Now do you understand why the Chinese government is attempting to ban Bitcoin? Chinese people are scared of their currency and want an easy way to convert theirs into a non-traceable one in case the country descends into a depression.
>Chinese people are scared of their currency and want an easy way to convert theirs into a non-traceable one in case the country descends into a depression.
There is a lot of talk of potential deflation cycle coming in, and in that case holding fiat is clearly the wiser option.
1. https://www.inman.com/2017/01/03/new-rule-china-may-affect-o...
The issue is getting the money out of the bank into some other asset in the first place. If you have that much purchasing power in a Chinese BTC exchange you probably already have a number of other means by which you can extract your money.
The hard part isn't what to do with your money -- it's what to do with your money to get it out of the bank and get it into another asset.
AFAIK it is not trivial to purchase that much BTC in China, so the level of attractiveness isn't as you assume.
because sending tens of thousands of dollars to a bitcoin exchange isn't traceable?
Is it easier for them to buy bitcoins over other assets? What about Gold / other foreign investments such as US securities?
Disclaimer: I am not a lawyer. This is not legal advice, nor advice of any other kind. Do not launder money.
...all of which is easily traceable by the government. Do enough of it, and you’ll eventually be disappeared for a friendly conversation with the police. It’s also expensive, and has a central point of failure (the lawyer).
That is why bitcoin is the up-and-coming escape mechanism for yuan. Obviously, not everyone was doing this, but it was becoming a trend, hence the crackdown. It was absolutely not “irrelevant”.
(Aside: I love the way that bitcoin people are incredibly imaginative when it comes to visions of borderless, regulation-free financial systems, but can’t see their way past even the most trivial of fraud incentives involving their system.)
This goes back to my original point regarding capital controls: previously discreetly tolerated, their violation is now openly acknowledged. If you stroll through Hong Kong you'll find invoicing services being openly advertised.
Why they're tolerated is more murky. My guess is it's a vital tool for China's movers and shakers. In that regard, one could argue that hiding under their bulk is a safer bet than flagging oneself as politically impotent by using outside channels.
> It’s also expensive, and has a central point of failure (the lawyer)
I haven't heard of any big frauds in the invoicing business, though there's no incentive to publicize it. These lawyers are typically providing other services to the capital providers, so it's--all in--probably less expensive than trying to surreptitiously purchase and dump large numbers of Bitcoins. From what I've heard, they're typically associated with internationally-reputable firms.
There's an interesting conversation about the strengths and detriments of invoicing versus Bitcoin for purposes of laundering money. But this isn't that conversation. The reality is most capital flight occurs through the former, to the point of making the latter numerically irrelevant. Capital controls were almost certainly not a significant factor in China's moves against Bitcoin.
Disclaimer: I am not a lawyer. This is not legal advice, not advice of any other kind. Do not launder money.
Like all other forms of rule enforcement, things are tolerated until they aren’t tolerated anymore.
You’re trying to extrapolate a story far beyond the evidence — just because “most” laundering happens another way doesn’t mean that bitcoin isn’t significant. It’s obviously significant to the government: they’ve cracked down on it.
It's significant in that ICOs have lots of fraud. The motive is important because if capital controls were the motive, the greater Bitcoin community has nothing to learn from it. If it's fraud, introspection is required. Barring that, non capital controlled countries should pay attention.
I agree that some ICOs are clearly fraudulent in nature. But it's no different than the early days of Kickstarter. Hell, look at Juicero. I think the advent of ICOs as an alternative vehicle for fundraising is making certain entrenched interests very nervous.
It does have a small group of people with disproportionate influence (case in point: the adoption of segwit) and who are incentivized to perpetuate the system. It is in their interest to find a solution to the fraud. The "capital flight" excuse is cute, but it won't convince other countries' regulators. Particularly if nothing is done and a bunch of moms and pops get defrauded on a significant scale by an ICO.
These modifications were made earlier this year to prevent capital flight.
Certainly, there is not a small industry for people hauling different debentures in and out of the country.
Take, for example, Tiffany & Co. whose products are on average 30% more expensive when paying in RMB vs USD. This means that at best you will make 70% of what you are trying to extract.
It's for this reason that this is not very attractive since there are many other schemes/methods by which you can get a better extraction rate.
Naturally, China has high VAT. But if you are just a small time criminal who just wants to secure his "koosh of a lifetime" that he will never be able to earn even if we will spend multiple lifetimes working?
The People's Bank of China is loosening capital controls [1]. The yuan is overheating and the PBoC wants to weaken the currency.
Capital controls weren't the reason behind China's move. Fraud was. Constraining the problem to China-specific characteristics appears to be why this "China banned Bitcoin because of capital controls" meme has taken root.
[1] http://www.reuters.com/article/us-china-economy-capital-cont...
The article provides virtually no details concerning what capital controls were loosened and in any case, whatever these measures, they were one-time event that doesn't prove a trend. China certainly wants to say it's loosening capital control and it's perfectly capable of showing the wire services some measures.
If you want to argue a trend, show us an analysis from a respected outside observer.
Show me a long article from outside observer.
SASAC signalled loosening capital controls this month [1].
> show us an analysis from a respected outside observer
We saw actual rules promulgated this month [2].
[1] https://www.wsj.com/articles/china-is-striving-to-contain-it...
[2] http://m.scmp.com/business/companies/article/2111731/pboc-sa...
https://www.ft.com/content/3a638d1c-8405-11e7-a4ce-15b2513cb...
Fraud? Massive amounts of fraud occurring through ICOs? American investors, even retail ones, are markedly more sophisticated than Chinese investors for having generations of cultural knowledge of conmen and securities.
Capital flight is happening, but from what I can tell the PBoC is currently encouraging it. Over the last 2 weeks, many screws have been loosened in a bid to (a) appease dealmakers and (b) push the yuan back down. The number of Chinese investors I work with who, over the last month, for the first time in years, were able to once again stage capital is massive.
TL; DR I am thoroughly convinced the "Bitcoin was banned in China because of capital controls" argument is being pushed by people who stand to gain from ICOs. Framing it as a China-specific problem, as opposed to an issue the Bitcoin community must address, sequesters the problem (for the time being).
Note: not saying you're doing this. I bought the argument for a bit. The facts, however, speak decisively one way.
Edit: in Jan 2016 the yuan really was going through the floor and people thought the sky was falling in. These latest actions just mean the PBOC is more comfortable with the range the currency is trading in.
https://www.ft.com/content/e17483b4-96ab-11e7-a652-cde3f882d...
while bitcoin historically was not the main instrument of capital flight, would capital flight not be much easier with bitcoin, especially for the average user?
one example cited elsewhere requires a lawyer to draft a $50M "invoice." it seems like the average chinese citizen would probably not have such connections.
is it possible the government is pre-emptively preventing flight among the masses? one way to disprove this theory would be to analzye the impact the masses could have on capital flight -- perhaps the majority of capital flight actually would occur among the rich and elite, who don't need bitcoin to move capital.
China lets its citizens export up to $50,000 a year [1]. I think the typical bank's receivables financing [2] minimum is about $100,000 to $1 million. Lawyers, invoicers, et cetera might take a further 1 to 10%, so let's say $200,000.
On one hand, we have the argument that people exporting between $50,000 and $200,000 a year is a problem (but people exporting $50 million is not). On the other hand, we have concerns about rampant fraud.
[1] https://www.westernasset.com/us/en/research/whitepapers/q-a-...
[2] http://www.business.hsbc.com.hk/en-gb/import-and-export/rece...
Disclaimer: I am not a lawyer. This is not legal, not any other kind of advice. Do not launder money.
In 2017 china has has:
Enacted laws that lowered yearly money per person taken from china from $64,000 to $9000[1]
Seen foreign outflow investments drop off a cliff in 2017 (almost 50%!) [2]
Massively restricted allowed classes of foreign investment such as real estate, traditionally one of the few ways private citizens and companies were allowed to take money out of china [3]
Cracked down heavily on bitcoin, an excellent currency exfiltration tech.
Its clear that this is part of a broader trend, please stop reposting this misinformation laden comment.
[1] http://www.cbc.ca/news/canada/british-columbia/housing-marke...
[2] https://www.forbes.com/sites/ellensheng/2017/07/14/deal-brea...
[3] https://www.brookings.edu/blog/order-from-chaos/2017/08/23/c...