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No. China has been pretty open and friendly to bitcoin so far.

What they fear is Ponzi pyramid schemes damaging the economy. Several ICOs have reached a billion USD without any product and often anonymously. These can bankrupt whole areas of a country. Now is the time to stop them.

Remember that their growth is exponential and one at a billion already puts it high in the history of Ponzi schemes (Ponzi himself 'only' caused around 200 millions. Madoff is the recordman with between 50 to 150 billions). Let them grow for more generations and there is a very big risk even for national economies.

It's not just the size of the population, but also how young financial markets are in China. For the vast majority of Chinese citizens, any kind of financial product is new or at most a generation old.

They don't have 1930s collapses or Madoff or Enron or 2007 collapse in their cultural DNA to build immunity against scammy speculators.

As a result of this, China's markets are overwhelmingly populated by retail investors who are more vulnerable to kind of ICO schemes we're tired of seeing in HN.

https://www.ft.com/content/e5af8da0-1fc7-11e5-aa5a-398b2169c...

No, that is not their fear. Governments barely care about scams in general - Madoff got off pretty lightly. The fear is losing control of monetary policy. But IMO governments won't outright ban these but come to some sort of middle ground where they get some sort of cut.

Then they should have banned all cryptocurrencies and ban exchanges/miners. But they specifically targeted ICOs. If they were worried about losing control of monetary policy you'd think they would ban others as well?

"Madoff got off pretty lightly"

He was sentenced to 150 years. «Lightly.»

"I'm not ashamed to admit it. When we arrived to prison, I was absolutely terrified. But I needn't have been. See, for a brief fleeting moment, I'd forgotten I was rich and I lived in a place where everything was for sale."

Madoff's money was seized, 80 millions were given back to debtors. He got sentenced to 150 years in jail. His son had to pay millions in damage too. I am not sure what you mean by "lightly".

Absolutely disagree. The amount of scamming and corruption (at least in the western perspective) in the Chinese economy is mind-boggling and they don't bat an eye at it.

The CCP cares about population destabilization and independence movements above all things. Economic control starting at the provincial level up through the CCP is job 1. The CCP is very watchful over their provincial governors getting too much power and alternative currencies offer them a potential way for provinces to exploit their local power.

Scams and corruption are one thing, exponentially growing pyramid schemes are another. If you are a market regulator who don't have the resources to go after all the wrongdoings, going after the >$1B pyramid schemes are your priority.

Some countries like Albania had very damaging scams that implied a sizeable percentage of their economy.

Exactly. Even highly-placed officials, like the former PBoC governor, explicitely said they did NOT want to kill Bitcoin: https://themerkle.com/former-pboc-governor-we-need-to-regula...

> all a sovereign nation needs to do to kill it is make convertibility to the local currency illegal.

This only works if all countries do it, and as is evident from the difficulty in getting coordinated world-wide action on climate-change, this is problematic. As an example, if I have tokens worth enough to say, buy a mansion in France, I can certainly find a local person who vacations in France that will take them for payment in exchange for some local asset.

What I'm saying is that it can easily be an asset without being a currency, and that is OK. A government can make it not viable as a local currency, but they can't make it not be an asset.

This only works if all countries do it

Not true. Using your example, you'd first need to convert your Francs into x-coin. If convertibility is illegal, then congratulations you just entered a black market.

Which is fine if that's what you want to do, but now your risk just increased dramatically. Is that kind of risk taking scalable for a mass market? I doubt it.

As to it being an asset and not a currency, there are many things that do that, but x-coin isn't that because it has the functions of a currency: Store of value, medium of exchange and unit of accounting. In your example, you're using the coin as currency to intermediate an exchange of [mansion].

you'd first need to convert your Francs into x-coin.

Francs -> USD -> x-coin

Not a solution. You're just moving things around - and it looks even worse because now you're structuring or laundering.

Are you arguing that it would be illegal for french people to buy x-coin at ALL?

Thats completely different from "conversion" bans that you were talking about before.

Sure, you can ban the use of all tokens, but a conversion ban between 1 currency and another makes no sense.

Makes perfect sense and has been traditionally the way nations control political revolutions.

https://en.wikipedia.org/wiki/Foreign_exchange_controls

the Greenback<>Greyback exchange situation during the civil war was also an interesting example of this.

I think anyone doing anything in cryptocoins needs a serious lesson in monetary history and policy.

If exchanges followed KYC, which they eventually will, then this would also not work. If you had to prove you are an American to use the USD -> x-coin pipeline, then good luck turning your Francs into x-coin.

But maybe Zimbabwean exchanges don't follow KYC. That's great for you, but going Franc -> ZD -> x-coin exposes you to a lot of other problems.

> you'd first need to convert your Francs into x-coin

I don't think I'll take advice on currencies from someone who thinks the French currency is the Franc.

Please, tell me more about who you will or won't take advice from. It's a very interesting topic apparently.

The forest is just in front of you.

I can also buy things online from other countries where it is legal and have them shipped to me.

> x-coin isn't that because it has the functions of a currency: Store of value, medium of exchange and unit of accounting.

That's a straw man because there's nothing in the definition of currency that is exclusive of being an asset.

While I share your opinions re: use of power to protect national currency, I don't see how they apply to this topic. The PBoC didn't ban exchanging cryptocurrency with local "fiat", just fund raising outside of regulation via ICOs. This is the FUD that is artificially tanking the market at the moment.

>> The PBoC didn't ban exchanging cryptocurrency with local "fiat"

http://uk.businessinsider.com/initial-coin-offering-china-bi...

It's possible they did.

I think a major contributor to FUD in this case is the translated interpretation of "financing trading platforms". In my observation, this does NOT mean mean "Yuan to BTC" exchange, but instead exchanges that are set up specifically to host ICOs, for example ICOINFO: https://translate.google.com/translate?hl=en&sl=zh-CN&u=http...

Perhaps so, I'm not an oracle on this matter, but it at least seems possible that this is wider that just banning ICOs and ICO trading platforms.

I guess wait and see what happens, because even if the official statement was explicit, whether any action is taken and what action that might be is another question entirely.

I think they actually did.

However, even if they didn't, the are intentionally keeping the velocity of Yuan>x-coin low to keep an eye on it. So the BoC might be saying, ok fine, buy bitcoin and then exchange it for trash-coin all you want, and if we see too many capital flows through Y>BTC we'll turn that off cause it's easier.

While that is certainly possible, no government can resist the temptation to collect tax on capital gains until the problem threatens national sovereignty, and we are pretty far away from an eject button scenario like that.

I disagree. Bitcoin and all the alternatives beat traditional currencies hands down.

• Most of them are not prone to inflation, let alone hyperinflation.

• They work globally. Technically you don't even need the internet to operate - there are SMS gateways for Bitcoin, for example.

• If you control your private keys, no shitty government can't stop you from using your own money (not directly at least), no shitty payment system can freeze your money on ridiculous charges.

• The transmission fees for most of them are a few cents or zero.

Cryptocurrencies are going to win over the traditional fiat ones only because they are a better store of value, the rest of the benefits are extra that will only accelerate this process.

I know you specify only "most coins", but it's worth mentioning that currently Bitcoin transaction fees for a simple transaction involving only 1 input at current USD exchange rate is about $3.

Which is great for large transactions but a shame for small transactions which are the most popular transactions in the economy.

Yes, I'm aware. That's exactly why Bitcoin Cash was created.

>but it's worth mentioning that currently Bitcoin transaction fees for a simple transaction involving only 1 input at current USD exchange rate is about $3.

What? I was able to clear a transaction last night for less than 0.0001 BTC/KB, which works out to less than $0.25 for a typical transaction. Granted, it probably wasn't included in the next block, but it was confirmed by this morning. Based on the mempool chart (https://jochen-hoenicke.de/queue/#24h), it looks like most transactions with fees above 0.0001BTC/KB are included in the next block.

* Inflation is a feature of currencies, not a bug. Now, you may disagree with the debt-driven economy, but it has indisputably responsible for uplifting billions of people out of poverty. [1]

* In 2017, traditional currencies work pretty well for global business.

* Without reversible transactions, you get to bear the full, unamortized cost of any and all fraud. Good luck issuing a chargeback against a bad vendor with cryptocoins. You also can't do many useful things without delegating to third parties, at which point you expose yourself to the same counterparty risk you wanted to avoid. Oh, I suppose you could deal with that problem by writing Ethereum contracts (In which case, you now have n+1 problems, for an unbounded value of n.)

* Most non-credit card transaction fees for USD are a few cents, or close to zero. If you're wiring money to Uganda five times a day, this may not be the case for you, but most of us aren't. (And BTC transaction fees are no longer close to zero.)

[1] I don't actually believe this to be the case, but it seems to be an argument that advocates of wild west capitalism use to extol the virtues of that economic system.

* It doesn't matter if it's a feature or a bug, most people prefer their money increase in purchasing power, not decrease. I also don't buy the argument itself.

* Yes, fiat is still dominant, I fully agree. But it is slowly changing. It will take a few decades.

* If you want reversible transactions, there are escrows. I recently made a bank transfer to what turned out to be a fraudster who just didn't send the product I paid for. It was even to the same bank. I have the police report. I gave all the information to the bank - they don't give a shit, they say it's my fault. The police says it will take them up to 2 years to investigate. I have zero hopes that transaction will get reversed.

* What are these magical "non-credit card" transactions that you do five times a day that have zero fees? Are you talking about cash?

> Most people prefer their money increase in purchasing power, not decrease. I also don't buy the argument itself.

Most people with money would. Most people with debts wouldn't.

The problem is that most people don't have money, but they do have a mountain of debt. (And even among people who are above water - they have assets that exceed their debts, not dollars.)

Actually, while we're on the topic of what most people want, that would be a debt jubilee. And, while we're at it, a redistribution of wealth.

Again, what part of the argument do you not buy? Billions of people have been lifted out of poverty, by entering the debt economy. Aside from communism, there has been no example in living history of an increase in standard of living without a debt economy. A debt economy is only possible in an inflationary system.

* It doesn't matter if its still dominant, and whether or not it will be overtaken. The point is that in 2017, I can do international business with traditional currencies just fine. Saying that you can use crypto-currencies to do international business is quite literally, a non-solution to a problem that I don't have.

* If you have escrows, you've just re-invented the financial system, with all its non-blockchain ledgers, arbitrary judgements, and middle-men.

You've given an example of the least reversible fiat monetary transaction (Non-erronous wire transfer - second only to Western Union in its capacity for fraud) - where you get exactly the same protection as you do with crytocurrencies (None).

If you used a credit card, you could have charged back. If you used any one of the pseudo-escrow services, like PayPal, you could have disputed the purchase. If you wired money to the wrong account, you could have have it reversed. Yes, fiat currencies have some sharp edges. In contrast, cryptocurrencies are like trying to hug Edward Scissorhands.

I can supply an anecdote where I once gave fifty bucks to a guy in exchange for a bike, and he laughed at me and rode off. For some reason, though, there aren't very many anecdotes where a lapse in OPSEC results in someone withdrawing five billion dollars from the Bank of America's systems into a Bahaman slush fund. In the crypto-coin world, this happens every other month.

* You misread that part of my post.

> Inflation is a feature of currencies...

Inflation is a tool of countries. I think it is a useful tool. In this topic one should compare Bitcoin to gold - no inflation [* insert caveats here about mining both physical and computational].

> In 2017, traditional currencies work pretty well for global business

I agree.

> Without reversible transactions...

Ultimately, removing the overhead of mediation will make transactions cheaper. It is possible to add mediation in another layer and I hope it would not be more expensive or risky than our current system.

Imagine a small business where charge-back fraud can really hurt. Cryptocurrency gives the ability to accept payments risk-free. This topic is really a double-edged sword.

Some optimistic things to think about:

- people who do not have access to banks but do or will have access to the internet and smartphones

- "streaming money" / micropayments

- smart contracts

For better or worse, inflation is a primary tool the government and banks use to influence their citizens' behavior. Without inflation there is no incentive to spend your money and recycle it back into the system. It can also be used to soften currency fluctuations.

That being said, if governments used cryptocurrency it opens a lot of interesting avenues for them. Tax fraud might be a thing of the past, people could be forced to register their wallets publicly, better protections for lost wallets. Inflation could be exchanged for variably adding/removing coins from the market.

Overall governments need to be able to manipulate currency, or all their citizens are totally exposed to the global market. Imagine if you had to check your savings account multiple times per day to watch it fluctuate thousands of "dollars" in value.

"Without inflation there is no incentive to spend your money"

That is quite the exaggeration.

Exactly. People don't really want money. They want the stuff / services that the money buys.

Even the deflationary markets, such as electronics, don't see any problems selling their products.

I think what they meant is "Without inflation there is no incentive to invest your money, rather than stuffing it in your mattress"

investments in a Bitcoin world would just have to give much higher rates of return.. I don't see how it fundamentally can't work. Also people don't realize but mathematically if Bitcoin was the size of a fiat currency its volatility would be more like a fist currency.

I honestly have no idea what you're talking about. All I'm trying to say is that economists generally agree that a small amount of inflation (around 2%) is good because people will rather have their wealth in stocks/bonds/etc rather than the fiat currency itself. We want money to move around, rather than sit in someone's safe

>We want money to move around, rather than sit in someone's safe

It's just paper. What's wrong with it sitting in someone's safe? We certainly don't want actual productive capital assets to be idle, but dollar bills don't produce anything. If they're sitting in a safe, the value of the ones that aren't in the safe goes up slightly.

I'm not sure quite what they meant, but that doesn't sound quite right to me either.

If the currency is stagnant or close to stagnant, the incentive to invest is that you end up with more wealth overall.

I'm not sure it's possible for deflation to be both predictable and higher than the market rate of return, because people today would immediately speculate and bid up the price of the currency to reflect its future expected value.

Of course inflation is an added incentive to invest money, or at least to store your wealth in assets other than money.

"Blockchain" is nothing but a fancy database without Bitcoin, good luck making it completely illegal like alcohol, marijuana, torrents

> "Blockchain" is nothing but a fancy database without Bitcoin, good luck making it completely illegal like alcohol, marijuana, torrents

I will put my money on the Chinese government. Your Bitcoins are worthless if you can't exchange them. A business will not risk losing their 'real' assets in favor of Bitcoin 'economy.'

The play in the U.S is cute but make no mistake; the government can pull the plug at any given moment, and there is absolutely nothing you will or can do about it.

It's illegal to convert Yuan into USD but that doesn't make the USD worthless. Similarly with Facebook, Google, etc which are all banned in China. If the Chinese government is the only government that bans Bitcoin, I would put my money on Bitcoin.

Of course if they convince the EU and US to join the ban then I would agree with you.

Comparing USD to Bitcoins is a sign of drinking too much Kool-Aid.

The U.S will never allow a bunch of randoms to have any financial leverage because they 'mined' a virtual coin. Corporations and people with money will just flee the country.

People with serious money laugh at Bitcoin 'millionaires'.

Umm ok? I don't see the connection to your previous point which was saying the Chinese government can single-handedly destroy Bitcoin worldwide (or even in China).

Drugs are highly illegal all over the world and yet it's still easy to buy them with a few phone calls. Now imagine if drugs could be shipped instantly over the internet from another jurisdiction where they were legal. There would really be no way to stop them. China can't do shit on their own if Bitcoin stays legal in EU/US.

Not saying you're wrong, but isn't a lot of the massive rise from ~200 USD up to ~3000 USD related to Chinese activity? And Chinese farms mine most of the bitcoins now?

A world where it is only legal to invest in IPOs like $SNAP and lose half of my initial investment within a few months seems unlikely. Government doesn't want to pull the plug, they want to find a way to get in on the action through taxes. There is something I can do for a company not fulfilling their fiduciary duty, file a class action lawsuit. The 152 billion US dollar cryptocurrency market cap can not go away in a moment no matter how hard you wish for that day unfortunately, institutional hedge funds and venture capital funds are on board

If I may, blockchain is perfect solution for what exactly?

I think it's a near perfect solution to the problem of recording and transferring ownership of deeds and titles.

Not with the current energy consumption.

Not all blockchains need to use energy-intensive proof-of-work mining to reach consensus.

Do you think the current security risks are an impediment to it being a perfect solution? I don't want my house deed transferred to someone else just because the provider that managed my wallet that held the deed to my house got compromised?

Wallets are not an essential component of a blockchain. Blockchains are simply a linked-list of data, with each new block of data ensuring the integrity of its previous block. That's it.

If you want to verify that a particular operation on the data was done by the person who is allowed to do it, you need some sort of public key crypto, right? If someone steals your private key, they can pretend to be you on the blockchain. Whether that private key is called a wallet or something else.

There was some buzz recently about Wal-Mary using blockchain to track pork through the supply chain. I thought it would be cool if they e.g. created tokens by hashing a pig's DNA.

That's not really true. We had hash chained data structures for ages before BTC came out. Nobody retroactively called these "blockchains".

In what way do you think it is superior to the current system (say, an Oracle RDBMS running in a county land office)?

"Probably the biggest lever a government has on their nation is monetary policy. There is no way that a government would allow the subversion of that."

This is a simplistic and wrong analysis. Governments care about the health of their economy, and as you said monetary policy is just one of many levers to influence that. Thus, if the cryptocurrency industry can help increase their economic wealth, they will not only allow it, but encourage the development of this industry and technologies. Case in point: various laws enacted or projects created by governments encourage blockchain/cryptocurrencies innovation & use:

https://www.americanbanker.com/news/delaware-blockchain-meas...

https://futurism.com/ethereums-founder-struck-a-deal-with-a-...

https://en.wikipedia.org/wiki/BitLicense

http://newmedialaw.proskauer.com/2017/04/20/arizona-passes-g...

"So [China] went ahead and did what I have been suggesting would happen, but much earlier than I suspected."

No. Your point would have been demonstrated if China had banned cryptocurrencies. However this is precisely what they did NOT do. They only banned ICOs. The Chinese government cares enormously about stability and public order. They saw plenty of ICO scams and unregulated markets causing people to lose fortunes—not good for stability and order—so they banned ICOs. China actually covets their position as a leader in Bitcoin and altcoins mining, so they are protecting their economic advantage by NOT banning cryptocurrencies. (Proving my point above.)

"Blockchain is a perfect solution for many things, but as a currency it's dead on arrival IMO."

Exactly the opposite. Currency, and store of value (went up 7×/19×/35× over last 12/24/48 months) are the 2 killer use cases for Bitcoin.

Governments care about the health of their economy

Yes, so long as they are in control of it. If the Chinese people start doing significant number of transactions in x-coin and not in Yuan then they lose their largest lever of power.

No. Your point would have been demonstrated if China had banned cryptocurrencies.

They don't need to yet because the cryptos aren't big enough. What they did is put significant brakes on them to make sure they can manage and track the rise/growth through known intermediaries - which is exactly what they did.

Banning them outright would have been too big of a move at this point and would have likely caused more instability than they wanted.

China actually covets their position as a leader in Bitcoin and altcoins mining, so they are protecting their economic advantage by NOT banning cryptocurrencies.

Chinese miners might, but the PnB certainly doesn't. In fact most of the big "Mines" are way outside of cities where they don't get much scrutiny. The PnB is probably looking to see if they can co-opt the situation, rather than let it run on it's own. I wouldn't put it past them to try and centralize it to make sure it falls under PnB purview - effectively having the same impact as making it parity with Yuan.

"They don't need to yet because the cryptos aren't big enough"

Your logic doesn't hold. ICOs are much smaller than cryptos. They banned the former, not the later.

"Chinese miners might, but the PnB certainly doesn't."

I take it you meant PBOC, not PNB. Well once again, a crypto outsider comes to tell us "governments will ban cryptos!" I have been hearing this critic for 7 years... But as I said, as we have seen over the last few years, the general attitude of governments toward cryptos has been the opposite: they have encouraged their development, they have let the exchanges operate, they have created regulation to bring some clarity in the market, etc. It is actually almost surprising to see the amount of positive attitude coming from specifically the USA, China, and Russia, to name a few. Even the former PBoc governor has explicitely stated he did NOT want to "kill" Bitcoin: https://themerkle.com/former-pboc-governor-we-need-to-regula...

China is screwed here, because you don't need any special tech to do and ICO. You can just buy a single Bitcoin, and declare each Satoshi in that Bitcoin to be one of your newly minted "KemendoCoins", redeemable at a 1 BTC/1 KemendoCoin rate in your store and all participating stores.

https://en.bitcoin.it/wiki/Colored_Coins

That cat is out of the bag.

The only way to block it is by making unlocked computers illegal, and requiring people to buy all software through controlled app stores.

„...convertibility to the local currency illegal...“ curious: what would be a real world example of this already existing?

https://en.wikipedia.org/wiki/Foreign_exchange_controls

Very common up until the late 20th century.