In Other News: China Limits Cryptocurrencies, Anxiety Over Tokyo Olympics & More – May 28, 2021

May 28, 2021

China’s move to limit cryptocurrencies other than its own digital Yuan is a repressive move advertised as a protective measure. Last week, the Chinese Communist Party (CCP) State Council ordered a halt to cryptocurrency trading and mining within its borders, claiming that the ban would better protect its citizens from fraud and lower financial risks and speculative trading. In response to the new policy, the value of Bitcoin and Ethereum – ecosystems heavily dependent on mining activity in China – tumbled and the coins posted their largest one-day loss since the onset of the pandemic last year. But the notion that China designed its policy to reduce criminal activity in the crypto world does not add up. Illicit activity has been shown to only represent a small percentage of all Bitcoin and Ethereum transactions, and law enforcement can have visibility into a number of those transactions via financial regulations, investigative software, and legal process. Further, if the policy is designed to thwart criminal activity, regulations could have targeted privacy coins like Monero which are increasingly used for illicit transactions. With the advent of its own digital Yuan, only the Chinese government will be able to see how its citizens are earning and moving money, and they will be able to track all of it in real time. It has also been suggested that the coins might have expiration dates, allowing the government to provoke national spending during times of economic need. China’s move comes as the latest in a broader effort by the government to surveil and limit the activities of its citizens. It is also possible that China could use its omnipotent control over the coin as leverage against dealings with foreign businesses, preventing the outflow of digital Yuan to companies who protest China’s human rights, environmental, or labor abuses, as the nation is increasingly aggressive against companies who protest against its internal policies.

Anxiety over the Tokyo Olympics is growing, as a major Japanese newspaper and members of the Japanese business community call for the games to be canceled. The Tokyo Olympic games were canceled in 2020 due to the pandemic and rescheduled for July 23 to August 8, 2021, but the timing is now of concern given that the Japanese capital and other parts of the country remain under a state of emergency due to Covid-19. This week, a major newspaper in Japan, the Asahi Shimbun, called for the games to be canceled. The editorial board wrote, “We cannot think it’s rational to host the Olympics in the city this summer.” The business community is also voicing concern. For example, the CEO of SoftBank Group Corp., Masayoshi Son, warned that visitors could bring variants of the virus and a new surge of infections to Japan. In Son’s view, canceling the Olympics would bring financial losses, but going forward would be more dangerous and could lead to additional loss of life, lockdowns, and further economic damage to the country. So far, the International Olympic Committee (IOC) has said that the games will go forward and that 80% of athletes and officials will be vaccinated by then. They also point to strict protocols and restrictions on movement to ensure that the games are safe. However, according to Asahi polling data, more than 80% of the Japanese population would like the Olympics to be canceled. Meanwhile, the U.S. Department of State and Centers for Disease Control and Prevention (CDC) this week warned Americans against traveling to Japan for the summer Olympic games due to concerns for Covid-19 infections and the country’s slow vaccination rate. At this point, it seems unlikely that the games will be canceled. Canceling the games would be a major blow to Japanese Prime Minister Yoshihide Suga and IOC President Thomas Bach, who both insist that the games must go on. But the growing anxiety around the Tokyo Olympics in Japan is evidence that the global concern for Covid-19 remains high and global economic recovery will continue to be hampered by low vaccination rates and the emergence of new, more deadly variants around the world.

Mercenary issue looms large in the backdrop of a recent U.S. visit to Libya, while support by multiple state actors remains necessary for economic security. In mid-May, Acting U.S. Assistant Secretary for Near Eastern Affairs Joey Hood and Special Envoy for Libya Richard Norland visited Libya in what was reportedly the highest level diplomatic visit to Tripoli since 2014. Libya has been in a volatile position of repeated civil wars ever since longtime leader Muammar Gaddafi was captured and executed in 2011. The most recent conflict began in 2019 when East-based Libyan commander Khalifa Haftar attempted to capture Tripoli and take control over Libya’s Government of National Accord (GNA), then the leading party recognized by the United Nations. Haftar, who was supported by the UAE, Saudi Arabia, Russia, and Egypt, was ultimately taken down in late 2020 when Turkey increased its support of the GNA. Turkey supplied advanced military hardware and deployed thousands of Syrian mercenaries and additional troops. Since then, a fragile ceasefire has held, but the situation remains complicated by the number of mercenaries still on the ground. In December 2020, the UN estimated that there were at least 20,000 foreign fighters and mercenaries in Libya, including Syrians, Russians, Sudanese and Chadians. In March, the majority of opposing state actors formally recognized Libya’s newly unified interim government but they have not done much to move the mercenaries. On May 21, UN special envoy for Libya Jan Kubis warned that the continued presence of mercenaries is a threat to the entire region, adding that last month’s killing of longtime Chadian President Idriss Deby is a reminder of the link between the security situation in Libya and security and stability in the region. Getting the Russian mercenaries out of Libya will be particularly difficult, while Turkey’s ground presence is viewed with more nuance by Libya’s Government of National Unity (GNU). Relations between Turkey and Russia will no doubt impact the degree of security that the government is able to achieve moving forward and presents a diplomatic opportunity for the Biden administration in the months leading up to Libya’s December elections.

An air base under construction on Mayun/Perim Island in the Bab el-Mandeb Strait off the coast of Yemen demonstrates the island’s continued appeal, and is likely part of a larger strategic effort to counter threats from Iran-backed Houthi movement. A May 25 AP report of the recent construction of a “mysterious” air base on Mayun Island, broadly believed to be the work of the UAE, was met with a flurry of responses from Yemeni and Saudi government officials. While Emirati officials in Washington and Abu Dhabi have not taken responsibility, U.S. Senator Chris Murphy called the base “a reminder that the UAE is not actually out of Yemen.” The Saudi state news agency SPA made a statement claiming that all equipment on Mayun Island was under control of the Saudi-led Coalition Command and dismissed the notion of UAE involvement. Mayun Island, which sits at the entrance to the Red Sea in the strategic Bab el-Mandeb Strait, has a storied history of occupation and over the years multiple nations have sought control of the land for geostrategic purposes. But historic attempts to use the location have been fraught with obstacles, as the Island has no sources of fresh water, is brutally hot and dry, and the land mass itself is quite small. The UAE took control of the Island in 2015 after Gulf Arab forces swept in and successfully expelled the Houthi fighters, and the following year the Emiratis proceeded to start construction of a runway. However, the project stalled and three years later, the UAE left the Saudi-led coalition and withdrew its troops. If the UAE is behind the recent construction, it seems part of a broader Emirati strategy to amass maritime control. Last June, UAE-backed Yemeni separatists took control of Socotra, another geostrategic Island in the Gulf of Aden. The Iranian press has recently reported that the UAE brought Israeli tourists to Socotra and is possibly collaborating with the Israelis to establish intelligence bases throughout the Gulf. The Saudis have denied UAE presence or involvement strategic endeavors on Socotra.