In August 1998, LTCM collapsed after its Ruble forward contracts proved illiquid, as the Russian bank counter parties, themselves, had invested their own reserves into the very same GKO's that the foreign GKO speculator sought to hedge.
That the GKO debacle coincided with the strategic START II/III negotiations isn't a coincidence, but it is beyond the scope and outside the focus of this article.
China: Tale of Two Currencies
China has two currencies: the Yuan and the RMB. The purpose of splitting her currencies is to better engineer the Chinese economy to prove irresistibly competitive by dint of overwhelming competitors' export trade and suppressing imports.
The problem, though, is that this successful mercantilist policy results in huge domestic surpluses, and the locals know better than to keep it in a dubious local bank or possibly depreciating cash.
BitCoin: Easier Than Getting a Thai Passport
Wealthy Chinese have, for years, been exporting capital globally: they're the marginal and major foreign buyers in almost every cosmopolitan real estate market.
Until recently, it was common practice for wealthy Chinese to go to Thailand to open a bank account, even acquiring a Thai citizenship in the process.
Lowering the Capital-Outflow Hurdle: Commoners Begin Speculating on the Capital-Outflow Game
Part of the reason the PBoC raised an alarm over BitCoin was that they quickly realised that while China can survive losing surpluses to speculative elite capital outflows, to have the non-wealthy classes speculating, with leverage, on both the quantity and velocity of domestic surpluses could induce a national banking and economic crisis.
Massive, levered BitCoin speculation allows the common Chinese resident a chance to simulate the capital outflow game of the wealthy, by bidding and selling a token that allows him to export his capital unencumbered. He believes he can then, if he is lucky, time his trades right and convert his local currency into a more desirable foreign one at a large profit.
It is this desire by the common man, to convert his savings and borrowed capital, into foreign currency at a substantial profit, that draws literally every soul in China into the crypto-currency market.
Xi: Wisely Preparing for Disaster
There is some good news: Xi's government is anticipating, if not actively engendering, a BitCoin crash.
The Chinese government knows BitCoin will crash, millions will lose everything, and the Chinese banking system will take a beating when all the off-balance sheet BitCoin loans default and the peer-to-peer lending schemes collapse.
Therefore, China continues to brace herself for this moment, knowing that there will be pain, but hopefully, the riots do not require tanks and heavy weapons to disperse!