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Comment by thkim | Hacker News Reader

This move seems obvious. Bitcoin's popularity has far more negative consequences for Chinese government (or any other government) than benefit. Bitcoin might topple the dollar hegemony if popularized, which might be what China wants, but central banks lose their power to control the money flow in the system. Why would any government want that? Any money goes into Bitcoin is essentially money gone offline right now so it reduces tax revenue and adds noise to national statistics. Bitcoin or any other crypto-coin has real chance of adoption only when it's sponsored by government.

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"Bitcoin or any other crypto-coin has real chance of adoption only when it's sponsored by government."

While I agree with your assertion that governments have no reason to support Bitcoin, I don't believe it follows that government sponsorship is necessary for the success of Bitcoin. I suspect most people betting on Bitcoin are aware that at some point, governments are going to act forcefully to kill Bitcoin, and the fallout will be utterly unpredictable.

But, I don't think it's something that can be put back in the bottle. We're crossing into uncharted waters here. Nothing like Bitcoin has ever happened before...so, we don't know how it's going to play out. I'm bullish even with the expectation that major world governments will collude with current financial elites to kill Bitcoin, because I suspect there is no way they can actually kill it.

> governments are going to act forcefully to kill Bitcoin, and the fallout will be utterly unpredictable.

I don't think so. I think it's quite predictable that, if that happens, Bitcoin will lose. In the sense that it will ultimately become a cryptocurrency also-ran. Something else will probably rise to take its place after it's been bloodied, something designed to be resistant to whatever response the world's governments bring to bear.

In the same way that peer-to-peer file sharing lost?

In the same way that Napster lost. Imagine if you'd invested in that one after the mainstream noticed it.

> Bitcoin might topple the dollar hegemony if popularized, which might be what China wants

Why would China want this? The current system works in their favor, even they admit RMB isn't ready to be a world currency yet by disallowing full convertibility.

> but central banks lose their power to control the money flow in the system

Exactly. Also, this is a big loophole over the RMB's non-convertibility limitation/feature.

Who is taking the other side of the trade with these Bitcoin/RMB exchanges? I mean, I often come across people who have RMB but want USD. Far less often do I come across people who have USD but want RMB.

Huh? Plenty of people are trying to buy RMB (so called "hot money") to take positions in the Chinese economy and perhaps to speculate on currency a bit. When I came to China 6 years, the exchange rate with about 7.5 RMB to 1 USD, now its like 6 RMB to 1 USD. Plenty of people think that the RMB has a lot of room to appreciate, especially if the Chinese gov. gets tired of buying treasuries.

Clearly my sample size is too small!

Any insight into how foreigners take positions in the Chinese economy with RMB they obtained through USD->Bitcoin->RMB transactions?

- Currency: easy, as you just need a passport to open a bank account - Starting a company: harder, as I thought that opening a WFOE required the capital to be injected in a specific way at a specific step in the process - High interest deposits: these seem either risky (some of the bonds sold by banks) or unavailable to foreigners (yu'ebao 余额宝) - Real estate: some cities require a hukou or minimum duration of residence - A shares: need to be a PRC national - Angel investments and unofficial loans to small businesses?

What else?

You are limited in how much RMB you can buy just as you are in selling. You are right that most RMB investments suck, beyond opening a massage parlor or dealing drugs in the tun or something. Real estate is the worst investment right now, hukou not withstanding. You can buy A shares now as long as you have RMB, but the stock exchange is insider trader driven.

Honestly, I don't know what the reason for incoming hot flows are, just that they have been a problem in the past. There are obviously good investments to be had here if you are well connected.

Every time an American buys a widget made in China - a rather frequent event - that causes someone somewhere in the supply chain to have dollars and want RMB.

The government usually takes care of this by buying their RMB. They then usually use the dollars to buy treasuries...

I am not so sure that no governments would like to sponsor cryptocurrencies. Obviously, not states with dominant currencies for the reasons you mentioned, but I could see other countries jumping into the opportunity of altering the status quo.

This is an interesting take on it. I assumed all governments would want to destroy Bitcoin (once they see its impact), but that really only applies to nations that have a dominant currency to defend, as well as a need for inflationary debt-based currency to support massive deficit spending for war and/or empire building (so, the US, China...maybe nobody else).

This. I can see many governments banning Bitcoin before it rises to it's full potential and then the governments accepting it.

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