The U.S. government's policy shifts on Bitcoin have been nothing short of a roller coaster. The Biden administration, worried about the impact Bitcoin would have on the financial system, warned that for American financial companies to invest in or gain exposure to cryptocurrencies such as Bitcoin was a dangerous choice from the standpoint of national security.

President-elect Trump, by contrast, declared during the campaign that he would make the United States the “capital of cryptocurrency.” And indeed, immediately after his victory, Trump nominated figures classed as pro-crypto to key posts in his administration. These early moves by Trump sent a powerful signal to the market. Before Trump had even been formally inaugurated as president, the price of Bitcoin broke through $100,000 for the first time in history.

To state my conclusion: in my view, America's course on Bitcoin is not a ‘happening’ that the Trump team caused ‘by accident,’ but may well be part of a national strategy chosen with geopolitics in mind, in the course of seeking change in the existing international trade settlement system.

The United States, Russia, and China have all bowed to Bitcoin

Bitcoin's passing $100,000 is a historic event. It has raised Bitcoin to sixth place in market capitalization among all the world's assets, traditional assets such as gold included. Yet if one were to name the single most important moment in Bitcoin's history, it would not be the $100,000 threshold that so many are watching, but the moment it passed one dollar. When Bitcoin crossed one dollar, the overwhelming majority of people on earth were entirely unaware that it had happened.

Why does crossing one dollar matter? Because it was the moment when Bitcoin, which had been regarded as a mere fragment of code, was for the first time acknowledged to have ‘value.’ The few people who believed in Bitcoin's value at the time saw the possibility that this asset could become an alternative to the existing financial system, and were convinced it could go on to become the very symbol of decentralized finance. But at that time Bitcoin guaranteed nothing at all.

Why is that? Before Bitcoin, people drew a clear distinction between the ‘means of transmission’ and the ‘thing transmitted.’ In fact it was so obvious that they never even thought about it. A credit card is a means of payment, but what it actually transmits is won or dollars. The same goes for Apple Pay and Samsung Pay. Bitcoin, however, is different. Bitcoin is at once the means of transmission and the thing transmitted. It is a means of transmission that can send value to the other side of the earth at the speed of electricity, and what it sends is Bitcoin itself.

Does this even make sense? Because of this absurdity, many people did not even attempt to understand Bitcoin and concluded it was a fraud. “What is the meaning of sending something that has no value at all?” Approaching it with this commonsense question, they ended up missing an enormous opportunity. Multiply zero by a hundred million and it is still zero, but multiply one by a hundred million and it is a hundred million. This is not a mere change of numbers; it means entering an entirely new world. Once Bitcoin passed one dollar, it began to display explosive power. That power left even great powers such as the United States, Russia, and China at a loss, and in the end they began, one after another, to bow to Bitcoin.

This, in fact, is something the existing financial system was never able to do. Bitcoin is an electronic object of value that can reach its destination safely not only without the cooperation of financial companies or states, but even in the face of their obstruction. It has no weight, so it can be sent anywhere; it does not rot, so it has no expiry date. Bitcoin has the power to shake the order of the existing world.

The World Economic Forum, comparing Bitcoin with the existing financial system, has assessed it as a new means of payment possessing ‘finality of settlement,’ while also raising the concern that this finality, while more powerful than that of the existing financial network, can at the same time carry risk. ‘Finality of settlement’ means that a transfer of funds is final and cannot be reversed. In the existing financial network, funds pass through several financial institutions before reaching the final recipient. Even if one of the financial institutions involved along the way goes bankrupt, or a problem arises during the transfer, the financial network as a whole takes responsibility and carries out the payment. This is done to maintain trust in the financial system, and it is carried out under compulsory legal obligation.

This is a point unique to Bitcoin. It realizes ‘finality of settlement’ on its own, without legal compulsion. Once a transaction is approved on the Bitcoin network, that transaction cannot be reversed. There is no need for banks to bear joint liability, or for problems to be resolved by halting a transfer, as in the existing financial network. These characteristics establish Bitcoin, compared with the existing financial system, as a means of payment marked by absoluteness and finality.

Early on, fears of use in international crime drove regulation

At the same time, however, it gives rise to a number of problems. To possess ‘finality of settlement’ is, put simply, the same as handing over a bundle of cash. Once cash is handed over, that is the end of it. The moment the recipient holds it in his hand, the money has already been delivered. The same is true of Bitcoin. But the limits of such a system are equally clear. What if you lose the money on the way while sending it to someone, for instance if you mistakenly send it to the wrong account? Like a bundle of cash, once it is lost it is all but impossible to recover. This is a great difference from checks, promissory notes, and credit cards.

That is, Bitcoin has no consumer protection function. This is because Bitcoin is like a cash transfer with no intermediary. Even if you mistakenly send bitcoin to the wrong address, there is no way to cancel or reverse it. Once the other party receives the bitcoin, the transaction is simply over.

But this characteristic of Bitcoin is not necessarily a bad thing. Cases of fraud in which someone falsely reports a credit card lost and then uses it are reported every year. Cases in which card information is stolen, or a lost card is abused, are commonplace as well. Because of the cost of maintaining the consumer protection function, and because of those who exploit it for gain, the credit card cannot help but be a fairly expensive means of payment. Credit card fees, in effect, include the cost of remedying such fraud and error. The same is true of transfers through banks. Bitcoin, however, requires no consumer-protection overhead beyond the network usage fee. For large payments in particular, Bitcoin's fees, unlike those of other means of payment, are negligible, and with technical improvements in future the fee could be brought down to a near-zero level.

Once one understands Bitcoin's ‘finality of settlement’ and its capacity to transcend borders, a concern readily comes to mind: that Bitcoin could be abused in international crime. Such organizations have their bank accounts frozen or cannot access the global financial network, so their funding is restricted. Likewise, certain countries are under financial sanctions. North Korea, Iran, and Russia are the representative cases. These countries are isolated from the international financial network and find their foreign exchange transactions blocked or restricted. For individuals, organizations, and states that cannot access the normal financial network in this way, Bitcoin's ‘finality of settlement’ becomes a new source of breathing room. Settlement using Bitcoin is possible without an intermediary institution or the approval of a third party, and it takes place freely across borders.

Russia, in fact, has been actively embracing Bitcoin as it labors under severe Western economic sanctions since the war in Ukraine. The United States has long used the financial system as a principal instrument of international sanctions. In particular, it has imposed sanctions by excluding specific countries or organizations from the global financial network through the SWIFT system.

But Bitcoin has emerged as a tool capable of circumventing this existing sanctions mechanism. Such concerns also underlay the Biden administration's negative stance toward Bitcoin and cryptocurrency. The fact that criminal organizations and sanctioned states are raising funds with Bitcoin led Washington to regard cryptocurrency as a threat to American national security. That is why the Biden administration pushed for regulation of Bitcoin and other cryptocurrencies.

Shaking the financial order, it has established itself as an unstoppable force

Bitcoin's ‘finality of settlement’ also has the potential to seriously undermine each country's ability to manage its currency. Monetary management is the core of economic sovereignty, the principal means by which a state coordinates and stabilizes its economy through its own currency. But the spread of Bitcoin can obstruct such policy.

Because Bitcoin has no borders, if a country's citizens come to prefer Bitcoin over their own currency, the effectiveness of monetary policy declines. For a state to manage its currency effectively, most of its citizens must store assets and transact in the national currency; if citizens come to prefer an alternative asset such as Bitcoin, there is a risk that the credibility and usefulness of the national currency will deteriorate badly. This can drive down the value of the nation's currency, and as a result prices rise and inflation is likely to worsen. What is more, because Bitcoin is not constrained by borders and can move freely, capital flight can accelerate.

The root of these three major problems, consumer protection, criminal abuse, and the erosion of monetary sovereignty, is precisely ‘finality of settlement.’ And all of these controversies emerged as real problems the moment Bitcoin passed one dollar. If Bitcoin is a ‘game,’ then the outcome of this game was already decided thirteen years ago, at the moment it crossed one dollar.

It is clear that Bitcoin poses a serious challenge to the existing monetary and financial system. If states had been able to eliminate Bitcoin entirely, then major countries such as the United States would surely have done so already. Yet the present reality paradoxically proves that they were unable to remove it.

Until now, the United States and a number of other countries have chosen, instead of eliminating Bitcoin, a strategy of delay. It was a stopgap intended to push back for as long as possible the spread of Bitcoin and the changes it brings. The representative effort was to emphasize the high volatility of Bitcoin's price, use this to argue that it is “unsuitable as money,” and thereby restrict ordinary people's access. But Bitcoin's destructive property of ‘finality of settlement’ did not change despite this delaying strategy. Even if price volatility acted as an obstacle, the fact that Bitcoin was shaking the existing financial order and opening new possibilities could not be stopped.

That in the 2024 U.S. presidential election President-elect Trump declared during the campaign that he would actively embrace Bitcoin and cryptocurrency is an important signal. It shows that some of the American elite have begun to recognize that the shelf life of the delaying strategy is over. Power is now in the hands of elites who judge that attempts to suppress Bitcoin have lost their effectiveness and that the time has come to shift policy toward actively embracing it. The reason the United States has begun to embrace Bitcoin is that Bitcoin has already established itself as an unstoppable force. Bitcoin is a threat to America's existing financial system, but ironically, for the United States, Bitcoin may be the best alternative among bad choices.

The crisis of the U.S. dollar has already begun, quite apart from Bitcoin. The year 2024 shows this change symbolically: the money the United States spends on interest on its national debt has exceeded its defense budget. The signal that the national debt is reaching a level that is hard to bear is unmistakable. The United States is the issuer of the world's reserve currency. It is the only country able to manage its money on the assumption that demand for the dollar will be continuously sustained. It is a country in which the national debt ceiling can be raised whenever the two parties agree. This is possible because America's Treasury system is closely bound up with international politics.

Countries that run trade surpluses with the United States buy U.S. Treasuries, which pay interest, rather than plain dollars, which do not. Germany did so, Japan did so, and in the past so did China. The use of the dollar as a means of trade settlement between third countries cannot be considered separately from the fact that American aircraft carriers ply the world's oceans and maintain order there. As international trade expanded, demand for the dollar increased, and this functioned as a kind of tax system. That is, the cost of maintaining the stability of international trade through the dollar took the form of the U.S. Treasury cycle.

A strategic instrument to check the China that threatens the dollar system

But China has begun to break this rule. Since Xi Jinping rose to the presidency in 2012, China has not been accumulating U.S. Treasuries. Its trade surplus with the United States keeps growing, yet its total Treasury holdings are stagnant. Instead, that money is being used for geopolitical projects such as China's ‘Belt and Road Initiative.’ From America's standpoint, China is building a system to oppose the United States by growing strong on top of the security system the United States provides.

U.S. Treasuries are regarded as an important asset not only by countries running trade surpluses but by global corporations as well. But experts now believe that demand for Treasuries has reached its critical point. Several signs have appeared recently. The U.S. Federal Reserve cut its benchmark rate, yet demand for long-term Treasuries fell and their prices declined. As a result, long-term interest rates rose.

Normally, when the benchmark rate is cut, long-term rates fall as well, but this time the opposite happened. This shows the structural limits of the U.S. Treasury system. It is why Trumpism is likely to deliver the final blow to a dollar system already weakened by China's revolt. Trumpism is connected to structural change in American society, beyond the individual named Trump. Traditionally, the manufacturing regions of the American Midwest supported the Democratic Party under the influence of the unions. But in Trump's first presidential campaign in 2016, people whose families had backed the Democrats since their grandfathers' generation turned their backs and chose the Republicans. J. D. Vance, the political newcomer Trump tapped as his vice president, is precisely the archetypal figure.

China struggles with capital flight by its rich through Bitcoin

America's dollar system is sustained fundamentally by the way the United States supplies dollars. The United States supplies dollars to other countries through its current account deficit. In this process, the United States can buy other countries' raw materials and manufactured goods with dollars. On the face of it, America seems to have the advantage: with money made by spraying special ink onto special paper, it can buy the world's resources almost for free.

But this system has eaten away at America from within. As manufacturing moved abroad, good jobs for the middle class disappeared. In the end, the voices of a middle class discontented with globalization grew louder, and the man who spoke for them and forged them into a political force was Trump. To tolerate no further export of jobs, and to that end to reduce America's trade deficit or at least hold it where it is: that is the core of Trumpism.

If the supply of dollars shrinks, the value of the dollar is likely to rise. The strong-dollar phenomenon may in fact act as a factor concealing the dollar's crisis. But if the supply of dollars stops and even the Treasury cycle is severed, the dollar will lose its standing as the principal means of trade settlement. That Korea and Japan should use the won or the yen in their mutual trade is no great problem from America's standpoint.

But if the yuan is used in settlement between third countries, the situation is different. This is hard for the United States to tolerate. The expansion of the yuan could be seen as a direct challenge to the dollar system. By contrast, Korea and Japan using gold or Bitcoin as a means of settlement is an option the United States can accept. Behind the yuan stands China, a geopolitical rival, whereas behind Bitcoin there is no such power. Going further, Bitcoin is also a strategic instrument capable of checking, in reverse, the China that seeks to threaten the dollar system.

In early 2024 it was reported that the British government had seized 61,000 bitcoin. The case came to light when a Chinese woman, Jian Wen, was arrested in the United Kingdom in May 2021 on charges of money laundering. She was accused of laundering bitcoin connected to a £5 billion investment fraud that had originated in China. British police seized more than 61,000 bitcoin in this case, and on May 24, 2024, Jian Wen was sentenced to six years and eight months in prison for money laundering.

Jian Wen was no more than one of the agents used to move the funds of China's wealthy out of the country via Bitcoin. She was merely one of the agents who, on the instructions of Yadi Zhang, who defrauded some 130,000 Chinese investors of £5 billion between 2014 and 2017, converted bitcoin into cash and other assets in various countries.

This case shows that from 2014 China's wealthy not only knew about Bitcoin but were attempting capital flight through it. In particular, after Xi Jinping took power as president in 2012, the anti-corruption campaign intensified and more than twenty thousand senior officials were being purged each year. As anxiety about asset freezes grew in such circumstances, China's rich discovered Bitcoin far earlier than the rich of other countries and began to use it as a means of protecting and moving assets.

The Chinese government intervened actively in the Bitcoin market to block this trend. In 2013, when Bitcoin's price rose, the governor of the People's Bank of China warned against exposure to Bitcoin and induced a price decline. In 2017, the Chinese government shut down all Bitcoin exchanges, suppressing the bull market. In 2021, it banned mining outright, seeking to remove the Bitcoin ecosystem from China.

In this way the Chinese government has actively suppressed the market at every Bitcoin bull run. But the Chinese people's passion for Bitcoin and their desire to move capital out could not easily be blocked. With capital flight continuing despite the suppression of Bitcoin, the Chinese government will face still greater pressure if the Bitcoin market enters another bull run.

If a Bitcoin bull market unfolds in 2025, the only card left to the Chinese government will be the extreme measure of banning ownership. But its effectiveness would be hard to guarantee. Even if an ownership ban were pursued forcefully, Bitcoin's decentralized nature makes it far from easy to block completely. The United States is likely to exploit this situation. If Bitcoin cannot be blocked, Washington will instead promote it in order to drive China into a corner.

Because of its decentralized nature, Bitcoin cannot be controlled by any particular state or power, and if it emerges as an international means of settlement it could put the Chinese government in an even more difficult position. The Chinese government stands at a fork in the road: either strengthen its defensive, closed policy toward Bitcoin still further, or change direction entirely and adopt an open policy like America's. But in a Chinese system whose core is capital control, liberalizing Bitcoin would be likely to lead to the destruction of the system itself.

Stablecoins and blockchain platforms deserve attention too

Of course, Trump's cryptocurrency policy is not purely a matter of tormenting China. Dollar stablecoins in particular mean an expansion of demand for the dollar. Vitalizing stablecoins and having American companies seize the initiative on blockchain platforms offers the United States a window of time in which to resolve its trade and fiscal deficit problems while maintaining leadership in global finance.

Stablecoins and enterprise blockchains are also an important theme connected to the global payment-system war in which Apple holds the initiative. Korean companies too must raise their antennae on this subject and detect the direction and the speed of Trump 2.0's policies. Handled badly, a major Korean company could seize favorable high ground and still fail to adapt to the new changes, collapsing in an instant like Nokia. America's policy shift is that systematic.

Oh Tae-min, Adjunct Professor of Blockchain, Graduate School of Information and Communications, Konkuk University; founder of Bitmobick; author and YouTuber. Books: Trump 2.0 (2024), The Great Bitcoin (2023), Bitcoin and the Geopolitics of the Dollar (2022), Bitcoin: A Genealogy of Wisdom (2020), Bitcoin Was Strong (2014)