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Author Topic: Part 2: Answer to "What will the China government do to bitcoin?"  (Read 4506 times)
zhangweiwu
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January 09, 2014, 12:19:06 PM
Last edit: January 09, 2014, 02:11:03 PM by zhangweiwu
 #1

What will the government do to bitcoin?

Short answer: it will not declare a war against bitcoin but cripple bitcoin operations in China.

The recent 31st Jan ban is resulted in a typical Chinese way, a funny way to many of you.  As reported in Chinese (source forgotten), the central bank organized a meeting with online financial service providers, and say: "we (and the government - central bank belongs to the government here) are concerned, please tell us what you are going to do to make sure our bosses are not worried' and the result is the 31th Jan ban. It is like a result of a negotiation, but unlike business negotions where people reach agreement through compromise, this one is a competition of obiedience, of willingly doing something without having to be ordered so, of good understanding of the government's intention. And what is government's intention? The government representatives perhaps had no intention from their bosses at all, except that they should see players docile (and they did). They want players evaluate the situation and do the right thing, despite they lack the knowledge of what is the right thing to do. Taobao's ban of 'anything related to bitcoin' was not required - Central Bank's opinion hasn't changed from considering bitcoin a tradable commodity yet - but a powerful man like Ma Yun wouldn't run away from this little docility contest, knowing the government reward most-docile players with a listening ear and free hand.

So no itention of our government is revealed through the meeting, only the intention of online e-commerce players are revealed: they intend to follow the no-ideaness of the government.

Although we do not know the government's intenion at the moment, it is more or less predictable in the future. Our government is not skillful at deliverying the right message to financial market. Its messasge towards bitcoin is now mis-interprated as "strong opression", like it was mis-interprated before. The market follows and shifted away from bitcoin.  This has the effect of driving away the good money (bitcoin) and introducing the bad money (Chinese imitation coins, see my last post). Following the crash of a few bad moneies,  the government identify crypto-currency as weed ('weed' is used in my other post, read it for culture background), and strongly oppress it. But, gov't won't declear a total war against Bitcoin - by listing something as enemy and not being able to crash it, goverment risk losing authority, and our government isn't sure about this "enimy" yet - when they do, they find it difficult to kill an idea. Anything that makes it insignificant, e.g. crippling the trade or forcing it into black market, would be their choice of action.

Bobby Lee of BTC China is trying two things. First is to stablize the market to buy some time for the government to make their decision (when the government is probably not least concerned with that!), and second is to do everything appear docile, hopefully more docile than online e-commerce companies, by self-regulating without regulation rules: "we are not bad seeds, let us grow, we will show that we are not weed".  He for example introduced liquidity rebate for both purposes.  He won't be successful on the first goal, because Huobi and dozens of Chinese-imitation-coins are doing the opposite, using the opportunity to take turf and keep it burning high (huobi means "fire coin").  He probably will achieve the second goal, and he hopes huobi's odorous marketing becames its bane, bad enough to make huobi insignificant but not that bad to beget a procrustean rule that cuts himself too.

So when will the government make a new decision? It probably is made. Recent news towards bitcoin are hasherer and hasher, as 5th Dec ban interpreated each time stricter than before. This often happen when a higher leader makes a different decision. I am not sure if it is easy to understand for western audience, so I will go through the trouble this time and explain with an mini drama I just improvised:

Quote
Improvised mini-drama

Officer: You can take the poverty data for your study, once you have a result, let us know, we want to have such academic output to our knowledge.
Poverty Researcher: Yes.

Another day;
Researcher: The data was missing for the last a few years. Can I get it?
Officer: I cannot give you any more data, because as I said, you can have limited data for your study.
Researcher: But yesterday you said I can take the poverty data.
Offier: Yes, I said you can take 'THE' proverty data, which is what I gave you already.

Another day;
Officer: I must explain that you are not allowed to publish your finding.
Researcher: Why?
Officer: The data is within the poverty management office, so is the result. I explained this in the very first time you asked for it, that we want the result. We will decide if we publish it. I informed your research institution that this project is strictly within our office and they replied they will follow whatever rules and regulation that we improvise.

Another day;
Officer: I am sorry to let you know, the data is fake.
Researcher: What???
Officcer: You heard it right. It was collected by an officer who is no longer on the post. His method have faults and we ordered the survey to be redone in the same years. What you have is the first batch of data, and we cannot offer you the correct data. As I well-explained the first time you asked for the data, I am not authorized to release any data I am managing. I cannot do anything more and this project ceases.

What really happened is each time a higher level offier came and rewrite the decision, but that higher level officier decided not to meet you in person.  You may think it is a joke if it is put on TV news, but I was having fun for lots of years watching ths drama from TV News channel. For a news reader with good memory, news reading is rather entertaining.

So is the same thing happening? Is the current news brooding a new decision that overwrites the previous one? I am speculating by saying yes, but even if it is not, it merely put more time between now and a disappointing new government action.

My (old) column about Bitcoin & China: http://bitcoinblog.de/tag/zhangweiwuengl/
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January 09, 2014, 12:41:56 PM
 #2

Thanks for taking the time to give us your insights.  Very interesting.   Grin

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January 09, 2014, 12:52:29 PM
 #3

You've got a talent! That mini-drama is funny as hell!
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January 09, 2014, 12:55:53 PM
 #4

Basically: "We've never been at war with Eurasia."

Thanks for the insightful threads zhangweiwu.
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January 09, 2014, 01:32:55 PM
Last edit: January 09, 2014, 01:51:58 PM by MatTheCat
 #5

In a most typically non-oriental manner, I would like to thank you for those fucking excellent articles/forum posts!

Very insightful. Seems that Chinese and Western cultures are poles apart and that we will really run into difficulties if one tries to understand the other through its own lens. Although your description could also in some ways apply to a western decision making process as a phenomena (btc) comes increasingly to the attention of increasingly powerful groups and individuals.

Small BTC tip on its way to you!

Edit: KAHRU will be pleased with both your posts and the increasingly harsh words of the Chinese government towards Bitcoin.



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January 09, 2014, 02:52:44 PM
 #6

thx for taking your time to share this with us!
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January 09, 2014, 03:01:31 PM
 #7

This post is fascinating, thank you.  What can we do, if anything, to help encourage China to allow Bitcoin?

1MEuWAgzeArG9sittnqhuTHkMtgvirZvuS
zhangweiwu
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January 09, 2014, 03:52:29 PM
Last edit: January 09, 2014, 04:08:34 PM by zhangweiwu
 #8

This post is fascinating, thank you.  What can we do, if anything, to help encourage China to allow Bitcoin?

Good question!

Due to culture gap advocation from the west won't work at the moment. I have an easy idea. I wasn't bold enough to say that until asked. But that idea require a technical mind to implement: Invent a software solution so that people can trade bitcoin in p2p style. One buys bitcoin by sending real cash to another who owns it. In short make everybody (or a lot of people) to be gateways, and remove centralized trading platform like BTCChina, thus keep bitcoin community active during the hard time to come.

This involve challanges, like how to verify the transaction outside of bitcoin network, but since there are people so smart to invent bitcoin itself, why not further? I heard ripple is doing this, but 1) they haven't finish this feature yet (am I outdated?) and we need it now; 2) they are not doing it with anti-scrutiny in mind. China outlawed gambling, and southern Chinese love gambling, we already have online underground gambling network working for years with large amount of small players in it, and these networks are 'left to live'. China has not outlawed trading bitcoin yet (only docile mediums decided to stay away) thus p2p trading isn't even outlaw by now. Even when they do, you cannot capture and fine everyone with a small offense like selling a coin.

China is expected to have hard time in the long run, perhaps starting with real estate bubble burst: at best it became a country of slow growth like U.S., and at worst, huge devaluation of CNY, hopefully without large job-lose, because that may trigger a war with Jap (devaluation of CNY and a war with Jap is also related). If anyone holding bitcoin asset kept its value, like anyone who own a house do in China now, others think why don't they do the same. When a lot of people are holding bitcoin, exchanging to fiat cash just for purchase, people then start to think "why don't I buy with bitcoin if most of my asset is already bitcoin", and then bitcoin can function as a currency. This conclusion (only when a lot of your asset is bitcoin then you want to mainly spend without exchange) is also true in other parts of the world, but you must keep the trading active to reach there.

My (old) column about Bitcoin & China: http://bitcoinblog.de/tag/zhangweiwuengl/
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January 09, 2014, 04:04:12 PM
 #9

I'm not so familiar with ripple but I think it is doing that. Maybe have a look at ripplechina.
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January 09, 2014, 05:02:28 PM
 #10

#zhangweiwu, awesome read!
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January 09, 2014, 06:17:12 PM
 #11

This post is fascinating, thank you.  What can we do, if anything, to help encourage China to allow Bitcoin?

Good question!

Due to culture gap advocation from the west won't work at the moment. I have an easy idea. I wasn't bold enough to say that until asked. But that idea require a technical mind to implement: Invent a software solution so that people can trade bitcoin in p2p style. One buys bitcoin by sending real cash to another who owns it. In short make everybody (or a lot of people) to be gateways, and remove centralized trading platform like BTCChina, thus keep bitcoin community active during the hard time to come.

This involve challanges, like how to verify the transaction outside of bitcoin network, but since there are people so smart to invent bitcoin itself, why not further? I heard ripple is doing this, but 1) they haven't finish this feature yet (am I outdated?) and we need it now; 2) they are not doing it with anti-scrutiny in mind. China outlawed gambling, and southern Chinese love gambling, we already have online underground gambling network working for years with large amount of small players in it, and these networks are 'left to live'. China has not outlawed trading bitcoin yet (only docile mediums decided to stay away) thus p2p trading isn't even outlaw by now. Even when they do, you cannot capture and fine everyone with a small offense like selling a coin.

China is expected to have hard time in the long run, perhaps starting with real estate bubble burst: at best it became a country of slow growth like U.S., and at worst, huge devaluation of CNY, hopefully without large job-lose, because that may trigger a war with Jap (devaluation of CNY and a war with Jap is also related). If anyone holding bitcoin asset kept its value, like anyone who own a house do in China now, others think why don't they do the same. When a lot of people are holding bitcoin, exchanging to fiat cash just for purchase, people then start to think "why don't I buy with bitcoin if most of my asset is already bitcoin", and then bitcoin can function as a currency. This conclusion (only when a lot of your asset is bitcoin then you want to mainly spend without exchange) is also true in other parts of the world, but you must keep the trading active to reach there.

Keep the posts going zhang they are incredibly interesting!

Your idea is already been implemented in Open Transaction, it will probably be released shortly. Mastercoin is also doing a tremendous job in implementing a new protocol on top of Bitcoin so everything you mention(plus security) will be implemented in the coming months.
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January 09, 2014, 06:41:11 PM
 #12

Due to culture gap advocation from the west won't work at the moment. I have an easy idea. I wasn't bold enough to say that until asked. But that idea require a technical mind to implement: Invent a software solution so that people can trade bitcoin in p2p style. One buys bitcoin by sending real cash to another who owns it. In short make everybody (or a lot of people) to be gateways, and remove centralized trading platform like BTCChina, thus keep bitcoin community active during the hard time to come.
If someone can build a way to send real money around without trusting some third party, Bitcoin is unnecessary.

Systems involving "vouchers" require trusting the party that issues vouchers.
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January 09, 2014, 07:12:19 PM
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Err... ignoring the fact that fiat (what you like to call "real money") itself is controlled by a single entity, thus requiring trusting some third party by design. Wink
National currency has a single point of required trust, yes, but that just means vouchers for national currency have two.

Of course, if some central bank itself were to decide to print some of its national currency as blockchain assets, the matter would be resolved. But that's not a likely scenario, I think.

If there is something that will make Bitcoin succeed, it is growth of utility - greater quantity and variety of goods and services offered for BTC. If there is something that will make Bitcoin fail, it is the prevalence of users convinced that BTC is a magic box that will turn them into millionaires, and of the con-artists who have followed them here to devour them.
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January 12, 2014, 09:59:19 AM
 #14

You mention the holiday period in China starting on the 24th. When does it end? And do the banks close during that period?
zhangweiwu
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April 03, 2014, 02:05:50 AM
 #15

What will the government do to bitcoin?

Short answer: it will not declare a war against bitcoin but cripple bitcoin operations in China.


I was right:) The prediction was made 09th Jan. China still did not ban bitcoin tradng, but is closing all bank accounts of exchanges.

My (old) column about Bitcoin & China: http://bitcoinblog.de/tag/zhangweiwuengl/
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