
Why Chinese people will drive the next bull market in bitcoin - rubikscube
http://qz.com/74137/six-reasons-why-chinese-people-will-drive-the-next-bull-market-in-bitcoin/
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Tuna-Fish
This lacks the background of _why_ the Chinese want to invest abroad so much.
I'll try to provide a little:

Traditionally, In Chinese society it's expected that in your old age you will
be cared for by your children. That is, you don't really need retirement
savings. Thanks to social change and the one-child policy, millions of Chinese
don't believe that this will work for them. So, they are facing either working
until they drop ( _if_ they can find some place to keep working in, and that's
a big if), or saving for retirement.

Saving for retirement is very hard because the Chinese government has
intentionally made it almost impossible. The currency inflates quickly enough
that storing as cash is completely pointless. There are very strong currency
controls that block any investment into foreign companies -- and even into
profitable parts of local ones. The internal stock market that the Chinese can
invest in is a total scam. This only leaves real estate (which is believed to
be in a huge bubble), and the technically illegal shadow banking system, which
itself is having trouble.

So in summary, the Chinese middle class is flush in cash, and desperately
wants to put it somewhere, _anywhere_.

How large of a part Bitcoin will play in this will likely depend on threatened
the Chinese government will be of it. While the system is technically sound, I
have little faith that it could survive the Chinese government using
informants and executions against anyone taking in RMB and selling BTC.
However, as of right now, most of the shadow banking system is illegal, but
it's so large (nearing the GDP of the country) that the government simply
doesn't dare do anything about it. Will the same happen to BTC being used to
move wealth across the border?

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Quiark
So, why is the government doing this?

~~~
Tuna-Fish
The cynical answer is that they are doing it to maintain full control over the
economy and to loot the private sector dry. Note that the rich and the
connected are not limited by these rules.

There are probably less cynical reasons for their actions. I just haven't ever
heard any.

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tomhschmidt
>5\. Chinese techies are used to spending an ungodly amount of time mining
virtual coins in online games.

It's like he doesn't even know how Bitcoins work.

~~~
cpdean
You're polite. It's clear the author doesn't understand the difference between
btc mining and mining in an mmorpg.

~~~
corysama
I don't think that's clear at all. The paragraph about gold farming is brief
and vague. My impression is that he's trying to convey that many Chinese are
already very familiar with an analogous system. Whereas if you haven't played
mmos, bitcoin mining is an entirely alien concept.

If you take a break from thinking like a crypto-economic-engineer and look at
btc mining from the pov of your average consumer, the biggest difference
between btc mining and gold farming is that btc has automated the human player
out of the game. From the outside, it looks a lot like farming for gold in
Progress Quest.

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rdl
If I were Chinese, I'd want a cryptocurrency which:

1) Allowed me to "store value" in a variety of different assets (USD, various
US stocks, commodities, etc.) -- NOT a single speculative currency.

2) Anonymous/no transaction records

3) Multiple issuers and thus multiple roots of trust; If I had $100k to store
offshore, it wouldn't all be at risk to one entity.

4) Protocol designed for anonymity; wallet software or wallet providers who
left no particular trace on your local machine, network traffic monitorable
from your local machine, etc.

In short, some kind of open network of blinded token issuers, NOT bitcoin.

~~~
wisty
Most of this is possible, if you use bitcoins to buy offshore assets,
something which Chinese can't easily do.

It's really quite hard to move money to and from China. Bitcoin is a
relatively secure way of doing so. It's probably not legal, but it's easier
than Fedexing cash.

~~~
rdl
There have to be better China-specific ways of doing this. There is a
relatively flourishing parallel banking system (for loans to SMBs); there has
to be some hawala type system where you loan money to a producer in China,
then receive retained earnings overseas.

The issue is _not_ what to do with the money outside China; it's the first hop
of being able (legally, or untraceably) to get the money out of China.

The other competitor seems to be "fly to Macau", which from what I saw at the
tables, involves people who were "very new money" throwing down USD 50k at a
throw of the dice. Presumably this is somehow connected to laundering money,
and not purely entertainment.

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mschuster91
Well, there _is_ a point for Chinese gov't to crack down on: bitcoin exchanges
and businesses accepting bitcoins. After all, you need to cash them out
somehow.

~~~
mikecarroll
Right--it's easy for the Chinese government to restrict the points of exchange
for bitcoin into other currencies, like banks (most of which are state-owned),
mobile phone recharge cards, credit cards, etc.

Doing that would leave bitcoin only attractive to the elite that can move
their country in and out of the money easily. But then the obvious question
is: for folks that can already move money around easily outside of government
control--why would those people want to take on the extra risk inherent in
bitcoins?

~~~
mschuster91
For corrupt officials BTC presents an easy way to hide black money. A banking
account has official records which can be obtained by police (and seized by
it!).

So, a criminal moves his funds into Bitcoin, either at a Chinese exchange or
at a foreign one, and then hides the private key on paper somewhere. If he
gets arrested/sentenced to death/whatever, family/friends can always recover
the money.

Actually, I'm wondering why the Mafiya doesn't use Bitcoin for cross-border
drug exchanging already...

~~~
rdl
Hawala or the equivalent makes MUCH more sense for moving money. BTC has
neither the depth nor technical features to accomodate massive illegal flows.

The problem with cross-border drug exchange is that at the retail level, you
end up with a fuckton of $5-20 bills. You could color up to $100s in some
cases, but even that is hard at scale.

Dealing with bulk currency in the heavily surveilled customer nations (USA,
EU) is hard. The gold standard seems to be shipping bulk currency out, since
most drug people are already good at moving bulk products in. Trying to
deposit it into

If you had a way to spend infinite $5 bills in the US to buy BTC, you'd be
just as likely to have a way to spend infinite $5 bills in the US to buy bank
deposits in Macau. It's the first stage which is the serious problem, not
stages 2/3. Pretty much all _3_ stages of money laundering now happen outside
the US -- or you bring washed money back into the US to invest in some cases,
the last stage.

Hawala works because you can net stuff out, thus reducing the need to move
bulk currency. But you still need to move bulk currency eventually to settle
up.

~~~
mschuster91
Well, the retail-level $5/10/20 bills can be exchanged anonymously at Bitcoin
ATMs. If I were a dealer, I'd do this so that coptards can't seize the money
at the place I store it.

Often in local news there are reports about small dealers getting busted,
while they only have small quantities of drugs at home, if at all, most have
shitloads of money in their homes - which breaks their neck in court.

~~~
rdl
The issue isn't street dealers dealing with shoeboxes of cash, it's levels up
from that. You can pay for jewelry, guns, rent, stolen precursors, grow
equipment, labor, rims, etc. in cash. You can't pay for cars or houses. You
can generally pay the dealers 1-2 steps up from retail in bulk cash without
problems, but at the point where they need to bring product in
internationally, it becomes an issue.

It used to be meth worked a lot better (since you could produce it more
locally/closer to consumption), but since Diane Feinstein severely restricted
effective formulations of Sudafed (pseudoephedrine) in the Methamphetamine
Control Act of 1996, most of the production moved to Mexico, along with most
of the (ditchweed) marijuana production, and smuggling routes for both South
American cocaine and heroin (also brought in from abroad).

The pharm market is probably more cash-based, since it seems to be just as
much "buying pills off people who get them for ~free from pharmacies, for
cash" as "bringing in bulk pills from India/China/Israel". This might vary per
medication though, but there are definitely entirely-domestic pharm dealers.

I'm not really sure what's happened with the MJ market post-MMJ; I know a lot
of the grow ops in the Triangle went from being local people to being Mexican
gang grows, but I think there are plenty of 100-400 plant warehouse grows now.
I'm not really sure about the outdoor market in places like Missouri (which I
believe is one of the bigger domestic outdoor producers). I do know there's a
huge pricing differential between Oakland and the East Coast, probably due to
MMJ and quantity.

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TheCoelacanth
> 6\. The government can’t track it, can’t block it, and can’t crack down on
> it.

This is a common misconception about bitcoins. In fact, bitcoin lets you track
every transaction that has ever been made.

~~~
metachris
But you can't track where the transaction happened (eg. if inside of China or
not). Also you cannot reliably trace funds over multiple transactions due to
the easy mixing with other funds.

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primitur
BRB, off to open a Bitcoin exchange in China ..

Seriously though, could it be that we're finally seeing a solution to the
worlds problems, with decentralized currency become a peoples movement to
remove the existing power structures?

Methinks if thats the case, then duh .. China is where it needs to happen most
of all. For all of our sakes!

~~~
lnanek2
Good luck. Business owners in China frequently claim the government can just
take your business any time they feel like it. You can't even run a business
without friends in the government and police and massive gifting.

