
China orders Bitcoin exchanges in capital city to close - AndrewDucker
http://www.bbc.co.uk/news/business-41320568
======
cs702
As soon as I read this, two words came to mind:

Capital flight.

A growing number of Chinese nationals has been using Bitcoin to siphon money
out of China over the past several years.[1][2]

Not surprisingly, the Chinese government is cracking down on this innovative
form of capital flight.

[1] [http://www.theepochtimes.com/n3/1891021-how-chinese-use-
bitc...](http://www.theepochtimes.com/n3/1891021-how-chinese-use-bitcoin-to-
funnel-money-out-of-the-country/)

[2] [http://www.theaustralian.com.au/business/markets/chinese-
inv...](http://www.theaustralian.com.au/business/markets/chinese-investors-
use-bitcoin-to-get-yuan-out-of-country/news-
story/7cd6f89ae7cd84aef91078326b6274cc)

~~~
evbots
I really don't understand the capital flight argument. The Chinese economy has
seen overwhelming growth in the past 10 years. If you are searching for yield,
it's in China.

~~~
patio11
Much of the money getting made in China is ending up in the hands of
government employees who should not have very lucrative jobs, and the
combination of lavish personal consumption by them and obvious advantages
afforded to their children ("princelings") is causing audible social
discontent about corruption.

The Chinese Communist Party considers audible social discontent to be an
existential threat and responds to it with overwhelming force. Part of the
response is banning public expressions of discontent. Part of it is shooting
corrupt officials after show-trials. Part of it is rejiggering incentives, to
make it clear that you'll have to keep your money under the watchful eye of
the CCP rather than discretely investing it in a country which probably won't
execute you.

~~~
dilemma
>Much of the money getting made in China is ending up in the hands of
government employees

BS

------
tannerbrockwell
China will nationalize the domestic miners and treat Bitcoin as a commodity
asset that the state controls.

I believe this will immediately cause a constriction in supply as those coins
will not be sold at least initially on the open market.

Look for this messaging to coincide with the pronouncements around the new
five-year plan(FYP)[1]. As the first major section of the 13th FYP, innovation
is emphasized as a cornerstone of China’s development strategy.[2] Bitcoin is
a technology and has already come along way from the Satoshi whitepaper.
State-Owned Enterprises will be emphasized as they strengthen SOEs as national
champions at home and abroad and protect their interests in this emerging
blockchain space. The goal of the One Belt, One Road (OBOR) initiative is to
facilitate access to natural resources and encourage economic development in
China’s poorer western provinces.

While such an initiative can continue without bitcoin, it is interesting to
think of how OBOR would be strengthened on the world stage with an instantly
settled mechanism such as bitcoin behind its infrastructure.

[1]
[https://en.wikipedia.org/wiki/19th_National_Congress_of_the_...](https://en.wikipedia.org/wiki/19th_National_Congress_of_the_Communist_Party_of_China)

[2]
[https://www.uscc.gov/sites/default/files/Research/The%2013th...](https://www.uscc.gov/sites/default/files/Research/The%2013th%20Five-
Year%20Plan.pdf)

~~~
tboyd47
Interesting theory but how can China control Bitcoin if there's nothing
stopping people in other countries from mining it?

~~~
tannerbrockwell
China will nationalize the domestic creation of Bitcoin. This is their sphere
of influence. Thus they will control the domestic production of bitcoins. This
nationalization will kick off the next leg up of the exponential growth for
bitcoin. Just as the US Marshals auctioning off the Silk Road coins
established legality in the American market. China will want to control
capital flight and will use bitcoin as the release valve for their
outrageously overhigh investment in US Treasuries.

~~~
tboyd47
Bitcoins are not like some manufactured physical item where a group of people
can collectively seize the means of production with force to control supply of
said item. It would be kind of funny if the CCP views it that way but I doubt
they do. They probably have more knowledge about how Bitcoin works than
everybody on HN combined.

~~~
tannerbrockwell
The miner's mining Rig's are plugged into the state controlled power grid. If
China wants to control the means of production, they simply follow the power
hogs, remember we're talking about operations that are industrial scale. The
small players have 500+ mining rigs alone. The means of production will be
seized. Existing coins are a toss-up. Although since the penalty could be a
death sentence, I'm sure the business's that have these will comply with what
ever orders follow.

~~~
tboyd47
You are still thinking about this in terms of a physical object. Miners don't
"produce" anything except in the same sense that I "produce" the answer to a
crossword puzzle. You can take away my pencil but it doesn't make the puzzle
unsolvable.

~~~
tannerbrockwell
Dude. The mining rigs are physical. All I said was that China will seize the
'means of production' so they control the manufacture domestically. It's a
phrase that was used a lot to describe the basic tenets of different types of
economy and harkens to a time when industrialization was a major focus of the
first world and people trying to find their place in an industrial society.
The "means of production" phrase has been distilled and entered the zeitgeist
as a way to talk about communism.

~~~
tboyd47
Yep, thanks, I'm aware of the history of the term.

Think back to what I said about crossword puzzles. If China had a world-class
crossword puzzle team, winning every competition, why on earth would they
seize their own team's pencils? It wouldn't stop the competitions from
happening, and it wouldn't stop other teams from winning them.

I'm not trying to be a pedantic prick on the internet, so please excuse me if
I'm coming off that way, but I enjoy this topic a lot, probably too much.

~~~
tannerbrockwell
Because it is the most efficient way to build a reserve of a limited commodity
(bitcoin) that has a much longer exponential curve to expand along. Currently,
the Chinese miners are operating as a business to squeeze a margin out of the
discounted electricity available in China. It is in China's interests to treat
this as a national resource wherein it is produced domestically. My thesis is
NOT that they want to control Bitcoin, only the domestic production for their
long term national interests. Remember mining will continue until
approximately 2140, that is a significant horizon to look at.

~~~
tboyd47
Thanks for explaining! I finally understand what you were saying and it
actually makes a lot of sense.

------
wyc
Right now, I like anything that helps normalize the white-hot hype of
cryptocurrencies. There's some real utility in this technology, and we won't
get to see it until companies are forced to make sustainable business cases
and serve real customers.

However,

> A website set up by the Chinese central bank warned that cryptocurrencies
> are "increasingly used as a tool in criminal activities such as money
> laundering, drug trafficking, smuggling, and illegal fundraising".

That sounds a bit like lip service...are they really just protecting investors
and citizens, or is it because the assets are much harder to seize? Recently,
there has been a large crackdown on foreign real estate purchases[0].

What other incentives does the party have for this policy?

[0]
[https://www.forbes.com/sites/ellensheng/2017/07/31/chinese-o...](https://www.forbes.com/sites/ellensheng/2017/07/31/chinese-
overseas-real-estate-buying-spree-slows-delayed-by-tightened-capital-
controls/#1dd5a37514f7)

~~~
baldfat
I think all governments hate the crypto part of the currencies. You can't tax
what you can't track. You can't manipulate what you don't have.

I personally fall a little to the left of currencies. I think these monetary
systems are far right Libertarian's dream seeds. I do realize I am probably
wrong but this is how they make me feel.

~~~
lojack
> You can't tax what you can't track.

Most cryptocurrencies are actually quite trackable. Significantly more
trackable than fiat currencies. There are notable exceptions like Monero and
currencies specifically meant to protect privacy, but the vast majority are
quite public.

~~~
baddox
I'd say they're only more easily tracked than _cash_. It doesn't get much
easier to track than a bank or credit card account. And of course cash has its
own problems (namely, it's difficult or even illegal to get and transport in
large quantities while maintaining some anonymity).

~~~
vasilipupkin
At some point, you want to buy something with your money. The minute you do,
tax authorities in your country can detect the discrepancy between your stated
income and your lifestyle.

------
neya
I have a different technological perspective on this. Having traveled and
lived in Asian, Chinese-majority cities/countries, this is a typical Chinese
govt. move. In China, WeChat is a dominant player (by Tencent), a LOT of the
transactions in China happen through WeChat, which offers seamless payments
integration. The penetration is so strong that even poor, road-side sellers
accept money through WeChat. Almost everyone has a WeChat account.

This in my personal opinion - is to prevent BitCoin from posing a threat to
their homegrown technology industry, which is honestly no match for what we
have in the Americas.

List of banned companies:

Google - Because they want to protect their clone Baidu.

Twitter/Facebook - Because they want to protect their clone Weibo.

YouTube - Because they want to protect their clone YouKu.

.

.

.

(it's a long list)

BitCoin banned - Because they want to protect their homegrown WeChat.

Just my opinion.

~~~
tboyd47
Interesting - but isn't Bitcoin more of a protocol and WeChat more of an
application? Couldn't WeChat offer Bitcoin payments?

~~~
baybal2
Try to explain this to an average communist party member

------
harwoodleon
Bitcoin and for that matter all crypto currency is a libertarian ideal.

Libertarian ideals do not fit in communist societies. Regulation was always
coming, as even liberal societies regulate.

But regulation is only there to keep the established order. The established
order is very afraid of crypto right now in the same way the music industry
freaked out over MP3.

I can't help it, but I get annoyed when crypto is branded with illegal
activities like terrorism, fraud etc. No one talks about USD being used in the
same way!

~~~
eloff
Cash is the original anonymous "crypto"-currency. Still the preferred tool of
money launderers, drug dealers, pimps, black marketeers, and other neerdowells
everywhere. Also, offers real anonymity with no blockchain records.

~~~
fwdslash
I completely agree with this. For years, I was a crypto-currency advocate,
telling any and all that it's better than their credit and debit cards. When I
took a look at _why_ , though, I realized that tool (in physical form) already
exists: cash. As long as you trade a few with a few friends, or buy something
from a Mom & Pop, no one can really know what bills you have, and there's no
record, ever.

~~~
tannerbrockwell
Every bill has a serial number. Social graph exploration of paper currency is
possible with bill readers at only a few points in the bill life cycle.

If the same nodes repeatedly 'touch' the same serial numbers you can infer a
relation.

~~~
eloff
You make it sound easier and more powerful than it really is though. For all
intents and purposes, cash is mostly anonymous. Bitcoin, on the other hand, is
traceable if you can map accounts to real people.

------
lordnacho
You gotta wonder if they will go after the miners. I suppose other cryptos
have dealt with this issue, and one with the right properties will emerge, but
BTC requires huge warehouses full of computers to mine, so the
decentralisation part of the argument is a bit flawed.

And the big miners happen to be in China, which is pretty convenient for the
government. Not sure exactly how much of capacity is in the country, but if a
lot of it gets shut down I think there's a 2 week reset window before the
difficulty can come back down. If it's a large proportion it will
significantly lengthen the time between blocks.

Also in the bigger picture, if illicit movements bother the Chinese, will they
pressure other countries to stop allowing BTC?

~~~
solotronics
the core dev team for BTC already said they are prepared to either emergency
adjust difficulty or change the hashing algo if a disaster happens with the
miners .. yes this is technically a hard fork of the block chain but it has
happened before in an emergency

~~~
lawn
Well the core dev team already classifies the miners as attacking the network
when they don't vote for them and chooses another fork. I would take what they
say with a huge grain of salt.

------
AlexCoventry
So they're only mentioning bitcoin because every exchange offers bitcoin
trading pairs, right? This is effectively suppression of every cryptocurrency,
not just bitcoin?

------
iagooar
For those of you who know a bit more about the topic. Is this ban going to
stop the large-scale cryptocurrency mining that occurs in China? Isn't it
actually something interesting for the rest of the world, as mining could
become a bit easier?

~~~
jraines
I don't know, but that's one of the two "real" questions:

1\. How will China treat miners?

2\. Will they go forward with blocking node communication at the port/GFW
level?

Re: 1, if they shut down / limit mining it's nbd. If they co-opt it to try &
launch 51% attacks it's a big problem, but not, I think, insurmountable and
would be a tactical error.

------
paulsutter
Bitcoin price impact is the best way to gauge the significance of any
particular news (this? not much):

[https://finance.yahoo.com/quote/BTCUSD=X/](https://finance.yahoo.com/quote/BTCUSD=X/)

~~~
psyc
This isn't new news. It was suspected/known 2 weeks ago and it tanked the
price from ~4700 to ~3000, before it rebounded.

~~~
paulsutter
exactly - these changes were a bigger concern two weeks ago, and all these new
stories are now noise

We'll know when something meaningful happens by the price impact

------
korzun
But.. but.. an 'analyst' for CoinDesk said this was normal and the exchanges
will just need to get a license and China welcome them back with open arms.

The bullshit artists that already 'invested' in this scheme will now tell you
that China did not matter and the people under them will parrot it.

Anybody that disagrees simply doesn't understand Bitcoin or just mad that they
could not get on the choo-choo train at the right time.

~~~
gruez
>The bullshit artists that already 'invested' in this scheme will now tell you
that China did not matter and the people under them will parrot it.

If you're so sure that it's bullshit you're free to put your money where your
mouth is and short it.

~~~
pja
1) Shorting into a bubble is usually a terrible idea.

2) The only realistic way to short BTC is to do so via a very small list of
exchanges. Even if you trust them (which, given the history of cryptocurrency
exchanges is hardly a given) the borrow cost is huge: there's no way you could
reasonably make this kind of macro BTC bet.

The combination of these two realities makes the "If you don't believe the
price, you ought to be shorting it" assertion completely baseless.

~~~
antonislav
Could you expand on point 1? Or maybe point to some references?

~~~
pja
Once a security has entered bubble territory, by definition its price has
become disassociated from any underlying fundamentals - bubbles form when
rising prices drive positive sentiment which pulls in fresh buyers who buy
into the rising price story, driving the price higher which in turn draws in
more buyers in a self feeding cycle that only ends when the supply of fresh
buyers dries up.

Because this is a self feeding cycle, the price can double & redouble from
almost any point if the "story" is good enough. So you can be dead right about
a given asset being in a bubble, but if you short it the odds are that you're
going to get painfully stopped out long before the bubble collapse finally
happens. As Keynes said, prices can remain irrational longer than you can
remain solvent: The history of investing is littered with individuals who were
right, but lost their capital because they were simply too early.

~~~
pja
& if you want evidence of this cycle in action for BitCoin, try this:

“The price of BitCoin has a 91% correlation with Google searches for BitCoin”
[http://uk.businessinsider.com/bitcoin-price-correlation-
goog...](http://uk.businessinsider.com/bitcoin-price-correlation-google-
search-2017-9)

Obviously BTC can be in a bubble & whilst still having real value - the two
things are not necessarily connected. (Although having a good future value
story is helpful for a bubble to form in the first place I would argue.)

------
Tepix
This isn't news, it's been known for a couple of days.

------
haburka
I think this is a really good sign that it's a good idea to get out of crypto
currencies. China is actually pretty good at making decisions to defend it's
country from negative outside influence. Anywhere that hosts a bitcoin
exchange is also hosting criminal activity. Consequently, Bitcoin exchanges
are going to make areas more dangerous to live. It's just a bad business
decision to allow it to exist in your country.

~~~
sova
Many of us analysts who are deep in the game recognize that China is simply
shutting them all down to start its own cryptocurrency that (probably) has
ID/government name linked to it.

~~~
tunetine
Cite this please.

~~~
sova
[https://www.neowin.net/news/china-experimenting-with-its-
own...](https://www.neowin.net/news/china-experimenting-with-its-own-
cryptocurrency)

~~~
vasilipupkin
I don't get it. What's the point of a country issuing a cryptocurrency? isn't
decentralization the whole point of bitcoin, ethereum, etc. ?

~~~
sova
It is! unless you are China and you still want to make money while making sure
the company line is toted by all.

China is able to track their populous really well, or at least have their
population believing so, and thus anything that adds pseudo-anonymity kinda
ruins their mission. In the future it is probable that all countries will have
their own cryptocurrency, backed by some sort of tangible asset like Au (gold)
or Ag (silver). What strikes me as very important for the US is establishment
of a national cryptocurrency. It can be anonymous (everyday cash is
essentially anonymous), but the consensus on how to regulate one is very much
a process of education (elder generation finance people don't really get
bitcoin yet). So once regulatory measures can be taken to ensure there's no
theft etc, then it'll be easy. China's thinking on the matter is that if it
cannot be regulated, shut it down and make a version that can be.

