The Great Bifurcation
China bets on atoms while America doubles down on code
In January 2026, two announcements passed almost unnoticed in the Western press. The People’s Bank of China revealed that the value of its gold reserves had surged from $319.45 billion to $369.58 billion in a single month. Days later, Beijing announced it would “tighten virtual currency restrictions” in 2026, reinforcing its 2021 ban on crypto trading and mining.
These confirm that the geopolitical fault lines of money are shifting. For the last few months, the prevailing narrative coming from the US has been that stablecoins, tokenized assets and Bitcoin are the future of finance—that Bitcoin is the ultimate neutral reserve asset, a digital gold that transcends borders, stablecoins the rails of the future and tokenisation of everything inevitable. Beijing, however, has reached a different conclusion: decentralized networks are not truly decentralized, stablecoins remain subject to US hegemony, and Bitcoin itself is not neutral.
As the US aggressively integrates crypto into its financial system under the Trump administration—what we recently called the “Trump Shock”—China is moving in the opposite direction, accumulating gold at unprecedented rates while tightening controls on any crypto asset it does not govern. Rather than confronting America head-on and trying to reclaim crypto dominance, China appears to be exiting the game almost entirely to play a different one.
In other words, we are witnessing a monetary bifurcation. The US is building a financial system anchored in code and credit—Bitcoin and dollar-backed stablecoins. China is returning to metal—gold as the foundation for a dedollarized order.
This divergence mirrors a deeper pattern in how these superpowers approach economic development. As Nicolas pointed out last year in Drift Signal, the US bets on software, AI, and code in general—building digital infrastructure that scales globally at near-zero marginal cost. China, meanwhile, bets on factories, manufacturing, and atoms—building physical infrastructure that produces tangible goods. The same division is now playing out in money itself. America is building a monetary system in software. China is building one in metal.
The Americanization of Bitcoin
From Beijing’s vantage point, the ‘decentralized’ nature of Bitcoin is increasingly a mirage, the hegemony of stablecoins a trap, and the tokenization of real world assets another way for the US to ensure dollarization of the world. The US has successfully co-opted the crypto ecosystem and evangelized everywhere that the world will be tokenized—Larry Fink, Blackrock’s CEO has been evangelising the world, from the UAE to the halls of Davos on tokenization of finance. Under Trump, the US officially wants to become the “crypto capital of the world”—home to the largest regulated exchanges like Coinbase, and issuers of dollar denominated stablecoins like Circle and now Tether.
When Trump publicly endorsed Bitcoin and literally suggested it could “pay off the $35 trillion US debt,” he wasn’t just speaking to voters or industry; he was signaling to Beijing that crypto was becoming a vector of American financial power. Some American companies rely on Bitcoin in their treasuries—MicroStrategy alone holds over 450,000 BTC, roughly 2% of Bitcoin’s total supply. American ETFs hold it, and American regulators are creating the frameworks—like the GENIUS Act—to enable it.
This is the SaaS model applied to money. Bitcoin and stablecoins are software products that scale globally, require minimal physical infrastructure, and generate network effects that entrench American financial dominance. Just as Microsoft and Google became essential infrastructure for the digital economy, Bitcoin, USDC and USDT are becoming essential rails for the tokenized economy. Control the code, control the system.
What interest does China have in propping up an asset class that extends the reach of their primary geopolitical rival? The answer came in February 2026, when Reuters reported China’s vow to “tighten virtual currency restrictions,” reaffirming its stance against any tokenized asset outside their control. As Noelle Acheson rightly points out in Crypto is Macro, it is important to understand that this is not a ban, it is a tightening of control.
The Gold Standard of Dedollarization
While the US bets on digital code, China is betting on atoms.
Beijing is aggressively buying gold to anchor a payment system decoupled from the dollar. In just one month, the value of China’s gold reserves jumped by $50 billion. As Izabella Kaminska noted in her excellent publication The Peg, this shift to hard assets is the cornerstone of a new dedollarized payment architecture.
The logic is elegant and strategic. Gold has a distinct advantage over Bitcoin for a rival superpower: the US may hold a lot of it, but they cannot control gold the way they can control the on-ramps, off-ramps, and regulatory framework of the crypto economy. Gold is universally trusted, non-programmable, immune to software updates, quantum computing threats, or 51% attacks.
Unlike Bitcoin’s cryptographic security, which relies on mathematical assumptions about computational difficulty, gold’s value is secured by physics. You cannot hack atomic structure. You cannot fork gold into ‘Gold Classic’ and ‘Gold Cash.’ And critically for China’s purposes, no amount of American regulatory power can freeze gold bars sitting in Shanghai vaults the way OFAC sanctions can freeze digital assets routed through US-controlled infrastructure.
This is the factory model applied to money. Gold requires physical mining, refining, storage, and transportation—exactly the kind of supply chain dominance China has spent decades building. While America optimizes for code that can be copied infinitely, China optimizes for atoms that must be extracted, processed, and secured. It’s a return to industrial-age economics in the monetary sphere, and it plays directly to China’s strengths.
Gold accumulation reveals China is seeking a system completely decoupled from the dollar. Beijing is comfortable relying on gold as their anchor while the US tries to leverage Bitcoin and debt-backed stablecoins to financialize the internet. It is a bifurcation of trust: the West trusts code and credit; the East trusts metal and atoms.
Treasury Secretary Scott Bessent noted in recent testimony that US officials had heard rumors China may be developing digital assets backed by gold rather than the RMB, possibly using Hong Kong as a testing ground. Yet as Izabella Kaminska observes in The Peg, China faces a structural constraint. Reserve currency issuers historically run external deficits, supplying safe assets to global markets. China’s export surplus model produces the opposite configuration. A gold-backed stablecoin could provide cross-border settlement outside dollar clearing without fully liberalizing the capital account, but it would impose discipline on monetary expansion, limiting tools central to China’s export-led development model.
Gold accumulation alone does not create a functioning payment system. As Jess Hoversen points out in the recently launched Hegemoney, China is building the digital infrastructure to operationalize its dedollarization strategy. The Cross-Border Interbank Payment System (CIPS) processed nearly $25 trillion in 2024, up from $5 trillion in 2019, streamlining RMB settlements outside SWIFT. mBridge, a joint project with Thailand, UAE, and Saudi Arabia, enables instant cross-border CBDC settlements, processing over $55 billion across 4,000 transactions since launch. In January 2026, China became the first country to launch an interest-bearing CBDC, giving the digital yuan a structural advantage over zero-yield stablecoins in cross-border transactions. These are the rails through which gold-backed reserves would flow—the digital plumbing for a commodity-anchored system.
The Shadow Mining Strategy
But China has not entirely abandoned the Bitcoin ecosystem—they’ve simply repositioned within it.
While China banned Bitcoin trading and mining in 2021, prompting a massive hashrate migration to the US and other jurisdictions, credible reports suggest significant underground mining operations continue to operate within China, often tolerated by local authorities. Though the US now officially leads in hashrate, China retains substantial control over mining hardware manufacturing—companies like Bitmain (a company that has been the focus of US National Security probe) and MicroBT still dominate ASIC production—and likely maintains more covert mining capacity than publicly acknowledged.
This positioning reveals the strategic asymmetry at the heart of the bifurcation. America controls the software layer—the exchanges, the regulatory frameworks, the stablecoin USD denomination and its infrastructure. China still controls significant portions of the hardware layer—the physical mining equipment, the manufacturing capacity, the supply chains.
The pattern repeats across the broader economy. American tech companies design the chips; Chinese factories manufacture them. American platforms write the code; Chinese suppliers build the servers. With Bitcoin, American institutions accumulate the asset while Chinese factories produce the machines that secure it.
From a strategic perspective, this positioning offers unique leverage.
