Communist roots as much as it is a move of self-preservation against rising internal powers. In the words of my friend Charles Hugh Smith via some correspondence we’ve been having this week “Xi has set out to crush the Network State”.

I said in my earlier Network State Primer about the coming tension between Nation States and Network States: the former will go down swinging.

The power structures of the nation states won’t go gently into the dustbin of history. They will go down swinging, over a transitional era that may span decades or longer, similar to the centuries long tensions between monarchs and the Papacy that shaped the transition from the Middle Ages into the Renaissance.

China has decided to make their last stand of the Nation State, now. Here at this moment in time. They will not bail out Evergrande, they will allow their side of the Everything Bubble to pop, and they will use the economic crash to make a final sweep of consolidation of their power. They will make sure their Big Tech knows who is in charge and that it is not them.

Over here in the West, recent regulatory jabs at crypto seem almost enfeebled by comparison. The SEC forcing Coinbase to cancel a program they hadn’t launched yet (so it makes no difference to their bottom line), while bickering with the CFTA over who gets to regulate crypto.

The subtext to all this is we shall now see, and be forced to choose, a path forward in the digital networked age:

Behind door #1 we keep the nation state format of centralized, top down control and escalating interference into both the economic and private lives of its subjects.

Behind door #2 is the coming tension between nation states, network states and crypto-claves that I outlined previously.

Neither path will produce a serene and stable gilded age. They will both be chaotic and volatile, Fourth Turning style transitions. The former in the course of implementing then maintaining a totalitarian dictatorship by force. The latter in the interplay and jockeying between three disparate organizational dynamics, each with it’s own centre of gravity (power), source of wealth and interdependencies with the others.

China may be able to make option #1 work there, at least for awhile, but would a China style technocratic dictatorship actually fly and sustain in the West?

At first glance one may think so. The zeitgeist today seems to be one clamouring for authoritarianism and collectivism. But upon deeper examination this may only be the vocal minority of academia, media pundits and Social Justice Inc. The majority of the population may just be keeping silent out of pragmatism and sheer exhaustion from the never-ending elitist sanctimony and cultural Marxism.

But the pushback against COVID authoritarianism, now made acute by forced vaccinations and the ongoing threats of never-ending lockdowns may finally be getting hints of non-compliance through to policy-makers in the West. Australia has officially abandoned their Zero Covid policy and vaccine passport mandates are incurring revolts and in some places are abandoned.

What would it take for Western governments to ban crypto, reign in ascendent tech platforms and more permanently abrogate all property rights?

Western governments would have to go “Full China”

My worry under lockdowns was that Western governments pined for China-style autocracy. And let’s call it for what it is: for a couple years since all this started, they certainly tried it. To varying degrees they continue to cling to the hope that they can remain relevant in a 21st century world using technocratic methods developed out of 20th century industrialism. Most policy makers are still trapped in a mindset learned from an era of assembly lines and cubicles. They think the only difference is it’s now digitized.

But the more I started thinking about this the more I realized how unlikely this is in the realms of erstwhile liberal democracies.

For one thing, decentralized crypto currencies have already changed the game  in the West in a way where there is no going back. It is estimated that by 2024, there will one billion Bitcoin HODLers, and that makes them a real constituancy.

Another reason is that we are at least nominally democracies, with elections. That means our societal fabric has a particular architecture very different from China’s. While elections have become largely ceremonial ratifications of homogenous policy tracks, contested between insular factions within political monocultures, they at least show the overlords where the boundaries of their powers are.

Take for example the recent Canadian election, where Justin Trudeau’s gambit to secure a majority failed and he’s stuck with another minority government. The rising right-wing PPC party won no seats, and yet, secured 5% of the popular vote, up from 1.62% in 2019, the year that party formed. They blew out the Green Party at 2.6% and who has been around for 35 years. Their performance caused much pearl clutching from the MSM and there will be more going forward, especially should the incumbent government continue with its post-national, woke, collectivist aspirations.

The Chinese peoples have never been free. There’s never been a liberty inspired revolution there, only a cultural (Marxist) one. People in China have no constitutionally guaranteed rights, they aren’t even citizens. They’re subjects. They will take it, at least for now, because they’ve always taken it. As Charles put it in his emails to me, their history is replete with

“one bloody purge after another, of someone consolidating power and then unleashing a Cultural Revolution to eliminate rivals, etc. If crashing China’s bubble is the nuclear option, Xi is quite confident he can push the pain level to 11 and most will accept it, those who don’t will enjoy treatment as an honorary Uyghur.”

That’s not the case here in the West where there have been at least two revolutions fuelled directly out of an impulse for liberty: The French and the American. Even though the former went off the rails a lot quicker than the latter did, it still happened and it is a stark reminder of where things go when wealth inequality gets so out of whack and the elites become so detached from reality (Charles thinks this is where things are headed in the US, he may not be wrong).

For cryptos to be hit with a China-style ban, in their entirety here in the West, governments would have to go Full China, complete with total control over every aspect of every citizen’s life (China just set limits on how much time you’re allowed to spend on Tik Tok, they have social credit systems which meter your alcohol consumption, the list goes on and is getting longer).

How long would that last here in the West? Either the citizenry would move straight into the final hyper-normalization phase seen in the Soviet Union before it collapsed (paraphrasing: “They pretend to govern us and we pretend to obey”), or, the pitchforks and torches come out almost immediately. Countries break up. Secessionists abound. At least a few people face some Mussolini moments if not full on Storming of the Bastille and a French Revolution style purging of perceived elites. It would get ugly.

I’m not saying this is what would happen if Western governments banned crypto, I’m saying it could happen in response to the kind of dictatorship that would have to be imposed in order to ban crypto.

That also doesn’t mean that cryptos can’t go “risk off” (to use Charles’ description) for awhile, even in lieu of a ban. Especially if China allows the economic chips to fall as they may and that ripples across the global economy (perhaps China is unleashing yet another global contagion…. on purpose).

The way I see it, the tension in liberal democracies between nation states and network states will be played out through their respective monetary systems.

  • The nation state’s fiat money will be digitized into CBDCs, which will be specifically constructed to preclude wealth formation or savings and almost certainly be the rails of Westernized social credit systems,
  • The network state stable coins (like Facebook’s Diem), which may endeavour to extend the lifespan of fiat currencies and fuse with CBDCs
  • And crypto currencies founded on hard money principles that catalyzed the entire decentralized revolution. These will exist out of default because in the absence of total dictatorship and owing to the demands of optionality, capital pools will have to go here (among other places) out of self-preservation.


I cover this dynamic extensively in The Crypto Capitalist Letter, a long with a tactical focus on publicly traded crypto stocks. Get the overall investment / macro thesis free when you subscribe to the Bombthrower mailing list, or try the premium service for a month with our fully refundable trial offer.

About the author 

Mark E. Jeftovic

Mark E. Jeftovic is the founder of Bombthrower Media and CEO of, a company he co-founded in 1998 which has been operating along the lines described within these pages.

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  1. > The way I see it, the tension in liberal democracies between nation states and network states will be played out through their respective monetary systems

    Missing one:

    – Decentralized stablecoins built on eurodollar (re: Eurodollar University w/ Jeffrey P. Snider and Emil Kalinowski) principals applied on chain.

  2. I think the SEC lawsuit against LBRY, which seeks to make all crypto a security, including ETH and BTC, plus the combined IRS/SEC/FBI action against Free Talk Live, to make all sellers of crypto unlicensed money transmitters and money launderers, shows where the US government is going.

  3. I think you underestimate the ability of the US government to control or marginalize cryptocurrency simply by banning the conversion of USD to/from crypto. This would create a shadow economy out of the crypto ecosystem (some might argue it already is a shadow economy), and it might continue to exist. However, today the adoption of crypto by the masses and the ease-of-use of crypto transactional tools are not ready to support abandonment of the familiar fiat system. There are still too many transactions that cannot easily be accomplished using cryptocurrency.

  4. Behind Door #3
    China 1) ends speculation in its economy 2) moves to a true market based economy 3) gets its people ready for hard times 4) rolls out its Crypto Currency and 5) backs its crypto currency with gold. Which would you rather own? a) Dollars being printed by the trillions b) Bitcoin that is correlated with U.S stock market c) grossly overvalued treasury bonds d) grossly overvalued stock market e) china's crypto currency or f) gold. Will the rest of the world have to go back to a true market based economy? Will interest rates be market based instead of central bank based?

    1. China is an absolute dictatorship with a centrally controlled command economy, where all transactions will be mediated by a social credit system.

      It’s impossible to invest in anything Chinese or own “assets” there because they observe neither human rights nor property rights. Especially of foreigners (even owning Chinese stocks from here in the west confers no shareholder rights. They are SDRs, not shares).

  5. Curious here, FDR outlawed owning gold in the 30s and people complied. And the US didn’t go “full China” to do it. How would banning crypto be different this time? To the point above, converting it into USD could be traced or banned with serious penalties; not to mention that the FBI can trace transactions. Mark, I want to better understand the practical details of your argument around the inability of the US to ban crypto, what am I missing?

    1. In the case of the gold ban, it was legal tender and it was ostensibly exchanged for fiat. The equivalent today would be the US Gov buying everybody's Bitcoin and then keeping it themselves.

      Further, of the circulating gold in the population, only about 50% of the citizenry complied. A lot of it was moved, first to Canada and then overseas. What will the compliance rate be today when government approval is at all time lows (especially compared to FDR) and people don’t need to somehow physically transport their bullion across borders when they can practically think it across the globe?

      The US is only ninth in the top 20 countries globally in terms of crypto use, so they would probably be making the same mistake China is now (and did 500 years ago) and take themselves out of the running to compete at the next level of finance and economics.

      This is what blithering idiots like James Scott (below) don't understand: it isn't up to the government. The level of abstraction has changed, and with it, the underlying architecture. It's not a matter of "will governments permit it?", it's a matter of "will governments successfully adapt to it?"

      1. Hi Mark, stumbled into your site. Interesting thesis that I think has merit, but i am it the formative stages of evaluating the hold that governments across the world will involve themselves in crypto. Declaring it legal tender such as Ecuador and Venezuela, or the repressive China way. Personally, I think that similar to all sins, it’ll be taxed and rather heavily, like marijuana, cigarettes, liquor and gambling. This would allow govies across the world to take that pound of flesh for a good long while until the next iteration of crypto evolves, where they may game plan that into confiscation.

  6. Western governments could easily be tempted to create a cyberpandemic (Schwab, WEF already did a practice run back in July): hand over your private keys in return for being allowed back on the internet. And there's the looming "green revolution" with power outages and power rationing are on the table: how much is your crypto worth if a transaction cannot be verified online?
    By the way, there was a big de facto anarchist and prospering enclave in the 18th/19th century in China when the central power was to weak to enforce anything. Read Jian Qu, Social Order through Contracts. Its a monograph, not for the faint of heart.

  7. Crypto is only allowed because it is an inflationary sink. If it ever becomes anything besides a highly speculative investment it will be shut down. The fact you did not write about this means you do not understand much.

  8. The government will simply tax it to death or limit the amount of coin can b used for transactions they already require disclosure on tax returns

  9. Taxes, wages and most goods and services are not paid for in cryptocurrency therefore governments in the west have nothing to lose by banning cryptos.

  10. Mark, enjoyed your read. I’m an admitted gold hodlr and crypto Skeptic (skeptic in the regard that the govt won’t kill it). I’m also an older generation and have a natural tendency to prefer what I can physically possess. Nevertheless I’m still open to the crypto idea if someone can convince me my skepticism isn’t valid, primarily because I do agree an independent currency of some sort is going to be badly needed once the government goons force CBDCs on us. But what’s preventing the govt from shutting it down, banning it, or at least regulating it to the point it’s impractical to use? And how can you make everyday purchases whether at a physical store or online with privacy? Surely businesses will comply with govt edicts rather than risk being shut down and possibly prosecuted. Sure people can still attempt to use it in a black market fashion, but just like anything else the government has made illegal, do you want to risk a stiff jail sentence if you get caught? The government is already monitoring every electronic action we take, how does crypto avoid that dragnet when not much else can? (And I think it’s safe to say we probably aren’t aware of all their tech capabilities). And what happens when the govt shuts down the internet or some foreign actor makes a successful cyber attack on the web? I also see from other posts that I’m not the only one with these same questions. You keep making the statement that the govt can’t control crypto but I’ve yet to see a realistic explanation from you or other crypto supporters that adequately explain why the govt won’t be able to control it. They can control the internet, so what’s to prevent them from controlling anything that uses that system? They can already determine where any activity on the web originates from. Believe me when I say I WANT the crypto system to work as you describe, but I’m just not seeing yet how it escapes govt control. If you want to win me and other skeptics over? Then you will have to do a better job explaining to us stupid troglodytes how it realistically avoids govt control. Sorry but your points about the differences in Chinese and Western culture isn’t alone a compelling argument. Your right about those differences, but those differences alone won’t do it in my estimation. Look forward to hearing better arguments from you.

  11. Mark,
    I have signed up for the Crypto Capitalist Newsletter. I have read the manifesto and agree with much of what you presume will be the course for the big reset. I do not however believe the reset will ever be revocable. It will be intended to usher in a 1 world order described in the Bible as “the end times” of things. “No one will be able to buy or sell without the mark”…. I am of course a believer in Jesus Christ. As such, I can see everything through the lense of scripture. Crypto will be the method and vehicle of control. The masses will be forced to take “the mark”. I assume you will not. We may be on our way faster than people can keep up. What better way to usher in the reset than defaulting on our debt as a country that cannot stop gulping tit juice from social programs and military defense spending. Two black holes sucking up the monetary universe. I digress. I have a question for you. I am a newbie in investment trading and pretty much relied on LPL for trades and management. What trading platform would you recommend for crypto trades? Is there one that stands out above the rest? Thanks in advance for reading my rambling and answering my question.


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  13. All such utter nonsense. The elephant in the room that is NEVER discussed is that a government doesn't have to ban crypto – that's not possible anyway. All they have to do to bring it a stop is ban the exchanges.

    Yet, all the cleverest talking heads keep ranting on about banning crypto, or conversely how it is not possible to ban it. Arrrgh!! I already KNOW it can't be banned. Instead, tell me how to continue being able to convert my money into crypto after they've come for the exchanges please.

    1. There is this thing, called FOREX, that dozens of governments wish they could ban others for trading offshore versions of their currency and side stepping their jurisdictions rules (also with a complex array of derivatives from the cashflows between economies).

      You would need to ban ALL intl bank transfers between banks on behalf of clients… even those of banks that aren’t even in the jurisdiction of the government doing the banning… even those in currencies that one does not control…

      You would need to ban people swapping cash for crypto on random messaging apps in person, a behavior that has happened even before centralized exchanges existed for crypto…

      And once in defi land, people use decentralized exchanges with no need to swap back into fiat if the counterparty will accept crypto (for goods and services), which far more people and biz in 2021 accept more than they did in 2008.

      Any nonsense that might seem to exist is born from your ignorance because you do not do use crypto…

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