AI and Cryptocurrency: Pillars of Modern Economic Dynamics

By: crypto insight|2025/12/01 18:30:08

Key Takeaways

The current economic stability heavily relies on artificial intelligence (AI) investments, as traditional growth drivers falter.
Market volatility is increasingly influenced by capital flows, deviating from traditional economic indicators.
Energy, not computing power, is the primary bottleneck in AI scalability, demanding infrastructural expansion.
Cryptocurrency’s potential for growth positions it as a pivotal political and economic asset for younger generations.

WEEX Crypto News, 2025-12-01 10:25:18

In the intricate landscape of today’s economy, the role of artificial intelligence (AI) and cryptocurrency has emerged as focal points driving shifts and contending with systemic challenges. The intricate dance between market forces and technological innovation is reshaping how economies grow, interact, and stabilize. This article examines the nuanced roles AI and cryptocurrencies play in today’s economy, shedding light on their impacts and future prospects.

AI as the Beacon of Economic Stability

Artificial intelligence is steering the current economic ship through turbulent waters, primarily acting as the primary engine for GDP growth while other traditional sectors lag. The reliance on AI investments to stave off economic downturns is emphatically illustrated by the diminishing role of other economic spheres, which include labor markets and consumer finance. This situation paints a stark picture: without AI, the structure supporting the economic edifice would be significantly weaker.

AI investments have begun to substitute for workforce hiring, enhancing company profitability despite a weakening labor market. The automation AI introduces often covers roles involving low skill and routine tasks, which usually face the brunt of recession impacts first. Consequently, even as these jobs diminish, productivity and company earnings get a boost. Therefore, income starts shifting from labor toward capital, maintaining GDP number appearances while underlying employment dynamics shift unsustainably.

AI’s role doesn’t stop here; it has also insulated segments of the economy that could otherwise signal or suffer from economic distress. By propping up productivity and squeezing inefficiencies out of systems, AI maintains an illusion of stability and masks underlying vulnerabilities, such as rising inequality and stagnant wages. The stakes for policy-makers are high. They recognize that should AI expenditures falter, the broader economy would also face steep declines. Hence, policies supporting AI expansion are poised to become crucial leverage points.

Cryptocurrency: From Financial to Political Asset

Cryptocurrencies are undergoing significant transformation, transcending their role as mere financial instruments to becoming powerful political assets, especially among younger demographics. The high growth potential of these digital currencies positions them uniquely as mechanisms through which younger generations might seek financial upside amid broader economic instability and inequality.

The political significance of cryptocurrency lies in its ability to offer a semblance of capital access, in contrast to traditional assets, which baby boomers predominantly control, widening the generational wealth gap. As costs for essentials like childcare and housing rise, leaving many financially strained, cryptocurrencies present an alternative avenue for wealth creation. This dynamic prompts policy circles to seriously consider digital currencies within the broader framework of economic reform and intergenerational equity.

This political asset classification means cryptocurrencies could impact legislative priorities and regulatory frameworks substantially. Governments may find themselves pressured to accommodate and integrate crypto-economic activities into mainstream financial systems to promote fairness and stimulate the economy.

Market Dynamics: Untethered from Traditional Fundamentals

A recent examination of market behaviors indicates a detachment from traditional economic fundamentals. Volatility has reigned supreme, driven more by institutional capital flows than by economic data or company performances. This trend underscores a market environment where sentiment and liquidity controls bypass fundamental indicatives, allowing for dramatic price shifts based on speculative trading or central bank communications.

Several trends exemplify this disconnect: AI-driven trades react mechanically to price volatilities, while commodity trading advisors (CTAs) implement shifts based on predefined price thresholds, impacting broader market indices. Furthermore, stock buybacks have emerged as a prime force underpinning equity demands, overshadowing individual and institutional direct investments.

The Volatility Index (VIX), often perceived as a gauge of market fear, now contrasts this notion. Its spikes no longer solely reflect panic but rather indicate surges in hedging and repositioning activity, often unrelated to broader market sentiment. The market, hence, is in a cycle, feeding off self-created volatility rather than depicting an organic economic narrative.

The Energy Requirement of AI

While AI’s potential is vast, its scalability faces a significant constraint: energy. As discussions around AI scalability often focus on computational power—specifically, graphics processing units (GPUs)—the actual limiting factor lies within energy infrastructure capabilities. As AI expands, its energy needs skyrocket, necessitating massive investments in power supply, grid capacities, and innovative energy sources like nuclear or natural gas.

Addressing these requirements involves substantial investment not only from a financial perspective but also concerning regulatory and strategic planning. Over the next decade, expanding energy availability and modernizing power distribution networks stand to serve as pivotal projects for advancing AI scalability effectively. Investment strategies and policy decisions now must align with this reality to leverage AI’s full economic benefits without hitting a resource wall.

Toward a Dual-Track Economic Future

The unfolding economic landscape presents a dual track: one dominated by capital-driven AI enterprises, another by labor-reliant traditional sectors. This divide is not only operational, with AI sectors enjoying high production and profitability with minimal employee dependency, but also strategic, receiving heightened protection and investment.

In contrast, traditional sectors struggle under increasing strain, contending with feeble labor absorption, consumer stresses, and steep liquidity challenges. The interplay between these economic tracks predicts future value shifts, bolstering entities adept at bridging these divisions or capitalizing on their separation. This bifurcated economy compels businesses to innovate creatively, amalgamating AI advancements within practical economic frameworks.

Looking Forward: Strategic Implications

AI continues receiving policy support to prevent economic downturns, shielding it from the economic repercussions of stagnant broad-based growth. AI’s perceived inevitability and importance secure governmental and financial backing, making it a cornerstone of strategic planning. This expectation of unwavering support underscores a commitment to avoid recession-driven setbacks.

Simultaneously, financial flows influencing market dynamics are predicted to evolve, as traditional monetary policies like Quantitative Easing (QE) take a backseat to liquidity movements orchestrated by government financial departments. Over the next 12 to 18 months, market trajectories will likely trail these liquidity pathways more than predictive economic roadmaps or fundamental analyses.

Cryptocurrencies, meanwhile, gain ground as significant asset classes tied intricately to economic and political movements. Their integration into financial systems calls for cautious regulation balancing innovation with stability, promoting equitable wealth access across generations.

FAQ

How is AI impacting the current economy?

AI significantly influences the economy by driving productivity and profitability while compensating for shortcomings in labor market growth. It replaces routine tasks, thereby enhancing corporate efficiency, but also redirects wealth from labor toward capital, necessitating policy intervention.

Why is energy a bottleneck for AI development?

AI’s scalability is constrained primarily by energy requirements. As AI systems demand extensive power, infrastructural advancements in energy production and distribution become crucial to support ongoing AI deployment and growth.

What role does cryptocurrency play in modern economies?

Cryptocurrencies serve as alternative investment vehicles primarily appealing to younger generations, providing potential capital growth amidst economic inequality. Their rising political and financial relevance suggests impending regulatory adjustments to integrate digital assets within established economic systems.

How have market behaviors shifted recently?

Market movements are increasingly dictated by capital flow strategies rather than traditional economic fundamentals. This shift reflects a growing emphasis on liquidity management, speculation, and hedging over economic indicators, challenging conventional market analysis.

What are the challenges in addressing economic duality?

The economic dichotomy between AI-driven sectors and labor-reliant industries exposes challenges in balancing innovation with sustainable employment. Bridging this divide requires businesses to synthesize advancements holistically, aligning technological integration with economic stability efforts.

Foreword: Today, the People's Bank of China's website published the "Notice of the People's Bank of China, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, State Administration for Market Regulation, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission, State Administration of Foreign Exchange on Further Preventing and Dealing with Risks Related to Virtual Currency and Others (Yinfa [2026] No. 42)", the latest regulatory requirements from the eight departments including the central bank, which are basically consistent with the regulatory requirements of recent years. The main focus of the regulation is on speculative activities such as virtual currency trading, exchanges, ICOs, overseas platform services, and this time, regulatory oversight of RWA has been added, explicitly prohibiting RWA tokenization, stablecoins (especially those pegged to the RMB). The following is the full text:

To the people's governments of all provinces, autonomous regions, and municipalities directly under the Central Government, the Xinjiang Production and Construction Corps:

Recently, there have been speculative activities related to virtual currency and Real-World Assets (RWA) tokenization, disrupting the economic and financial order and jeopardizing the property security of the people. In order to further prevent and address the risks related to virtual currency and Real-World Assets tokenization, effectively safeguard national security and social stability, in accordance with the "Law of the People's Republic of China on the People's Bank of China," "Law of the People's Republic of China on Commercial Banks," "Securities Law of the People's Republic of China," "Law of the People's Republic of China on Securities Investment Funds," "Law of the People's Republic of China on Futures and Derivatives," "Cybersecurity Law of the People's Republic of China," "Regulations of the People's Republic of China on the Administration of Renminbi," "Regulations on Prevention and Disposal of Illegal Fundraising," "Regulations of the People's Republic of China on Foreign Exchange Administration," "Telecommunications Regulations of the People's Republic of China," and other provisions, after reaching consensus with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, and with the approval of the State Council, the relevant matters are notified as follows:

I. Clarify the essential attributes of virtual currency, Real-World Assets tokenization, and related business activities

(I) Virtual currency does not possess the legal status equivalent to fiat currency. Virtual currencies such as Bitcoin, Ether, Tether, etc., have the main characteristics of being issued by non-monetary authorities, using encryption technology and distributed ledger or similar technology, existing in digital form, etc. They do not have legal tender status, should not and cannot be circulated and used as currency in the market.

The business activities related to virtual currency are classified as illegal financial activities. The exchange of fiat currency and virtual currency within the territory, exchange of virtual currencies, acting as a central counterparty in buying and selling virtual currencies, providing information intermediary and pricing services for virtual currency transactions, token issuance financing, and trading of virtual currency-related financial products, etc., fall under illegal financial activities, such as suspected illegal issuance of token vouchers, unauthorized public issuance of securities, illegal operation of securities and futures business, illegal fundraising, etc., are strictly prohibited across the board and resolutely banned in accordance with the law. Overseas entities and individuals are not allowed to provide virtual currency-related services to domestic entities in any form.

A stablecoin pegged to a fiat currency indirectly fulfills some functions of the fiat currency in circulation. Without the consent of relevant authorities in accordance with the law and regulations, any domestic or foreign entity or individual is not allowed to issue a RMB-pegged stablecoin overseas.

（II）Tokenization of Real-World Assets refers to the use of encryption technology and distributed ledger or similar technologies to transform ownership rights, income rights, etc., of assets into tokens (tokens) or other interests or bond certificates with token (token) characteristics, and carry out issuance and trading activities.

Engaging in the tokenization of real-world assets domestically, as well as providing related intermediary, information technology services, etc., which are suspected of illegal issuance of token vouchers, unauthorized public offering of securities, illegal operation of securities and futures business, illegal fundraising, and other illegal financial activities, shall be prohibited; except for relevant business activities carried out with the approval of the competent authorities in accordance with the law and regulations and relying on specific financial infrastructures. Overseas entities and individuals are not allowed to illegally provide services related to the tokenization of real-world assets to domestic entities in any form.

II. Sound Work Mechanism

(III) Inter-agency Coordination. The People's Bank of China, together with the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, and other departments, will improve the work mechanism, strengthen coordination with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, coordinate efforts, and overall guide regions to carry out risk prevention and disposal of virtual currency-related illegal financial activities.

The China Securities Regulatory Commission, together with the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the People's Bank of China, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the State Administration of Foreign Exchange, and other departments, will improve the work mechanism, strengthen coordination with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, coordinate efforts, and overall guide regions to carry out risk prevention and disposal of illegal financial activities related to the tokenization of real-world assets.

(IV) Strengthening Local Implementation. The people's governments at the provincial level are overall responsible for the prevention and disposal of risks related to virtual currencies and the tokenization of real-world assets in their respective administrative regions. The specific leading department is the local financial regulatory department, with participation from branches and dispatched institutions of the State Council's financial regulatory department, telecommunications regulators, public security, market supervision, and other departments, in coordination with cyberspace departments, courts, and procuratorates, to improve the normalization of the work mechanism, effectively connect with the relevant work mechanisms of central departments, form a cooperative and coordinated working pattern between central and local governments, effectively prevent and properly handle risks related to virtual currencies and the tokenization of real-world assets, and maintain economic and financial order and social stability.

III. Strengthened Risk Monitoring, Prevention, and Disposal

(5) Enhanced Risk Monitoring. The People's Bank of China, China Securities Regulatory Commission, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, State Administration of Foreign Exchange, Cyberspace Administration of China, and other departments continue to improve monitoring techniques and system support, enhance cross-departmental data analysis and sharing, establish sound information sharing and cross-validation mechanisms, promptly grasp the risk situation of activities related to virtual currency and real-world asset tokenization. Local governments at all levels give full play to the role of local monitoring and early warning mechanisms. Local financial regulatory authorities, together with branches and agencies of the State Council's financial regulatory authorities, as well as departments of cyberspace and public security, ensure effective connection between online monitoring, offline investigation, and fund tracking, efficiently and accurately identify activities related to virtual currency and real-world asset tokenization, promptly share risk information, improve early warning information dissemination, verification, and rapid response mechanisms.

(6) Strengthened Oversight of Financial Institutions, Intermediaries, and Technology Service Providers. Financial institutions (including non-bank payment institutions) are prohibited from providing account opening, fund transfer, and clearing services for virtual currency-related business activities, issuing and selling financial products related to virtual currency, including virtual currency and related financial products in the scope of collateral, conducting insurance business related to virtual currency, or including virtual currency in the scope of insurance liability. Financial institutions (including non-bank payment institutions) are prohibited from providing custody, clearing, and settlement services for unauthorized real-world asset tokenization-related business and related financial products. Relevant intermediary institutions and information technology service providers are prohibited from providing intermediary, technical, or other services for unauthorized real-world asset tokenization-related businesses and related financial products.

(7) Enhanced Management of Internet Information Content and Access. Internet enterprises are prohibited from providing online business venues, commercial displays, marketing, advertising, or paid traffic diversion services for virtual currency and real-world asset tokenization-related business activities. Upon discovering clues of illegal activities, they should promptly report to relevant departments and provide technical support and assistance for related investigations and inquiries. Based on the clues transferred by the financial regulatory authorities, the cyberspace administration, telecommunications authorities, and public security departments should promptly close and deal with websites, mobile applications (including mini-programs), and public accounts engaged in virtual currency and real-world asset tokenization-related business activities in accordance with the law.

(8) Strengthened Entity Registration and Advertisement Management. Market supervision departments strengthen entity registration and management, and enterprise and individual business registrations must not contain terms such as "virtual currency," "virtual asset," "cryptocurrency," "crypto asset," "stablecoin," "real-world asset tokenization," or "RWA" in their names or business scopes. Market supervision departments, together with financial regulatory authorities, legally enhance the supervision of advertisements related to virtual currency and real-world asset tokenization, promptly investigating and handling relevant illegal advertisements.

（IX） Continued Rectification of Virtual Currency Mining Activities. The National Development and Reform Commission, together with relevant departments, strictly controls virtual currency mining activities, continuously promotes the rectification of virtual currency mining activities. The people's governments of various provinces take overall responsibility for the rectification of "mining" within their respective administrative regions. In accordance with the requirements of the National Development and Reform Commission and other departments in the "Notice on the Rectification of Virtual Currency Mining Activities" (NDRC Energy-saving Building [2021] No. 1283) and the provisions of the "Guidance Catalog for Industrial Structure Adjustment (2024 Edition)," a comprehensive review, investigation, and closure of existing virtual currency mining projects are conducted, new mining projects are strictly prohibited, and mining machine production enterprises are strictly prohibited from providing mining machine sales and other services within the country.

（X） Severe Crackdown on Related Illegal Financial Activities. Upon discovering clues to illegal financial activities related to virtual currency and the tokenization of real-world assets, local financial regulatory authorities, branches of the State Council's financial regulatory authorities, and other relevant departments promptly investigate, determine, and properly handle the issues in accordance with the law, and seriously hold the relevant entities and individuals legally responsible. Those suspected of crimes are transferred to the judicial authorities for processing according to the law.

（XI） Severe Crackdown on Related Illegal and Criminal Activities. The Ministry of Public Security, the People's Bank of China, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, as well as judicial and procuratorial organs, in accordance with their respective responsibilities, rigorously crack down on illegal and criminal activities related to virtual currency, the tokenization of real-world assets, such as fraud, money laundering, illegal business operations, pyramid schemes, illegal fundraising, and other illegal and criminal activities carried out under the guise of virtual currency, the tokenization of real-world assets, etc.

（XII） Strengthen Industry Self-discipline. Relevant industry associations should enhance membership management and policy advocacy, based on their own responsibilities, advocate and urge member units to resist illegal financial activities related to virtual currency and the tokenization of real-world assets. Member units that violate regulatory policies and industry self-discipline rules are to be disciplined in accordance with relevant self-regulatory management regulations. By leveraging various industry infrastructure, conduct risk monitoring related to virtual currency, the tokenization of real-world assets, and promptly transfer issue clues to relevant departments.

IV. Strict Supervision of Domestic Entities Engaging in Overseas Business Activities

（XIII） Without the approval of relevant departments in accordance with the law and regulations, domestic entities and foreign entities controlled by them may not issue virtual currency overseas.

（XIV） Domestic entities engaging directly or indirectly in overseas external debt-based tokenization of real-world assets, or conducting asset securitization activities abroad based on domestic ownership rights, income rights, etc. (hereinafter referred to as domestic equity), should be strictly regulated in accordance with the principles of "same business, same risk, same rules." The National Development and Reform Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, and other relevant departments regulate it according to their respective responsibilities. For other forms of overseas real-world asset tokenization activities based on domestic equity by domestic entities, the China Securities Regulatory Commission, together with relevant departments, supervise according to their division of responsibilities. Without the consent and filing of relevant departments, no unit or individual may engage in the above-mentioned business.

(15) Overseas subsidiaries and branches of domestic financial institutions providing Real World Asset Tokenization-related services overseas shall do so legally and prudently. They shall have professional personnel and systems in place to effectively mitigate business risks, strictly implement customer onboarding, suitability management, anti-money laundering requirements, and incorporate them into the domestic financial institutions' compliance and risk management system. Intermediaries and information technology service providers offering Real World Asset Tokenization services abroad based on domestic equity or conducting Real World Asset Tokenization business in the form of overseas debt for domestic entities directly or indirectly venturing abroad must strictly comply with relevant laws and regulations. They should establish and improve relevant compliance and internal control systems in accordance with relevant normative requirements, strengthen business and risk control, and report the business developments to the relevant regulatory authorities for approval or filing.

V. Strengthen Organizational Implementation

(16) Strengthen organizational leadership and overall coordination. All departments and regions should attach great importance to the prevention of risks related to virtual currencies and Real World Asset Tokenization, strengthen organizational leadership, clarify work responsibilities, form a long-term effective working mechanism with centralized coordination, local implementation, and shared responsibilities, maintain high pressure, dynamically monitor risks, effectively prevent and mitigate risks in an orderly and efficient manner, legally protect the property security of the people, and make every effort to maintain economic and financial order and social stability.

(17) Widely carry out publicity and education. All departments, regions, and industry associations should make full use of various media and other communication channels to disseminate information through legal and policy interpretation, analysis of typical cases, and education on investment risks, etc. They should promote the illegality and harm of virtual currencies and Real World Asset Tokenization-related businesses and their manifestations, fully alert to potential risks and hidden dangers, and enhance public awareness and identification capabilities for risk prevention.

VI. Legal Responsibility

(18) Engaging in illegal financial activities related to virtual currencies and Real World Asset Tokenization in violation of this notice, as well as providing services for virtual currencies and Real World Asset Tokenization-related businesses, shall be punished in accordance with relevant regulations. If it constitutes a crime, criminal liability shall be pursued according to the law. For domestic entities and individuals who knowingly or should have known that overseas entities illegally provided virtual currency or Real World Asset Tokenization-related services to domestic entities and still assisted them, relevant responsibilities shall be pursued according to the law. If it constitutes a crime, criminal liability shall be pursued according to the law.

(19) If any unit or individual invests in virtual currencies, Real World Asset Tokens, and related financial products against public order and good customs, the relevant civil legal actions shall be invalid, and any resulting losses shall be borne by them. If there are suspicions of disrupting financial order and jeopardizing financial security, the relevant departments shall deal with them according to the law.

This notice shall enter into force upon the date of its issuance. The People's Bank of China and ten other departments' "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation" (Yinfa [2021] No. 237) is hereby repealed.

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