8 ms·

As soon as I read this, two words came to mind: Capital flight. A growing number of Chinese nationals has been using Bitcoin to siphon money out of China over

by cs702 9y ago

As soon as I read this, two words came to mind: Capital flight. A growing number of Chinese nationals has been using Bitcoin to siphon money out of China over the past several years.[1][2] Not surprisingly, the Chinese government is cracking down on this innovative form of capital flight. [1] http://www.theepochtimes.com/n3/1891021-how-chinese-use-bitcoin-to-funnel-money-out-of-the-country/ http://www.theepochtimes.com/n3/1891021-how-chinese-use-bitc... [2] http://www.theaustralian.com.au/business/markets/chinese-investors-use-bitcoin-to-get-yuan-out-of-country/news-story/7cd6f89ae7cd84aef91078326b6274cc http://www.theaustralian.com.au/business/markets/chinese-inv...

dreen 9y ago
I used it to transfer money between countries with an exchange rate better than any other available. Surely this is not illegal?
- eloff 9y ago
  It is in China now. Russia too IIRC. Probably several other countries that impose capital controls. In the west this is legal, but the bank may still ask you where the money came from under their enforcement of laws like knowing your customer and money laundering controls. Tax agencies may also get involved if there is automatic reporting.
  - the_mitsuhiko 9y ago
    How is it illegal in Russia?
    - eloff 9y ago
      https://www.bloomberg.com/news/articles/2016-04-28/russian-law-would-send-bitcoin-users-to-jail-as-cybercriminals https://www.bloomberg.com/news/articles/2016-04-28/russian-l...
      - flatfilefan 9y ago
        this has never become a law afaik
        eloff 9y ago
        Not yet anyway, laws take time. I hope it doesn't become law (and I suspect it's too extreme for that, even for Russia.) But it gives you an idea of the way things are trending there.
- sboselli 9y ago
  Yes, unfortunately, that is indeed illegal. That's exactly what capital flight is (one of its forms), and what most thrid-world countries try to avoid by these banning practices. They (we) have shitty unstable currencies and broken banking systems that the people have no trust in, so they use their savings to buy USD (hard to do in these countries) or Bitcoin to maintain value. Note that money doesn't even need to leave the country for it to be a form of capital flight; just the fact alone that you're buying foreign currency or Bitcoin in a black market.
- occamrazor 9y ago
  Forex commissions are lower than 1%. Which exchanges offer better rates on a fiat/bitcoin/fiat transfer?
  - sushid 9y ago
    Kraken is ~.26% for a taker and ~.16% for a maker. And in some places, you have to jump through a lot of hoops to send money.
    - yourapostasy 9y ago
      Unfortunately, many companies still insist upon remitting in paper checks, especially for cross-border transactions. If I could route a paper check remittance to a BTC/ETH exchange like Kraken, buy into BTC/ETH in that paper check's denomination, then immediately sell and withdraw as USD, then I and many other vendors could solve that use case. If anyone knows of a BTC/ETH exchange with turnarounds even faster than forex brokers, and can process paper checks, then please post who you use. For a world economy that is supposed to be a global integrated entity, the amount of rentier hurdles sitting on the borders never ceases to amaze me. For the few customers that agree to a wire transfer, I'm trying out a cryptocurrency exchange in 2018 to convert them to USD.
  - yourapostasy 9y ago
    Where are you getting below 1%, and how much are you exchanging? I'm working with 5-figure USD amounts, drafted on paper checks, and I'm averaging right around 1-1.2% after all costs are accounted for, but not below that.
    - tonfa 9y ago
      Stock broker with FX, market spread and low fee, total result can easily be less than 0.1% (and even a lot less most likely closer to 0.01%).
      - yourapostasy 9y ago
        How do I get in touch with a "Stock broker with FX"? That's not a term I'm familiar with unfortunately, and searching that string turns up either FX brokers, or FX trading platforms. I've spoken with my US equities/funds brokerage firm, and they have an FX desk, but they're still more expensive than the dedicated FX broker I found and currently work with. Before that, I was regularly raked by my US bank for 4-6% off the mid-market. I haven't seen mid-market spread + 0.01% anywhere, and only seen + 0.1% thrown around for 6-figure and up USD transaction sizes, wire transfer (ACH or SWIFT), at least several of those per month volume. TransferWise works at mid-market + 1%; but they don't work with paper checks. What you're getting is even better than cryptocurrency exchange-facilitated conversions, so I'm very interested in finding out more if you can post a pointer in the right direction. Thanks.
- throwaway613834 9y ago
  This is a great example of something that just boggles my mind. With all the regulation out there (on financial stuff in this case), how do people naturally come to the conclusion that such a scheme bypassing them is not illegal? (genuine question; not disparaging you)
  - gph 9y ago
    Well that is sort of a common law view of things. But most countries practice case law, which means if somethings not explicitly illegal then it must be legal. So I don't think circumventing the law is seen the same way as it would over in the anglosphere, where we'd condemn someone for intentionally not following the 'spirit of the law' and a judge/jury might convict them anyways. Disclaimer: IANAL and perhaps a bad judge of how people around the world view the law.
    - throwaway613834 9y ago
      > Well that is sort of a common law view of things. But most countries practice case law Aren't these the same thing? [1] Do you mean something else (civil law)? But that's a great point; maybe the problem is my lack of living in a purely civil law country. The thing is though, it seems more like common sense to me than a legal issue. Like for example, if (say) murder with a knife and a gun had been illegal, but there was no law against using baseball bats, then suddenly everyone in a civil law system would naturally assume using baseball bats to kill would be okay? It just doesn't make sense to me that "whatever is not expressly illegal must be legal", whatever the legal system... but maybe you're saying that would actually stand up in a civil-law court, and people would actually be okay with it? It's also quite counter-intuitive to me since the US (with its common law) seems to be quite prominent in its tendency to let its people and companies stick to the letter of the law but not its intent. e.g. so many corporations find legal loopholes to take advantage of all sorts of people (from consumers to politicians) by means which are not technically expressly illegal but which almost surely are out of line with the spirits of many existing laws. [1] https://en.wikipedia.org/wiki/Common_law https://en.wikipedia.org/wiki/Common_law
      - 9y ago
nikcub 9y ago
> The saver can then exchange bitcoin for dollars at any of the global bitcoin exchanges without anyone ever knowing his identity. This is where the "Chinese people use Bitcoin to exfil capital" story falls apart. It's near impossible to open a foreign bank account and pass KYC from within China as a Chinese citizen. You have to travel to Macau or Hong Kong - and if you're doing that you may as well use the cheaper and more efficient underground laundering and exchange networks. The most well known ways of exfiltrating capital out of China - foreign real estate[0], casino junkets[1] and foreign acquisitions[2] - have been cracked down on in the past 12 months. I think Bitcoin pales in comparison to these sources and is a minor irritant, and it was more likely Bitcoin is now being more heavily regulated because of the ICO boom and associated scams in China. [0] https://www.forbes.com/sites/ellensheng/2017/07/31/chinese-overseas-real-estate-buying-spree-slows-delayed-by-tightened-capital-controls/#3988ec2614f7 https://www.forbes.com/sites/ellensheng/2017/07/31/chinese-o... [1] http://www.abc.net.au/news/2017-06-13/crown-employees-detained-in-china-charged/8612688 http://www.abc.net.au/news/2017-06-13/crown-employees-detain... [2] http://www.afr.com/news/world/chinas-strict-capital-controls-are-working-20170808-gxrtxi http://www.afr.com/news/world/chinas-strict-capital-controls...
- cs702 9y ago
  As sboselli points out below (https://news.ycombinator.com/item?id=15285900 https://news.ycombinator.com/item?id=15285900), money doesn't even need to leave the country. Just the fact alone that a Chinese citizen is buying foreign currency or Bitcoin in a black market constitutes a form of capital flight.
- Nursie 9y ago
  > foreign real estate There's been something of a crackdown on this in the last few months too, AFAICT http://www.telegraph.co.uk/business/2017/08/18/china-crack-firms-irrational-overseas-spending/ http://www.telegraph.co.uk/business/2017/08/18/china-crack-f...
- deleted 9y ago
  [deleted]
- baybal2 9y ago
conanbatt 9y ago
Part of me believes that an economic crisis on china regarding capital flight could be the next global crisis. If chinese cpaital alone stopped buying property, and caused some plummet in property demand, it alone could cause plenty of waves.
- happyhappyjoy 9y ago
  This is already happening in Canadian cities. They can't make payment on their mortgage. They can't find a buyer at high prices.
evbots 9y ago
I really don't understand the capital flight argument. The Chinese economy has seen overwhelming growth in the past 10 years. If you are searching for yield, it's in China.
- eightysixfour 9y ago
  The CCP's concern is that once people get wealthy in China, they want to leave China with the money.
  - booleanbetrayal 9y ago
    It's a legitimate concern rooted in past precedent. I also think this is partly why you are seeing large expenditures aimed at green-tech, etc. If you can turn around some of the social ills (namely pollution), you can stem the flow a bit.
    - vkou 9y ago
      It's not just quality of life. A lot of wealthy people have at least some exposure to criminal behaviour, and are not keen on being swept up in white collar prosecutions.
      - jiggunjer 9y ago
        Makes me wonder why Canada isn't run by triads yet.
- rossdavidh 9y ago
  Some of China's growth looks bubble-ish, even to wealthy Chinese. If you think that, you might want to get your wealth out before the bubble bursts.
  - rconti 9y ago
    Yeah -- or at the very least, diversify.
flowctrl 9y ago
Note that the Chinese government also demanded DVDs of all transaction records at the exchanges. This means that the Chinese citizens who moved their Bitcoin off of the exchange will have to answer to the bean counters. How could a clever Chinese citizen avoid government scrutiny of their cryptocurrency finances under these conditions? They could trade Yuan (cash) for BTC through an underground mechanism of some sort. The vast majority will already be on the record at the soon to be defunct exchanges.
- howlin 9y ago
  They could buy the hardware and power needed to mine new coins. This seems to be the simplest solution for someone who wants to get a couple thousand bitcoins without leaving a paper trail.
  - solotronics 9y ago
    there is a theory that this is the reason the majority of miners are in China. Combine cheap power from bribed officials and the mining ASICs and you have money laundering generators.
  - Retric 9y ago
    Buying Bitcoin ASIC miners creates a paper trail. Manufacturing them in china let's you move money around, but you could also Manufacture anything else and just sell it in the west.
  - duxup 9y ago
    You gotta buy the hardware in some fashion that is deniable or hidden .... same thing with running it. That's a lot of work.
- eternalban 9y ago
  Let's do a little searching for "anonymous" in the memory hole: http://www.newsweek.com/virtual-currency-bitcoin-anonymous-web-shopping-67841 http://www.newsweek.com/virtual-currency-bitcoin-anonymous-w... https://www.newyorker.com/magazine/2011/10/10/the-crypto-currency https://www.newyorker.com/magazine/2011/10/10/the-crypto-cur... https://arstechnica.com/tech-policy/2011/06/bitcoin-inside-the-encrypted-peer-to-peer-currency/ https://arstechnica.com/tech-policy/2011/06/bitcoin-inside-t... https://techcrunch.com/2011/05/20/bitcoin-ven-and-the-end-of-currency/ https://techcrunch.com/2011/05/20/bitcoin-ven-and-the-end-of... https://gizmodo.com/5803124/what-is-bitcoin https://gizmodo.com/5803124/what-is-bitcoin Hah. So the usual suspects were pimping it, in 2011, as "anonymous". Surprise!? It's like the utopia of Internet sold in the 90s that predictably mutated into the global panopticon. Always read the specifications. Always.
JumpCrisscross 9y ago
> growing number of Chinese nationals has been using Bitcoin to siphon money out of China over the past several years Growing but irrelevant. The largest sums I've heard of being moved by Bitcoin are, at most, a few hundred thousand dollars. This pales in comparison to the invoice factories in Hong Kong, Taiwan, et cetera through whom hundreds of millions of dollars flow. The CCP is worried about fraud in a way American regulators aren't because Chinese victims of ICOs are more likely to look to Beijing when they lose their money. (Keep in mind that Bitcoin was fine until ICO promoters started pilfering from the masses. Also, China is loosening its capital controls in a bid to keep the renmimbi from overheating [1].) [1] http://www.reuters.com/article/us-china-economy-capital-controls/china-relaxes-some-cross-border-capital-curbs-as-yuan-steadies-sources-idUSKBN17L0M2 http://www.reuters.com/article/us-china-economy-capital-cont... Disclaimer: I am not a lawyer. This is not legal nor financial advice. Do not launder money.

by cs702 9y ago

dreen 9y ago

I used it to transfer money between countries with an exchange rate better than any other available. Surely this is not illegal?

eloff 9y ago
It is in China now. Russia too IIRC. Probably several other countries that impose capital controls. In the west this is legal, but the bank may still ask you where the money came from under their enforcement of laws like knowing your customer and money laundering controls. Tax agencies may also get involved if there is automatic reporting.
- the_mitsuhiko 9y ago
  How is it illegal in Russia?
  - eloff 9y ago
    https://www.bloomberg.com/news/articles/2016-04-28/russian-law-would-send-bitcoin-users-to-jail-as-cybercriminals https://www.bloomberg.com/news/articles/2016-04-28/russian-l...
    - flatfilefan 9y ago
      this has never become a law afaik
      - eloff 9y ago
        Not yet anyway, laws take time. I hope it doesn't become law (and I suspect it's too extreme for that, even for Russia.) But it gives you an idea of the way things are trending there.
sboselli 9y ago
Yes, unfortunately, that is indeed illegal. That's exactly what capital flight is (one of its forms), and what most thrid-world countries try to avoid by these banning practices. They (we) have shitty unstable currencies and broken banking systems that the people have no trust in, so they use their savings to buy USD (hard to do in these countries) or Bitcoin to maintain value. Note that money doesn't even need to leave the country for it to be a form of capital flight; just the fact alone that you're buying foreign currency or Bitcoin in a black market.
occamrazor 9y ago
Forex commissions are lower than 1%. Which exchanges offer better rates on a fiat/bitcoin/fiat transfer?
- sushid 9y ago
  Kraken is ~.26% for a taker and ~.16% for a maker. And in some places, you have to jump through a lot of hoops to send money.
  - yourapostasy 9y ago
    Unfortunately, many companies still insist upon remitting in paper checks, especially for cross-border transactions. If I could route a paper check remittance to a BTC/ETH exchange like Kraken, buy into BTC/ETH in that paper check's denomination, then immediately sell and withdraw as USD, then I and many other vendors could solve that use case. If anyone knows of a BTC/ETH exchange with turnarounds even faster than forex brokers, and can process paper checks, then please post who you use. For a world economy that is supposed to be a global integrated entity, the amount of rentier hurdles sitting on the borders never ceases to amaze me. For the few customers that agree to a wire transfer, I'm trying out a cryptocurrency exchange in 2018 to convert them to USD.
- yourapostasy 9y ago
  Where are you getting below 1%, and how much are you exchanging? I'm working with 5-figure USD amounts, drafted on paper checks, and I'm averaging right around 1-1.2% after all costs are accounted for, but not below that.
  - tonfa 9y ago
    Stock broker with FX, market spread and low fee, total result can easily be less than 0.1% (and even a lot less most likely closer to 0.01%).
    - yourapostasy 9y ago
      How do I get in touch with a "Stock broker with FX"? That's not a term I'm familiar with unfortunately, and searching that string turns up either FX brokers, or FX trading platforms. I've spoken with my US equities/funds brokerage firm, and they have an FX desk, but they're still more expensive than the dedicated FX broker I found and currently work with. Before that, I was regularly raked by my US bank for 4-6% off the mid-market. I haven't seen mid-market spread + 0.01% anywhere, and only seen + 0.1% thrown around for 6-figure and up USD transaction sizes, wire transfer (ACH or SWIFT), at least several of those per month volume. TransferWise works at mid-market + 1%; but they don't work with paper checks. What you're getting is even better than cryptocurrency exchange-facilitated conversions, so I'm very interested in finding out more if you can post a pointer in the right direction. Thanks.
throwaway613834 9y ago
This is a great example of something that just boggles my mind. With all the regulation out there (on financial stuff in this case), how do people naturally come to the conclusion that such a scheme bypassing them is not illegal? (genuine question; not disparaging you)
- gph 9y ago
  Well that is sort of a common law view of things. But most countries practice case law, which means if somethings not explicitly illegal then it must be legal. So I don't think circumventing the law is seen the same way as it would over in the anglosphere, where we'd condemn someone for intentionally not following the 'spirit of the law' and a judge/jury might convict them anyways. Disclaimer: IANAL and perhaps a bad judge of how people around the world view the law.
  - throwaway613834 9y ago
    > Well that is sort of a common law view of things. But most countries practice case law Aren't these the same thing? [1] Do you mean something else (civil law)? But that's a great point; maybe the problem is my lack of living in a purely civil law country. The thing is though, it seems more like common sense to me than a legal issue. Like for example, if (say) murder with a knife and a gun had been illegal, but there was no law against using baseball bats, then suddenly everyone in a civil law system would naturally assume using baseball bats to kill would be okay? It just doesn't make sense to me that "whatever is not expressly illegal must be legal", whatever the legal system... but maybe you're saying that would actually stand up in a civil-law court, and people would actually be okay with it? It's also quite counter-intuitive to me since the US (with its common law) seems to be quite prominent in its tendency to let its people and companies stick to the letter of the law but not its intent. e.g. so many corporations find legal loopholes to take advantage of all sorts of people (from consumers to politicians) by means which are not technically expressly illegal but which almost surely are out of line with the spirits of many existing laws. [1] https://en.wikipedia.org/wiki/Common_law https://en.wikipedia.org/wiki/Common_law
    - 9y ago

nikcub 9y ago

> The saver can then exchange bitcoin for dollars at any of the global bitcoin exchanges without anyone ever knowing his identity. This is where the "Chinese people use Bitcoin to exfil capital" story falls apart. It's near impossible to open a foreign bank account and pass KYC from within China as a Chinese citizen. You have to travel to Macau or Hong Kong - and if you're doing that you may as well use the cheaper and more efficient underground laundering and exchange networks. The most well known ways of exfiltrating capital out of China - foreign real estate[0], casino junkets[1] and foreign acquisitions[2] - have been cracked down on in the past 12 months. I think Bitcoin pales in comparison to these sources and is a minor irritant, and it was more likely Bitcoin is now being more heavily regulated because of the ICO boom and associated scams in China. [0] https://www.forbes.com/sites/ellensheng/2017/07/31/chinese-overseas-real-estate-buying-spree-slows-delayed-by-tightened-capital-controls/#3988ec2614f7 https://www.forbes.com/sites/ellensheng/2017/07/31/chinese-o... [1] http://www.abc.net.au/news/2017-06-13/crown-employees-detained-in-china-charged/8612688 http://www.abc.net.au/news/2017-06-13/crown-employees-detain... [2] http://www.afr.com/news/world/chinas-strict-capital-controls-are-working-20170808-gxrtxi http://www.afr.com/news/world/chinas-strict-capital-controls...

cs702 9y ago
As sboselli points out below (https://news.ycombinator.com/item?id=15285900 https://news.ycombinator.com/item?id=15285900), money doesn't even need to leave the country. Just the fact alone that a Chinese citizen is buying foreign currency or Bitcoin in a black market constitutes a form of capital flight.
Nursie 9y ago
> foreign real estate There's been something of a crackdown on this in the last few months too, AFAICT http://www.telegraph.co.uk/business/2017/08/18/china-crack-firms-irrational-overseas-spending/ http://www.telegraph.co.uk/business/2017/08/18/china-crack-f...
deleted 9y ago
[deleted]
baybal2 9y ago

conanbatt 9y ago

Part of me believes that an economic crisis on china regarding capital flight could be the next global crisis. If chinese cpaital alone stopped buying property, and caused some plummet in property demand, it alone could cause plenty of waves.

happyhappyjoy 9y ago
This is already happening in Canadian cities. They can't make payment on their mortgage. They can't find a buyer at high prices.

evbots 9y ago

I really don't understand the capital flight argument. The Chinese economy has seen overwhelming growth in the past 10 years. If you are searching for yield, it's in China.

eightysixfour 9y ago
The CCP's concern is that once people get wealthy in China, they want to leave China with the money.
- booleanbetrayal 9y ago
  It's a legitimate concern rooted in past precedent. I also think this is partly why you are seeing large expenditures aimed at green-tech, etc. If you can turn around some of the social ills (namely pollution), you can stem the flow a bit.
  - vkou 9y ago
    It's not just quality of life. A lot of wealthy people have at least some exposure to criminal behaviour, and are not keen on being swept up in white collar prosecutions.
    - jiggunjer 9y ago
      Makes me wonder why Canada isn't run by triads yet.
rossdavidh 9y ago
Some of China's growth looks bubble-ish, even to wealthy Chinese. If you think that, you might want to get your wealth out before the bubble bursts.
- rconti 9y ago
  Yeah -- or at the very least, diversify.

flowctrl 9y ago

Note that the Chinese government also demanded DVDs of all transaction records at the exchanges. This means that the Chinese citizens who moved their Bitcoin off of the exchange will have to answer to the bean counters. How could a clever Chinese citizen avoid government scrutiny of their cryptocurrency finances under these conditions? They could trade Yuan (cash) for BTC through an underground mechanism of some sort. The vast majority will already be on the record at the soon to be defunct exchanges.

howlin 9y ago
They could buy the hardware and power needed to mine new coins. This seems to be the simplest solution for someone who wants to get a couple thousand bitcoins without leaving a paper trail.
- solotronics 9y ago
  there is a theory that this is the reason the majority of miners are in China. Combine cheap power from bribed officials and the mining ASICs and you have money laundering generators.
- Retric 9y ago
  Buying Bitcoin ASIC miners creates a paper trail. Manufacturing them in china let's you move money around, but you could also Manufacture anything else and just sell it in the west.
- duxup 9y ago
  You gotta buy the hardware in some fashion that is deniable or hidden .... same thing with running it. That's a lot of work.
eternalban 9y ago
Let's do a little searching for "anonymous" in the memory hole: http://www.newsweek.com/virtual-currency-bitcoin-anonymous-web-shopping-67841 http://www.newsweek.com/virtual-currency-bitcoin-anonymous-w... https://www.newyorker.com/magazine/2011/10/10/the-crypto-currency https://www.newyorker.com/magazine/2011/10/10/the-crypto-cur... https://arstechnica.com/tech-policy/2011/06/bitcoin-inside-the-encrypted-peer-to-peer-currency/ https://arstechnica.com/tech-policy/2011/06/bitcoin-inside-t... https://techcrunch.com/2011/05/20/bitcoin-ven-and-the-end-of-currency/ https://techcrunch.com/2011/05/20/bitcoin-ven-and-the-end-of... https://gizmodo.com/5803124/what-is-bitcoin https://gizmodo.com/5803124/what-is-bitcoin Hah. So the usual suspects were pimping it, in 2011, as "anonymous". Surprise!? It's like the utopia of Internet sold in the 90s that predictably mutated into the global panopticon. Always read the specifications. Always.

JumpCrisscross 9y ago

> growing number of Chinese nationals has been using Bitcoin to siphon money out of China over the past several years Growing but irrelevant. The largest sums I've heard of being moved by Bitcoin are, at most, a few hundred thousand dollars. This pales in comparison to the invoice factories in Hong Kong, Taiwan, et cetera through whom hundreds of millions of dollars flow. The CCP is worried about fraud in a way American regulators aren't because Chinese victims of ICOs are more likely to look to Beijing when they lose their money. (Keep in mind that Bitcoin was fine until ICO promoters started pilfering from the masses. Also, China is loosening its capital controls in a bid to keep the renmimbi from overheating [1].) [1] http://www.reuters.com/article/us-china-economy-capital-controls/china-relaxes-some-cross-border-capital-curbs-as-yuan-steadies-sources-idUSKBN17L0M2 http://www.reuters.com/article/us-china-economy-capital-cont... Disclaimer: I am not a lawyer. This is not legal nor financial advice. Do not launder money.