Peter Thiel warns Bitcoin could be Chinese financial weapon to undermine US dollar

Peter Thiel, founder of PayPal and Palantir, recently urged the United States government to have a tighter grasp of cryptocurrency regulations in the country. 

Bitcoin is likely to serve as a functional reserve currency

Speaking at a virtual event for the conservative Nixon Seminar, Thiel, a pro-Bitcoin maximalist, opined on whether China would win a financial arms race with the United States. 

He further posed the question of whether Bitcoin should be “thought of in part as a Chinese financial weapon against the US.” 

The billionaire venture capitalist said China would want to see two global reserve currencies, rather than the US dollar being the default reserve currency. According to Thiel, China is not aiming for its national currency to fill that role but rather to turn another currency into a weapon against the dollar — Bitcoin. China previously tried and failed at this attempt with another currency — the euro. 

This comes at a time where the world’s second-largest economy is about to expect its own central bank digital currency, the digital yuan. When asked by the moderator whether China’s plan of a digital yuan would be a threat to the dollar, Thiel responded that since it is issued by the country’s central bank, it was “some sort of a totalitarian measuring device. The billionaire dismissed the digital yuan, emphasizing that it is not “a real cryptocurrency.”

Fears over China’s assumed control over Bitcoin continues to loom. Another major concern is that Bitcoin is more likely to serve as a functional reserve currency, said Thiel. If the greenback becomes less dominant, the less affected China is by the monetary and foreign policies in the US. Thiel explained:

It threatens fiat money, but it especially threatens the US dollar. If China’s long Bitcoin, perhaps from a geopolitical perspective, the US should be asking some tougher questions about exactly how that works.

During the virtual seminar, former Secretary of State Mike Pompeo agreed that the digital yuan “has a huge impact” on China’s surveillance capacity and that it could also enable the bypass of US sanctions. 

US is falling behind on crypto regulations

Securities & Exchange Commission (SEC) Commissioner Hester Peirce warned that the US is falling behind other countries in issuing a regulatory framework for blockchain and cryptocurrencies. She stated:

I think we’re certainly falling behind the curve. We’ve seen other countries take a more productive approach to regulating crypto. Our approach has been to say no and tell people to wait… we need to build a framework that is appropriate for this industry.

For entrepreneurs in the country to better understand cryptocurrency-related regulatory policies, she hopes that Congress will step in to “draw some lines.”

In light of China’s rollout of its digital yuan, Peirce further addressed the issue of a central bank digital currency in the US, as the Federal Reserve is investigating the possibility of issuing a digital dollar.