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Comment by frjalex | Hacker News Reader

One good thing to always keep in mind is that China structurally maintains the status quo of a Leninist state --- IMO, the entire reason they banned crypto is that crypto's goal --- relative anonymity, privacy, and freedom of where to move one's money --- goes directly _against_ China's closed, tightly regulated financial system. The bureaucrats at their Ministry of Finance must be absolutely appalled by the idea that one could transfer money via bitcoin easily outside China without any sort of authorization.

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I suspect what is triggering this crackdown is that the enforcement of capital controls is becoming more critical as more people are nervous of a financial crisis in China because of bad debt / bad banks. Need to make sure those depositors have no place to go.

Though to be honest I don't understand how bitcoin can be used for getting money out of the country. Who would be willing to accept onshore CNY in payment for bitcoin in volumes if everyone is trying to move out?

Someone who needs CNY, that can then buy real goods and export them.

OK, so that may have worked before the ban, but unless you have a way to export under the counter, I presume this route is gone after the btc transaction ban.

Well, you'd have to do an off the books / private transaction of BTC-for-CNY, but there's presumably an infinite number of ways for someone to loan / give CNY for (to the government) nothing (and in reality, BTC, etc).

And with the CNY, you can buy real goods. And with those real goods, you can export them. And with those exports, you can sell them for foreign currency.

So as long as they're running an export-oriented economy, it's going to be very hard to fundamentally stamp out crypto as an option. This mostly strikes retail traders / buyers.

But my point is any time you export some physical good, you have a transaction going under the nose of the authorities. That's where they can stop you and ask some questions on the transaction that paid for those goods.

You paid for the transaction in CNY which is perfectly legal & normal (I would assume). The volume of exports from China is crazy and investigating every single transaction is not practical.

Yeah so part of it is in CNY and part of it is in btc. Can gov really say "wow you payed too little for that!"

Not even that. Although that's definitely another option!

I was thinking of two separate transactions with two separate parties: (BTC -> CNY, hidden as gift or loan) then (CNY -> goods, perfectly legal and normal).

The don't live in china after they cash out, they have the money to immigrate to a better country.

Probably around 80% of wealth is stored as real estate of which 60% is probably is stored as the relative proximity of people. So capital control is as simple as forbidding land from walking away and foreign countries not accepting migration of a billion people. basically a solved problem.

I have always imagined China to have more sophisticated tools for monitoring financial flows than Soviet Russia. Crypto (at least Bitcoin) isn't all that anonymous, nor outside CCP control so long as there are exchanges and miners located inside China. For instance, there were (probably unfounded) fears that the CCP could control Bitcoin by proxy if more than 50% of the hash rate was owned by Chinese miners.

I suspect the recent crackdown is more related to a fear of uncontrolled capital flight due to regulatory changes and anticipated slowdown of the economy.

I doubt it. It's not that hard to figure it out if every other capital flow is being tracked.

I'm guessing it has to do with preventing people from moving wealth out of the country.

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