Beijing has a bitcoin problem on its hands _ South China Morning Post what is a bitcoin miner

It’s proving to be a nifty way to move money across borders beyond the watchful eye of the government

The people’s bank of china barred financial institutions from handling bitcoin transactions, concluding it wasn’t a currency with “real meaning”. A few months later, in march 2014, it went further, ordering banks and payment companies to close the trading accounts of more than 10 bitcoin exchanges.

But bitcoin traders continue to show up the people’s bank of china. As goldman sachs points out, the trading volume on the mainland has risen markedly – even as bitcoins plunge in value (from about US$1,100 in late 2013 to around US$300) and lose cachet elsewhere. “bitcoin,” writes goldman sachs analyst james schneider, “has momentum in china.”

What gives?

Some mainlanders are surely buying bitcoin to engage in relatively innocent forms of financial speculation.What is a bitcoin miner but they are probably outnumbered by the people who are using it to move yuan overseas, while circumventing beijing’s currency controls. That’s partly because the mainland’s broader economic slowdown provides fewer lucrative investment opportunities. But it’s also because of communist party general secretary xi jinping’s ongoing crackdown on corruption, which has made it harder to launder ill-gotten funds. (hong kong money changers used to be the laundering method of choice, but are no longer readily available.)

Bitcoin’s value gyrates too wildly to be a viable transactional unit, but it’s proving to be a nifty way to move money across borders beyond the watchful eye of the government.

Bitcoin’s surging popularity on the mainland – despite the attempts to crack down against it – underscores how fragile the world’s second-biggest economy is at present.What is a bitcoin miner data released on wednesday showed industrial output since the beginning of the year was at its slowest pace since 2009, rising just 6.8 per cent in january and february. Deflation also seems to be on the horizon.

As growth slows, the risk of a hard landing for the mainland economy increases.

Officially, beijing is on the hook for about US$3 trillion of regional debt. (the japanese investment bank mizuho securities says US$4 trillion is closer to the mark.) what’s much harder to estimate is what the financial fallout will be from the more than US$20 trillion of credit churned out by the shadow banking system between 2008 and 2014. If large numbers of borrowers start defaulting on their debt – and analysts estimate that’s only a matter of time – beijing will almost certainly be on the hook for massive bailouts.What is a bitcoin miner

With the market thought to be capped at about 21 million bitcoins, it’s unlikely the currency will pose an overwhelming challenge to the people’s bank of china. But what about other digital currencies created on the mainland? In november, wired magazine explored the rise of darkcoin, which is fast becoming the chosen medium of drug merchants and others active on the mainland’s black market. It’s not hard to imagine the development of other such cryptocurrencies with chinese characteristics.

When the mainland previously faced money laundering problems, it had clearer solutions at its disposal. Last year, for example, beijing clamped down hard on macau, whose casinos had become a favoured laundromat for ultra-rich chinese.

But now that it’s facing a stealthier threat in bitcoin, its options are more limited.What is a bitcoin miner zhou is undoubtedly aware of the problem posed by bitcoin, but he may not yet know what he should do about it.

Bloomberg

It’s proving to be a nifty way to move money across borders beyond the watchful eye of the government

The people’s bank of china barred financial institutions from handling bitcoin transactions, concluding it wasn’t a currency with “real meaning”. A few months later, in march 2014, it went further, ordering banks and payment companies to close the trading accounts of more than 10 bitcoin exchanges.

But bitcoin traders continue to show up the people’s bank of china. As goldman sachs points out, the trading volume on the mainland has risen markedly – even as bitcoins plunge in value (from about US$1,100 in late 2013 to around US$300) and lose cachet elsewhere. “bitcoin,” writes goldman sachs analyst james schneider, “has momentum in china.”

what is a bitcoin miner

What gives? Some mainlanders are surely buying bitcoin to engage in relatively innocent forms of financial speculation. But they are probably outnumbered by the people who are using it to move yuan overseas, while circumventing beijing’s currency controls. That’s partly because the mainland’s broader economic slowdown provides fewer lucrative investment opportunities. But it’s also because of communist party general secretary xi jinping’s ongoing crackdown on corruption, which has made it harder to launder ill-gotten funds. (hong kong money changers used to be the laundering method of choice, but are no longer readily available.)

Bitcoin’s value gyrates too wildly to be a viable transactional unit, but it’s proving to be a nifty way to move money across borders beyond the watchful eye of the government.What is a bitcoin miner

Bitcoin’s surging popularity on the mainland – despite the attempts to crack down against it – underscores how fragile the world’s second-biggest economy is at present. Data released on wednesday showed industrial output since the beginning of the year was at its slowest pace since 2009, rising just 6.8 per cent in january and february. Deflation also seems to be on the horizon.

As growth slows, the risk of a hard landing for the mainland economy increases.

Officially, beijing is on the hook for about US$3 trillion of regional debt. (the japanese investment bank mizuho securities says US$4 trillion is closer to the mark.) what’s much harder to estimate is what the financial fallout will be from the more than US$20 trillion of credit churned out by the shadow banking system between 2008 and 2014.What is a bitcoin miner if large numbers of borrowers start defaulting on their debt – and analysts estimate that’s only a matter of time – beijing will almost certainly be on the hook for massive bailouts.

With the market thought to be capped at about 21 million bitcoins, it’s unlikely the currency will pose an overwhelming challenge to the people’s bank of china. But what about other digital currencies created on the mainland? In november, wired magazine explored the rise of darkcoin, which is fast becoming the chosen medium of drug merchants and others active on the mainland’s black market. It’s not hard to imagine the development of other such cryptocurrencies with chinese characteristics.

When the mainland previously faced money laundering problems, it had clearer solutions at its disposal. Last year, for example, beijing clamped down hard on macau, whose casinos had become a favoured laundromat for ultra-rich chinese.What is a bitcoin miner

But now that it’s facing a stealthier threat in bitcoin, its options are more limited. Zhou is undoubtedly aware of the problem posed by bitcoin, but he may not yet know what he should do about it.

Bloomberg