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.
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...
He was sentenced to 150 years. «Lightly.»
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.
Some countries like Albania had very damaging scams that implied a sizeable percentage of their economy.
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.
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].
I don't think I'll take advice on currencies from someone who thinks the French currency is the Franc.
The forest is just in front of you.
> 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.
Francs -> USD -> 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.
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.
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.
http://uk.businessinsider.com/initial-coin-offering-china-bi...
It's possible they did.
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.
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.
• 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.
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.
That is quite the exaggeration.
Even the deflationary markets, such as electronics, don't see any problems selling their products.
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.
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.
* 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.
* 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 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 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
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.
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.
Of course if they convince the EU and US to join the ban then I would agree with you.
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'.
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.
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.
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.
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...
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.
Very common up until the late 20th century.
What is interesting is the same thing that has been interesting from the beginning of the blockchain discussion. Namely that these "coins" purportedly offer an alternative currency to sovereign national currency.
I have always held the view that, the fundamental utility of doing commerce through a currency that is outside of sovereign national control/purview is a hard ceiling for any of these systems. 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.
At the point in which any alternative currency based market becomes big enough to matter within the boundaries of an existing currency based market, then all a sovereign nation needs to do to kill it is make convertibility to the local currency illegal.
China is basically saying, "look we don't even want to come close to this type of alternative currency possibly getting huge" - and the ICO method allows pretty much anyone to convert Yuan to "coin." So they went ahead and did what I have been suggesting would happen, but much earlier than I suspected.
The only way that wouldn't work is if nearly all necessary services, retail, logistics etc... uses the alternative currency. In which case the native currency has effectively failed and thus the government has failed as well.
So I don't see what the real upside here is, outside of very tiny, niche marketplaces that require this kind of currency.
I haven't heard anyone actually respond to this line of criticism of Blockchain.
Blockchain is a perfect solution for many things, but as a currency it's dead on arrival IMO.