China is not banning Bitcoin | Hacker News Reader

China is not banning Bitcoin

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68 pointsthbounzer37 comments

Of course not. No one said they were banning bitcoin. They have relegated it to a digital barter similar to other digital points like those used in World of Warcraft or SecondLife's LindeX.

What they have done is to shut it out completely from the formal Chinese banking and financial system. So much for the debate about bitcoin being a currency!

Sorry in advance for this wall of text and the redundant use of the word "currency." It makes for a shitty read, but I couldn't find a better way to construct my comment.

All joking aside [0], you seem a little over eager to discount Bitcoin in this regard.

Here's my take on BTC's relevance as a currency:

- Its 'success' as a currency in the developed world (in the way we use greenbacks & fiat / Chinese use Yuan in daily life) ...

... on this point, I've never been too hopeful. [1]

This definition of "success" is biased by most of our developed-world perspective. . tldr; - It will likely become 'relevant' without becoming a 'success' in the Western/1st-world sense.

Observations on why Bitcoin will struggle to become a ubiquitous currency:

1.) This statement from the PBOC - more or less negates its chances in China as being a "first-class citizen" (status) currency.

This comes as no major surprise to me. But, what is surprising is the portion which reaffirmed the legality of the participation in Bitcoin in China ("... Bitcoin transaction as a commodity trading behavior on the Internet, ordinary people have the freedom to participate in the premise of own risk."), as you alluded to in your comment. This more than "leaves the door open." That said, the factors which contributed to this approach are unbelievably complex and probably nefarious (w/regards to BTC's future).

2.) In the USA, I don't see a pressing need for it to be used in the way we know dollars to be used. The reason here is that we have a historically stable system in place.

3.) The volatility of Bitcoin is not, and likely will never be, as stable as most of the fiat units in circulation. This would discourage me from paying my employees in Bitcoin.

4.) Since day one, we have all been apprehensive about the deflationary nature of the currency -- expressing the Keynesian-concern that spending in an economy is vital to the prosperity of said economy.

With that being said, here is where-and-why I'm long ...

I.) ... because of the international nature of the protocol, one must think about those living in Iran, Zimbabwe, Argentina, Russia, etc.. In those places, I think it has legs as a currency, regardless of state-endorsement. Some of these states in crisis may even endorse Bitcoin.

I believe that perfection isn't sought after in the 3rd world, as confidence has been lost in the fiat systems in place. (This is the reason why greenbacks are so ubiquitous abroad.)

There's also a palpable anti-American sentiment in the third world that could discourage greenbacks' usage by the layman if there were a viable and universally accepted alternative.

But paper greenbacks don't play well with the internet. Bitcoins do. One can argue that you could still use greenbacks digitally abroad, but this is not without large transaction fees, and -- in the case of unstable countries -- there may uncertainty in the bank which is facilitating the financial services.

II.) ... it's nature has melded the idea of a cash dollar and a digital dollar into a decentralized, ephemeral-yet-"trustworthy" protocol. I can honestly say: I'd be a fool if I claimed to have the slightest idea how Bitcoin will innovate and make itself useful as a currency.

So, I actually believe that Bitcoin has relevance as a currency, just not in a way that would make sense to the developed world.

The above is part-and-parcel from Bitcoins as a store of value and other financial novelties, which I don't really have the time to enumerate.

[0] - "So much for the debate about bitcoin being a currency!"

[1] - [and it saddens me greatly, because I'm a Bitcoin fanboy, and I've believed since the early days that Bitcoin is special in many other ways. And no, I'm not a Bitcoin millionaire.]

If you enjoyed this comment - I am releasing a Bitcoin-related service in ten days, and, in the idealistic spirit of Hacker News, I kindly encourage you to add me to Google+ or Twitter, so that you can offer early feedback. @spencenow or https://plus.google.com/+SpencerDailey Thanks! :)

I understand you have a vested interest in bitcoin and for that same reason I would suggest you take a few basic economic courses so you can understand what a currency is and why it is impossible for bitcoin to be a currency.

> But paper greenbacks don't play well with the internet. Bitcoins do.

This is simply false. The evidence is all around you.

Bitcoin is composed of two parts: the token and the protocol. The protocol is interesting and useful. It will be most probably integrated into existing currency systems. We are already seeing this type of experimentation with the Canadian MintChip.

The token system on the other hand will be remembered as an interesting digital phenomena the same way we now look back at beanie babies and tulipmania.

"... it is impossible for bitcoin to be a currency."

It is already functioning as one -- just not a very effective or useful one. So, please be more articulate if you actually want to have a debate.

But thanks for diverting the the discussion by maligning my character.

Looking through your comment history, it's pretty clear that you have a strong aversion to Bitcoin. As someone so blindly opposed to it -- you probably have an ulterior motive too. At least I was forthcoming about mine -> I'm a Bitcoin fanboy and am building a business around it -- which is more than most speculators can claim.

So, what's yours? Because otherwise, you're kind of in need of digging yourself out of troll status. :)

It is functioning as digital barter - that you fail to recognize this and mistake it for a currency is why I suggested you take some basic economic courses.

How did I malign your character? I simply stated that since you are building a business based on bitcoin you may not be as objective as someone who has no vested interest one way or the other.

I don't own bitcoins or have any vested interest. It is simply an intellectual curiosity for me. I have no interest in making this personal and I was and am polite to you.

It seems like we had a misunderstanding around semantics then. My defintion was: "the fact or quality of being generally accepted or in use." The act of it being used as a currency.

My distinction between this and a more general "form of barter"/medium-of-exchange was written as '"first-class citizen" status' currency.

There are 2.5 billion adults walking the earth right now with no access to bank accounts[1]. I don't know what the "actual" value of bitcoin is, and I don't know if it will win the cryptocurrency race, but I am pretty confident that about a third of the population of the world will have a cryptocurrency wallet before they have a bank account. This is A Big Deal. Electricity is certainly an issue for many of those, but plunging hardware prices on smartphones and wireless internet access will allow them to skip checking accounts and go directly to a global financial network, just as many in the developing world had access to cell phones before land lines. At some point in the next few years, some entrepreneurial kid in some dirt poor corner of the world is going to become relatively wealthy via cryptocurrency; something that just isn't possible without a decentralized financial system. That's when I'll know we've hit the tipping point.

[1](http://econ.worldbank.org/external/default/main?pagePK=64165...)

This is lunacy at its finest. Those that have no access to bank accounts live in third world countries. Bitcoin pre-supposes that the user have access to a computer either stationary or mobile (cell phone, tablet, etc.) with access to the internet.

So what proponents of this idea are saying is that bitcoin will somehow, magically?, provide these people with not only the know-how of how to use a cryptocurrency but also provide them with these three indispensable resources:

electricity (dependable and stable)

internet (dependable and stable)

computer (mobile or not)

...all before they can then turn around and use bitcoin.

And that the central bank and government of said country will stand aside and relegate its monetary system and control to an outside force.

You are likely underestimating the "third world" of 2013. There are lots of companies embracing the constraints of SMS alone as almost everybody has a mobile phone in Kenya.

Think about all the things you could do with a Twilio account! Better get working on a product for a free and bright future. :)

Examples:

http://www.coindesk.com/bitcoin-and-m-pesa-why-money-in-keny...

http://www.sokotext.com

Excellent followup to the coindesk article: http://www.coindesk.com/bitpesa-uses-bitcoin-slash-kenyan-re...

I don't have total confidence in bitcoin itself, but I am very, very bullish on cryptocurrency.

Give it a few years (infographic for the lazy): http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTINFORMATI...

EDIT: to address your last point, I don't believe that it is within the power of any but the most sophisticated central governments to prevent adoption of a decentralized financial network. Look at the history of file sharing and bitcoin drug markets, for example. Every regulatory action creates evolutionary pressure on the network, and the succeeding services become more difficult to suppress.

Yes, this is general knowledge. But what you are asserting is a non-sequitur because you are assuming a direct link from adoption of cell-phones in third world countries to the adoption and use of bitcoin as a currency.

I was addressing three of your previous points–electricity, internet, computer. I don't see these as issues, and to assume that cryptocurrency will remain as under-serviced and difficult to use as it currently is would be remarkably shortsighted.

They are even less problematic when you consider them in comparison with the infrastructure required for physical currency banking: vaults, guards, armored cars, auditors, trust, communications.

When everyone already has the ability to use a cellular phone, the additional marginal resources required for using cryptocurrency are almost trivial. The way most banks operate, they would need electricity, Internet, and computers in all of their branch locations anyway.

If you have neither traditional banking nor cryptocurrency, aiming for the latter offers a bigger return on your infrastructure investment.

I think you are underestimating the suppressive effect of large government-controlled armies packing AK-47s and jeeps.

Armed government thugs create black markets.

There are people living in first world countries who have computers but can't get a bank account. If you have a negative report on ChexSystems, you won't be able to get a bank account, even if you have plenty of money for a computer.

Bitcoin isn't going to solve the problem for everyone, but there are definitely people who could get access to bitcoin but not to conventional banking.

Interesting enough, in Germany some banks (or rather credit unions, Sparkassen) pledged to give every comer a basic bank account in return for some regulatory privileges.

You think people in third world countries don't have cell phones and electricity, or privately run payment systems? http://en.wikipedia.org/wiki/M-Pesa

"So much for the debate about bitcoin being a currency!"

This is a ridiculous statement. China's current stance on BitCoin doesn't close the debate about it being a currency.

It's strange, because the government run China Telecom is letting you pre-order a phone with bitcoin.

I feel a little like its banning in China is inevitable. This is a currency that allows people to circumvent the PRC's ability to monitor and control money, in a country where Facebook and Twitter are blocked because the government can't control them. It seems to me like they're not taking it seriously as a viable currency, and that's why they're responding in this way.

I agree that it's inevitable that the Chinese government will ban Bitcoin. However, I think their gradual response is more due to the complex preparation needed to enforce a ban, than scepticism about its viability as a currency.

The great firewall - the infrastructure as well as the body of regulation on ISPs and online services - took time to reach its current level of effectiveness, and it is likely that a ban on bitcoin would also be phased in similarly. This announcement is certainly just the first step.

The most likely next steps would probably be:

- Ordering financial institutions not to provide services to Bitcoin-related companies such as exchanges; this could happen fairly quietly without explicit announcements. This might already have started.

- Withholding trade licenses and other regulatory approvals to prevent Bitcoin-related companies from operating; This can be done without specifying the actual reasons for denial, which would make it hard to be sure that it's happening.

This would drive Bitcoin to a small-scale, grey-market activity, with transactions forced to happen directly between individuals. They might leave it at that, or explicitly ban bitcoin, using the firewall to block the bitcoin and getwork protocols as well as and servers used by known web-based clients.

This!! It only makes sense. Currently getting money in to China is easy but getting money out of China is hard and the government of China has done this by design. They're not about to let bitcoin change that.

<i>It seems to me like they're not taking it seriously</i>

Quite the opposite... they are. They just don't want other people to take it seriously enough to undermine their own currency and their controls.

I think the notice is quite reasonable if you look from the risk perspective. Of course it was not issued solely because of that.

Always a good idea not to panic at Bitcoin news, unless you have a lot of your personal equity tied up in it - the revolution has already happened, the message calling for a feeless (although BTC has lots of fees associated with it), decentralized, secure, fast way to exchange economic value has been heard.

Whether it's Bitcoin or something else or a LOT of something else's, it's here to stay. I'm working on my own take on it, so I have opinions as to what it should look like, but the great news is so are lots of other people AND Bitcoin is still growing. Payments are about to explode - it's gonna be fun you guys.

I work in a different country than all of my friends and business partners, and we've all started using bitcoin for everything in the last few months. The first time you set up a multi-signature escrow with no fees, no middleman, and no 3-5 business day wait, it's mind blowing! I believe that everyone will eventually have this "ah hah" moment, even if the currency units themselves are horribly unpredictable.

The good news is, crypto isn't the only thing that can do that - banks already do it all the time! That's what I'm saying - this has shown a demand for what you just talked about, not Bitcoin in general (which, of course, has it's own demand). We're going to get more and more options that fit those qualifications, and a couple will become dominant. I would personally be a little surprised if Crypto is one of them, but not floored - it's totally in the running if not in the lead.

I think we're in the same camp, but I disagree that existing organizational structures will be able to compete with a decentralized, consensus-based network. I know the analogy is wearing thin, but I think of working within the current banking system as a bit like trying to lease time on a university mainframe circa 1980–difficult to access, and totally out of reach for anyone that isn't already on the periphery. You could send email and post to usenet, but you couldn't build an Amazon, or an Airbnb.

Of course banks can zip arbitrary amounts of cash all over the world, but I'm not a bank! The public internet created an economy where a clever and dedicated person can teach themselves all the skills necessary to pull down an income that was previously reserved for highly educated professionals. I believe cryptocurrency will have the same democratizing effect on finance, and open up opportunities for autodidacts that were previously only available to ivy-league MBAs. Most people will consider me an idealist (or a lunatic, if other commenters are to be believed), but I believe that we are on the verge of an unprecedented explosion of commercial innovation. Consider how long it took for the internet to filter from early adopters to the mainstream, and compare that to the growth of the bitcoin network. Last time it was decades, this time it was years, with exponential growth in just the last few months. I do have some bitcoins, and I wouldn't complain if they made me rich, but the exchange value of one particular unit of measure isn't what I'm excited about. There is just no way that top-down, private organizations can out-innovate the general public given access to a platform with the same capabilities and trivial barriers to entry. I'm especially hopeful that the ease of access and equal treatment of micropayments and massive wealth transfers will bootstrap parts of the world that are currently completely dark to the global economy. I hope that the speculative greed that is currently dominating the discussion around cryptocurrency won't overshadow its long term potential. Exciting times ahead!

I'm with you - but here's something that you may be overlooking:

1. New banks and new kinds of banks are forming every day with full rights and accreditations 2. You may not be a bank, but banks have APIs and methods of partnering with them so that you can act like a bank. Sure, you're still to some extent at their behest, but that can be mitigated all sorts of ways.

So maybe if you think banks as a whole won't be where we house our money in 50 years, then yeah, let's look at ways that cut those ties. I'm not of that opinion, at all actually, but it is one I can understand. My focus is how to empower individuals and businesses to have the same money transfer power that banks have - and I think I'm getting there.

The governments worldwide will have their "a-ha" moments too. And then yours/ours will be over.

Nothing about crypto payments is inherently illegal. In fact, I expect the illegal activity to quickly become dwarfed by compliant transactions. If governments decide they still want to squash it, I sincerely hope their efforts are just as effective as they have been at eradicating video piracy, illegal drug use, and global insurgent groups.

I am surprised at the selloff given that bit coin is completely impervious to government control. That is the whole point of bit coin. We buy bit coins because we all read about what happened in Cyprus and we don't want to worry about capital controls ourselves. We bit coin buyers are innovating beyond government sponsored/manipulated money (and hopefully getting filthy rich in the process).

The lesson of Cyprus is that allowing your government to create a financial sector which is worth more then your entire country, and can't default on that debt for fear of Russians murdering a lot of people is a bad idea.

It sure wasn't that Bitcoin somehow escapes you from the problem, since very few people are likely to have wanted to buy any Cyprian currency with Bitcoin - the bump is more a product of Bitcoin being an incredibly small economy.

If you're worried about Cyprus style theft happening in your country you need to start planning. Putting your life savings into Bitcoin given the volatility is crazy. It's not (yet) a stable store of weath.

You should try to keep deposited funds below the insurance limit set for your country, consider acquiring hard assets and precious metals which could be held off-shore in a country with good financial and legal regulation, and consider depositing funds in countries which are creditor nations with rock-solid banks which have minimal exposure to derivatives and other toxic assets e.g. Hong Kong and Singapore.

I understand how news like this will have short term price effects but isn't one of the fundamental reasons for betting on bitcoins that governments can't (not won't) regulate them?

P.S. When are spellcheckers going to start recognizing bitcoins?

This is going to hurt it nonetheless...

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