A China Triangle: Bitcoin, Baidu, And Beijing | Hacker News Reader

A China Triangle: Bitcoin, Baidu, And Beijing

forbes.com

54 pointsangelohuang13 comments

Even the most oppressive governments can't monitor or trace payments made with physical cash. But tracing Bitcoins is easy, thanks to the blockchain.

I wouldn't be surprised if there is a sudden crackdown, in which BTC China's records are seized and used to identify individuals who are using Bitcoin to shift money overseas. In fact, who's to say it's not happening already?

I can think of one good reason why the government wouldn't want to do that - because it's the people running the government who are using it to transfer public money to their overseas bank accounts. Obviously not all of them (there's more common methods, and not all of them are on the take), but enough to make it a bad idea to go fishing for money launderers.

They don't want to catch anyone unless they already know who they are going to catch.

I suspect this is also a factor in why it is taking them so long to unify their land ownership databases.

> ..it's the people running the government who are using it to transfer public money to their overseas bank accounts.

I really doubt that. People "running the government" are far more likely to use pseudo-legitimate methods of transferring their wealth overseas (i.e. methods that are not available to anyone who doesn't inhabit the corridors of power) than Bitcoin. No, the people transferring wealth via Bitcoin will be in the emerging middle class demographic, not the the ruling class.

Besides, if someone with political clout were to be identified as a Bitcoin launderer, it's likely that the evidence would simply be "lost".

It's far more likely that the authorities would selectively prosecute those who they wished to imprison for other reasons.

In these cases, use of CoinJoin is encouraged.

That would not prevent the authorities from discovering that someone had bought bitcoins via BTC China. Unless the target was able to produce the bitcoins or give a plausible explanation as to what they did with them, they would likely find themselves on the wrong side of a money-laundering conviction.

can't monitor or trace payments made with physical cash

For large values of cash, yes they can; cash is bulky and has to be smuggled if you want to do it secretly, which is expensive.

Hence all the US asset forfeiture laws, and various countries rules on bringing currency in or out.

I've travelled places where a single note is worth very little, so I needed to carry enough that if they were USD could be perhaps $8K. Nobody seems to notice.

Money launderers can expect to pay at least 10% of face value in "fees," perhaps up to 30%. So if someone wants to launder $100K they might be willing to pay $20K to get it done. Let's divide the money among ten mules, and one of those gets caught or defects, losing $10K. That leaves $10K total, $1K per mule, for "travel expenses." That's enough for each to book plane tickets and take a few hundred back home.

For you and I, doing this would make no sense. For plenty of people in the world, it could be the best career opportunity they have. It's not really clear to me how we can expect to stop this, apart from some more obvious markers in bills to show up in airport (and seaport) scanners (imagine embedding the Audi logo using metal film in every note--something like that).

> For large values of cash, yes they can...

No they can't, unless they have taken special measures (e.g. surveillance[1]) which are invariably resource-intensive. If a $100 turns up in a Miami drug dealer's wallet, there's no way of tracing it from the ATM is was issued from in NYC a month earlier. Cash does not leave a trail of breadcrumbs leading back to every wallet it passed through.

Bitcoins, on the other hand, are traceable by default. Users have to make an effort to cover their tracks using a laundering service (vulnerable to compromise) or something like CoinJoin (potentially vulnerable to network analysis).

[1]: http://www.kickstarter.com/projects/1460639069/follow-the-mo...

Interesting article overall, but:

"it is inconceivable that Baidu would permit the acceptance of Bitcoins without first clearing the matter with Beijing authorities"

It do not seem to be what suggested Kaiser Kuo http://qr.ae/GsjwK and it should be noted that Baidu is a bunch of small sized teams competing each other fiercly. Accepting Bitcoin could very well be decided locally, and the risk would be localized.

Even if the higher instances in Baidu or higher have heard of it, they probably won't have endorsed it officially and will be able to say they didn't know.

I would be extremely surprised if the Chinese government would be very open-minded with bitcoins and would suspect an hidden agenda behind. Why? Because from all what we know of Bitcoin and its use, it allows bypassing a lot of controls, and even threaten directly the life and blood of any government on Earth: the taxes.

Bitcoin doesn't threaten taxes at all. It would be like suggesting that taxes didn't work in the age of cash transactions (eg for the first 200 years of US history).

Primarily it threatens fiat-based Keynesian economics by making it impossible to inflate away savings / wealth / standard of living as a means of government deficit financing. To the extent a government is dependent on devaluing their currency to remain afloat or otherwise pretend to be better off than they are (eg paying for entitlements with inflation), is the extent to which bitcoin would be a threat with wide-scale adoption.

As long as the Gov't has authority what asset it accepts for tax payments, legal tender as issued by the central bank is in no danger. Since in industrialized nations taxes make up a large part of the GNI, I cannot see XBT dethroning national currencies.

The usual inflation of traditional currencies would predictably lead to a deflationary spiral in XBT until it either hits a ceiling or goes into extremely fast boom and bust cycles that kill trust. Everyone who tried to evade the debasement of his savings by 2% inflation only to witness them melting 50% in the next XBT bubble pop will be hesitant to go there again - especially if the market get so narrow that selling is a real problem.

Thanks gbog. To what extent is Baidu just small teams? I would have thought there should be at least a central core team for search?

That link using the HN link shortener:

http://www.quora.com/Bitcoin/What-will-Baidu-and-Bitcoin-acc...

My take on China's embrace of Bitcoin is not that it will help it with police-statesmanship, but simply that they really don't like the USG dollar, and would love if the international monetary system made a little more sense. Right now, Japan, Germany, and China (mostly) buy enormous amounts of US treasuries at tiny/negative interest, only to see them defaulted on little by little at the pace of inflation (which is of course paced by the USG). China doesn't really believe in fiat currency, definitely not at the state level. They should know, they invented paper currency back in the day. Instead, they buy precious metals (and other metals, they stockpiled copper during the gold boom a few years back), and I think they see something very similar when they look at Bitcoin. They see gold 2.0, at any rate, a contender to become the world's reserve currency, only with better liquidity than gold, less inflation (you can mind more gold into existence, but Bitcoin is capped at 21 million), and harder to forge.

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