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China Bans Companies From Raising Money Through ICOs (cnbc.com)
Regulators are about to begin scrutinizing China's initial coin offerings -- an industry worth hundreds of millions of dollars. From a report: Local outlet Caixin reported that a notice, issued by a working committee that oversees risk in the country's internet finance sector, said new projects raising cash or other virtual currencies through cryptocurrencies will be banned. It added that authorities will crack down on related fraudulent practices. The document defined initial coin offerings (ICOs) as an unauthorized fundraising tool that may involve financial scams, the Caixin report noted. The committee provided a list of 60 major ICO platforms for local financial regulatory bodies to inspect. Seven government administrations including the People's Bank of China, China Securities Regulatory Commission, China Banking Regulatory Commission and China Insurance Regulatory Commission issued a joint statement where they reiterated that ICOs are unauthorized illegal fund raising activity. The statement said authorities are banning all organizations and individuals from raising funds through ICO activities and that all banks and financial institutions should not do any business related to ICO trading.
China is evil
On 02 Sep, Bitcoin was at $4,964, as of right now it is at $4,223. I wonder how much lower it will go?
All this means is people can't hide their money from the government. The government is making all CC illegal for the most part. They will allow CC in the future but only ones that they approve. So as of right now having a CC is extremely risky for people in China so people are dumping them as quickly as possible so they can have actual cash instead of a piece of digital code that will not be usable to them and might get them arrested.
When a company goes public, it sells shares in the company to raise money; investors by equity, hoping that they'll get to reap the rewards of owning part of a successful company. These shares are sold as part of what's called an IPO (initial public offering).
An ICO (initial coin offering) is a similar concept, but far more general and interesting; rather than buying shares, an investor buys cryptographic tokens (called "coins") that represent some kind of ownership of (or affiliation with) the endeavor.
Because these tokens are just cryptocurrencies (perhaps built on top of the Bitcoin system itself), they are far more interesting than regular shares; they can be traded and split and exchanged in fractions of a coin—there's no need to deal in terms of one "share" at a time; you could sell 0.1234 coin, for example, and can make that deal 24/7, even on holidays. Moreover, cryptocurrency systems have built-in programming languages that can be used to control transactions in very intricate ways; essentially, you can control these tokens with "contracts" that are specified with the precision of a programming language—this is why people call cryptocurrencies programmable money. Furthermore, unlike shares, you can control the coins you buy completely; you can choose to keep them under the control of a third-party (such as a "brokerage" exchange), or you can choose to store them in any way that you choose, such as on a thumb drive that you keep around your neck, or split among several people, or cut up cryptographically and buried across the cyber-and-or-physical landscape like Horcruxes. It's all just data, and the possibilities are therefore endless.
It doesn't matter what China does; they cannot control it.
Oh yes, people will go to jail, but the Organism that is the cryptocurrency economy will learn and adjust through that age-old process, evolution by variation and selection. Even if real-world, public-facing endeavors are shut down, that won't stop virtual endeavors on the Internet; that won't stop people in China from making investments in endeavors in Europe, or anywhere else, and reaping their rewards secretly. Fuck You, authoritarians; the libertarians don't care about your rules anymore.
An ICO (initial coin offering) is a similar concept, but far more general and interesting; rather than buying shares, an investor buys cryptographic tokens (called "coins") that represent some kind of ownership of (or affiliation with) the endeavor. Because these tokens are just cryptocurrencies (perhaps built on top of the Bitcoin system itself), they are far more interesting than regular shares.
Nice analysis, but your use of the word "interesting" is interesting.
What is interesting about people investing in ICOs is that they get nothing real for their money. They are investing in something that they hope will be valuable for no other reason than that other people think it's valuable. This is the very definition of a bubble; they could be investing in beanie babies or tulip bulbs or collectable cards.
You just made that up out of whole cloth. The Chinese people don't trust their fiat. They are trying anyway to convert their cash into anything that they can use to take currency out of the country.
You are 100% correct. As the spouse of a Chinese national, and a person who has spent a LOT of time (full time) living in China, you are 100% correct. Wealthy Chinese want their money out of China, it's heavily manipulated and controlled, and China is finally cracking down on tax evasion (which is rampant in China).
And you are also completely wrong. Wealthy Chinese want their money out of China - but they also really do NOT want to end up in a Chinese prison or executed (yes, high amounts of tax fraud can receive a death penalty). So they tend to use legal vehicles only, including investments in actual registered overseas companies, legal gifts to family (why do you think the massive rise in "finding my overseas cousins" happened?), and setting up HK corporations that will invest funds overseas. Bitcoin and CC in general are now verboten as financial instruments in China, and no one will trust them anymore - because playing with them in any reasonable amount (10MM RMB or higher) can result in jailtime or worse...
Sucks if you're a CC speculator who's been relying upon the run-up in China/Asia to continue your gains - but that stool has just been kicked out from under you.
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Interesting.
BTCChina and Huobi are legitimate/legal (as far as I understand) CC exchanges in China.
Are you saying that it will be against the law for people to purchase BTC with yuan in China in the near future?
I understand that the Chinese KYC laws are being strengthened; that takes away the specter of tax evasion. But it allows people to protect some of their assets outside of China; have some assets not tied to they yuan or local real estate. Of course the government can always ask them politely to repatriate their CC but the decision of having to flee is postponed.
If you're scared of your govt then you need to further restrict its powers
Vote 3rd Party in 2016 and beyond
" It's a piece of data with which you can control a humongous, global network of computers that I assure you is very real."
What???? The coins don't control the network, the miners do.
Also if you replace a couple words with what the GP said and it comes back the same.
in one case I'm buying ownership of the company. In another I'm buying a good (albeit an intangible one). The only real parallel is that in both cases you might be buying something completely worthless. But in the case of buying shares there's decades of case law and regulations about how that all goes down designed to protect small investors from being swindled out of their life savings (at least there are in the States, not sure about China).
China can and should control it. People can do dumb things in mass. The Housing crash of 2008 is a good example. Recent studies showed that it was mostly caused by upper middle class people buying houses to flip and inflated prices and not working poor buying McMansions. The crash happened because they weren't living in the houses so that when they eventually inflated the market too far to sell them they just let them foreclose and cut their loses. But that was only made possible by deregulation that made it profitable to sell risky house flipper loans to the upper middle class.
TL;DR;. You want the government to control what people can and cannot invest in. Otherwise you'll have massive economic crashes for no good reason.The economic equivalent to traffic jams on a clear highway.
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No, it's going to be illegal to move more than $50,000 of CC outside China per year like it is with most other currencies. You have to invest in an actual physical/tangible asset or legal company to move any currencies larger than that amount. BTC and such are attractive because they can cross borders instantly, but with that gone - what's the attraction over gold, US dollars, or shares in a REIT?
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Point to a deer and call it a horse.
It's all fun & games until somebody gets their eye put out with an antler.
It's like that 'The Gods Of The Copybook Headings' Kipling poem; Society can only ignore and/or deny reality and human nature just so much for so long until it's faced with stark and unavoidable negative consequences usually costing obscene numbers of innocent lives and unspeakable human suffering.
And yet, here we are as a society playing out; "the bandaged fool's finger goes wobbling back to the fire" once again. It's rather disheartening to watch your society seemingly dead-set on destroying itself.
Strat
Progressivism (aka US 'Liberalism'): Ideas so good they need a police/surveillance-state to enforce.
but with that gone - what's the attraction over gold, US dollars, or shares in a REIT?
What would be the attraction of CC over gold, etc?
1. You needn't find a company to trust and you won't need to sign any papers.
When buying REITs or Gold you need to do due diligence on the company. One to One cryptocurrencies are easier than REITs or Gold. Meaning, that if you feel BTC is a solid investment in and of itself, it's an easier purchase, an easier asset to own than REITs or Gold. Also, when purchasing gold, one is not buying "gold" one is buying a piece of paper promising that the paper is backed by gold.(Meaning even more due diligence on the company in question.)
2. In an existential emergency (the second coming of Mao or the horrors of the Cultural Revolution) you can transfer your CC to another wallet. At that point you are in violation of law; you are a criminal. But if you are already a criminal because of your education, status, wealth, business dealings (whatever) and you're trying to escape with your life - in that caset your assets are "safe."
We both know that if one is caught that torture is an effective password breaker but that is yet another story. Your wife, child may be safe; may have the money; may have already moved it to another wallet. You will be tortured but, at least, your family is safe.
If you're scared of your govt then you need to further restrict its powers
Vote 3rd Party in 2016 and beyond
The earlier you are in, the better off you are as others buy in after you.
Your decades—no, centuries—of case law and governmental regulations are primitive, ad-hoc, wooden-gear playthings in comparison to the advanced logistical machinery offered by cryptotoken systems.
Anything your traditional stock shares can represent, cryptotokens can represent better, and without the need to rely on the bureaucrats of some baroque, kabuki rendition of authority, whose only real power is the unstable and poorly defined ability to tell men-with-guns to make trouble for this person or that.
BTW, the Housing Crash of 2008 was due to the bad policies concocted by those same kabuki artists in government: They increased moral hazard by keeping federal insurance while de-regulating risky investments; they bought votes by forcing banks to lend huge sums of money to worthless people; they screwed around with the investment signals in the construction market, as a way to offset their previous error in pumping up the tech stock market in the late 1990s.
The cyptotoken systems remove the levers from the hands of these fools.
So - rather than buy gold, or other assets, you recommend CC which is now banned from trading in significant amounts. Better to get something that is 100% traceable (yes, CC by design records ALL your transactions with it, as compared to gold or diamonds or other commodities) so that you can run the risk of prison or death. Hurray!
Currently, getting money OUT of China is quite problematic, and is limited to essentially investing in overseas companies, OR in funding a Hong Kong LLC (which can then fund overseas investments). Doing it with cash or equivalents - like cryptocurrencies now - are limited to $50,000 per YEAR. Going over that results in significant taxation penalties, and if you are over quite a bit (like 5X the limit) can result in jail time. Gold, jade, diamonds, silver, other precious metals and stones are exempt, however - and are a LOT harder to trace than CC (I know for a fact I can walk into a gold dealer in Los Angeles, hand him some gold coins, and walk out with cash - no ID needed).
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in this case the 'policies' were repealing several laws that kept various types of banks from interacting (Wall Street vs Main Street) and various accounting rules. This stuff started under the pro-corporate rule of Mr Clinton and reached it's apex under Bush Jr. Before that we had 70+ years without a major crash (80s S&L was small potatoes by comparison).
Cryptotokens aren't anything special. Their prices are high right now because of money laundering, drugs and ransomeware. If you doubt me ask yourself what you can buy with them. You're never going to pay your mortgage with bitcoin. Eventually the government will crack down not to stifle freedom but to control the sorts of crime most people agree should be controlled (I'm aware of the anarchists who think everything should be legal).
There are good reasons for a society to be controlled and regulated. There is such a thing as experts and people who have studied things. This isn't to say you can't be lied to by phonies. But it also doesn't mean you throw your hands up and declare anarchy just because running a society is hard.
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Can you easily acquire tens or hundreds of thousands of dollars in jade and gold and diamonds with cash?
Can you easily leave China with said jade without anyone knowing?
The wealthier you are the more options you have. If you could buy expensive pieces of jade with cash and wear them and sell them OK. Two thumbs up. That works.
If so - that is far superior to CC.
But what if you're not that wealthy? What if the most you can squirrel away is $5,000 or $10,000 or $25,000 a year? Would REITs make sense? You would need to spend a lot of time investigating said companies etc. And, if you bought jade or gold you would spending $1000+ travelling to a foreign country, you would lose a fair bit of value when selling the jade to the US buyer. That takes a lot of time and a lot of due diligence. Is it really better than buying CC?
I don't know? I'm not arguing that it is. I'm actually very curious. One of the reasons I'm interested in CC is for just this reason: emergency ethics. How does one survive the economic and political collapse of your country? Think 1930s Germany for Jewish people, or 1960s China, if you're tainted by the scourge of one or more of the 4 Olds, Or if you're living in Venezuela or Zimbabwe during the violence and massive inflation.
If you're scared of your govt then you need to further restrict its powers
Vote 3rd Party in 2016 and beyond
Can you easily acquire tens or hundreds of thousands of dollars in jade and gold and diamonds with cash?
Yes. Visit any high-end jewelry shop in Shanghai, Guangzhou, Shenzhen, Beijing, Nanjing, or any larger city. I have a good friend who sells such jade, and she regularly sells 2-3 bracelets a month that are worth more than 1 million RMB. Typically cash sales, too...
Go to your neighborhood ICBC or BOC and watch. You'll see dozens of people an hour walking in and out with literally bags full of RMB. China is still very much a cash society - it is nearly impossible to get by in China without cash. Credit and fast pays are coming, but cash is still king.
Can you easily leave China with said jade without anyone knowing?
Yep, just slip it on your wrist and be done with it. Same with ruby and diamond rings from Thailand, gold from HK and Malaysia, and many other precious metals and diamonds. Customs officers won't blink at all when a lady is wearing a nice gold and diamond necklace - no thought at all that it may be worth a half million dollars.
But what if you're not that wealthy? What if the most you can squirrel away is $5,000 or $10,000 or $25,000 a year? Would REITs make sense? You would need to spend a lot of time investigating said companies etc. And, if you bought jade or gold you would spending $1000+ travelling to a foreign country, you would lose a fair bit of value when selling the jade to the US buyer. That takes a lot of time and a lot of due diligence. Is it really better than buying CC?
Yes, because how do you sell - liquidate - that Bitcoin to get cash? Bitcoin - like a CC - has ZERO privacy with the transactions. A given chain may be anonymous, but once you know who owns that chain - you know EVERYTHING they ever did with it. And how many exchanges in China will give you cash for your CC without the required reporting to Beijing over who and how much?
China has insane currency control laws on its books, and violation of them - even "structuring" to get around any limits - can and will result in significant jail time. Why would a sane, rational person even consider a purely electronic currency that records everything you've ever done with it, and must be reported to the central authority any time you wish to actually use it? Or even purchase it?
I don't know? I'm not arguing that it is. I'm actually very curious. One of the reasons I'm interested in CC is for just this reason: emergency ethics. How does one survive the economic and political collapse of your country? Think 1930s Germany for Jewish people, or 1960s China, if you're tainted by the scourge of one or more of the 4 Olds, Or if you're living in Venezuela or Zimbabwe during the violence and massive inflation.
How is a CC a supply for emergency ethics? How portable is that CC? If you were a Jew in 1930s Germany, and had successfully masked your name, how would you like to have a single donation to the local synagogue with your CC suddenly get tracked back to you?
IF you want to have an emergency store of value, silver is probably your best bet. Incredibly liquid - you can exchange it for cash, on the spot, anywhere around the world without any records. You can buy it for cash the same way. It is low enough value per ounce that it won't break you to accumulate it or spend it, and it is still valuable enough that 10 pounds of the stuff is a couple of thousands of dollars in value.
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I've been trying to wrap my head around this for a few days now and don't really get it. With an IPO you get an actual stake in a company - for good or bad. With an ICO you get... some digital tokens? Why can they not get devalued through creating more coins when the company wants to sell more? Bitcoin maybe I get because there's a limited quantity possible, but is that the case for these other ICOs? Can someone explain?
And it's not a case of big, bad commie government doesn't understand anything it can't control. The Chinese government wants stability in the country because if the general population doesn't revolt, they can stay in power. I have been to China several times within the past 10 years and my last 2 girlfriends were born and raised in China ladies. I can tell you that China has quite possibly the most unsophisticated investors on the planet. Here in the USA, if people don't have the money to invest in the stock market, they won't do so. Sometimes they don't have time to research it so they won't invest. And I know some people who have the money but aren't interested in doing it themselves so they just pay people to invest their money for them. In China, lack of knowledge about the stock market and limited funds do not discourage investment. It's crazy, but it's like the entire country is filled with people who fall for Ponzi schemes. The most recent of the two Chinese ladies I mentioned earlier knew on some level that it actually was possible to lose money in the stock market, but she seemed to think that only stupid people ever lost money and the fact that I wasn't putting every dime I had into the market meant that I was throwing away free money. She didn't claim to know what I should be putting that money into, and I do actually put some money into investments, but she often complained that I wasn't putting enough in. Everything I've read about investors in China just convinces me that the general public sees the stock market as a "can't lose" proposition and I can certainly understand the government not wanting to see tons of rip offs done with ICOs that go nowhere and then the population gets upset and social upheaval results.
How is a CC a supply for emergency ethics? How portable is that CC? If you were a Jew in 1930s Germany, and had successfully masked your name, how would you like to have a single donation to the local synagogue with your CC suddenly get tracked back to you?
IF you want to have an emergency store of value, silver is probably your best bet. Incredibly liquid - you can exchange it for cash, on the spot, anywhere around the world without any records. You can buy it for cash the same way. It is low enough value per ounce that it won't break you to accumulate it or spend it, and it is still valuable enough that 10 pounds of the stuff is a couple of thousands of dollars in value.
First, as you plan your emergency "Get Out Of Dodge" wallet you won't transfer from any wallets you've used before. You'll acquire BTC (or some other cryptocurrency) and you will add to this secret wallet as you see fit. The wallet cannot be traced to you. Obviously you can't spend any of the money without giving some clue to the secret police, so once the money goes in, it isn't spent frivolously.
I would much rather be a refugee with cash for bribes AND have the bulk of my savings in a brain wallet. Obviously you can be tortured if they think you have a CC wallet. Best yet, before the sh!t hit the fan my wife and daughter left the country and, as they're safe, they can access the CC, transfer the money to a new, unknown-to-me, wallet and live free and clear.
Re cash and physical items: how do you smuggle stuff out when border guards are frisking you for gems and cash? Even swallowing gems is not a fool proof. You'll be gutted and they'll pull them right out of your intestines.
If you're scared of your govt then you need to further restrict its powers
Vote 3rd Party in 2016 and beyond
I think you're missing the fatal flaw with CC - and that flaw is by design. If I link ONE transaction to your wallet - I then have EVERY transaction in your wallet. I use video to link you to the purchase of a suit? Now I know everything you've ever done with your wallet. Ever. With cash, at most you have me linked to a purchase of a single suit. How is that kind of "a single connection exposes everything" a good means of being invisible?
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Yes. But you're out of the country at that point.
.... the millions of other times people had to flee an oppressive regime.
All you say is true. The blockchain is a ledger of accounts and can easily be traced by a government agency. Nonetheless, you've left the country with your assets. Now, it's true, you have a different set of problems: namely staying hidden from people trying to track you down.
If you're a solitary criminal (or part of a criminal organization) foreign agencies will collaborate to arrest you. If you're a refugee fleeing a country, one of millions of refugees that's another story. Will the government of Zimbabwe or Venezuela be able to track down, arrest, and return refugees from other countries? Don't think so. Could China? Yes if they care about that particular person.
One more factor is the delay involved between transaction to ability to act. The government agency will have to have hundreds, if not thousands of agents, to be able to catch people at point of sale. This is more than possible within a government's territorial boundaries as policemen and others could be routed to the crime. But it is a far different thing for these same agencies to do in a foreign land.
Say I, a Chinese citizen, go to a BTC exchange, show my passport (identify myself for KYC purposes) I could then cash out 1000s of dollars of BTC with ease, just paying the commission. Yes, China will know what I cashed out and when - but then what? I've already fled from China.
A wealthy person who can afford to travel to Australia or the US twice a year with jewelry that's converted to local currency; or who buys real estate or invests in businesses has options unavailable to poorer people. If I can save $10,000 in a year I don't want to spend over ten percent of my savings traveling; not to mention the loss in the jade/gold transaction. My $10,000 may very well shrink to $5,000 or less.
I'm not trying to persuade you that CC is superior to cash. I'm trying to think through this problem as if I lived in China or Venezuela or Nazi Germany or the Russia in 1920 or
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Yes. But you're out of the country at that point.
Because countries NEVER cooperate with each other, or call for extradition, especially with tax matters...
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They do. Of course. :)
But now your talking about CC as tax evasion as opposed to fleeing. (And yes countries can and do conflate the to.)
Still cash, as you put it is preferable.
If you're scared of your govt then you need to further restrict its powers
Vote 3rd Party in 2016 and beyond
In the case of China - fleeing with more than $50,000 IS tax evasion. You're not allowed to take that much currency out. And try to do that in the US as well without declaring currencies over $10,000 - that is a Federal offense that can result in jail time. Try quitting the US as a citizen - the IRS will claim a nice big chunk of your worldwide assets as an "exit tax". And if you don't pay, you end up in jail.
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We may have speaking past each other. In one case (the one you're mentioning) it is a clear case of tax evasion. In the other case (the one I was bringing up) it was a case of emergency leave now because the SH!T has hit the fan. In otherwords you're fleeing the Cultural Revolution in 1960s China, or fleeing Germany in the 1930s.
Can the government claim tax evasion? Yes. Of course.
Using Bitcoin for tax evasion is foolish. All transactions are on a public ledger and can be used to trace and convict you of tax evasion. Using Bitcoin as a store of value, like gold, has its place. Unlike gold it's easily transportable and divisible. So, imagine, you are fleeing China post revolution and you sell your home for pennies on the dollar and now you are walking down towards Hong Kong and the territories with tens of thousands of other refugees. Gold weighs a lot, it's bulky, it clinks and will be noticed by your fellow travellers as well as border guards. Tax evasion (if the government wants to call it that is the furthest thing from your mind.)
If you're scared of your govt then you need to further restrict its powers
Vote 3rd Party in 2016 and beyond
If I link ONE transaction to your wallet - I then have EVERY transaction in your wallet.
This is overstating matters. Modern ("hierarchical deterministic") Bitcoin wallets make it easy to use separate addresses for each incoming transfer, and this is generally the default setting. The addresses are all derived from a single seed, but unless you know that seed they appear to be independent. Incoming payments are not associated with the other addresses based on the same seed (your "wallet") until the coins are spent, and even then only to the extent that multiple inputs are combined together to fund a single transaction. Bitcoin clients routinely offer privacy-enhancing features such as control over which inputs are combined and randomizing the outputs to make it difficult to tell which is the payment and which is the "change".
And if all that isn't enough, there is no limit to the number of separate wallets you can have.
"The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat