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That is interesting. Is it easier for them to buy bitcoins over other assets? What about Gold / other foreign investments such as US securities?

JumpCrisscross 9y ago
The principal mode of Chinese capital flight is through Hong Kong- and Macau-based invoice factories. A lawyer in those jurisdictions writes an invoice for $50 million and the Chinese firm “pays” it. Bitcoin is irrelevant to Chinese capital controls. Disclaimer: I am not a lawyer. This is not legal advice, nor advice of any other kind. Do not launder money.
- irq11 9y ago
  ”A lawyer in those jurisdictions writes an invoice for $50 million and the Chinese firm “pays” it. Bitcoin is irrelevant to Chinese capital controls.” ...all of which is easily traceable by the government. Do enough of it, and you’ll eventually be disappeared for a friendly conversation with the police. It’s also expensive, and has a central point of failure (the lawyer). That is why bitcoin is the up-and-coming escape mechanism for yuan. Obviously, not everyone was doing this, but it was becoming a trend, hence the crackdown. It was absolutely not “irrelevant”. (Aside: I love the way that bitcoin people are incredibly imaginative when it comes to visions of borderless, regulation-free financial systems, but can’t see their way past even the most trivial of fraud incentives involving their system.)
  - JumpCrisscross 9y ago
    > all of which is easily traceable by the government This goes back to my original point regarding capital controls: previously discreetly tolerated, their violation is now openly acknowledged. If you stroll through Hong Kong you'll find invoicing services being openly advertised. Why they're tolerated is more murky. My guess is it's a vital tool for China's movers and shakers. In that regard, one could argue that hiding under their bulk is a safer bet than flagging oneself as politically impotent by using outside channels. > It’s also expensive, and has a central point of failure (the lawyer) I haven't heard of any big frauds in the invoicing business, though there's no incentive to publicize it. These lawyers are typically providing other services to the capital providers, so it's--all in--probably less expensive than trying to surreptitiously purchase and dump large numbers of Bitcoins. From what I've heard, they're typically associated with internationally-reputable firms. There's an interesting conversation about the strengths and detriments of invoicing versus Bitcoin for purposes of laundering money. But this isn't that conversation. The reality is most capital flight occurs through the former, to the point of making the latter numerically irrelevant. Capital controls were almost certainly not a significant factor in China's moves against Bitcoin. Disclaimer: I am not a lawyer. This is not legal advice, not advice of any other kind. Do not launder money.
    - irq11 9y ago
      ”This goes back to my original point regarding capital controls: previously discreetly tolerated, their violation is now openly acknowledged. If you stroll through Hong Kong you'll find invoicing services being openly advertised.” Like all other forms of rule enforcement, things are tolerated until they aren’t tolerated anymore. You’re trying to extrapolate a story far beyond the evidence — just because “most” laundering happens another way doesn’t mean that bitcoin isn’t significant. It’s obviously significant to the government: they’ve cracked down on it.
      - JumpCrisscross 9y ago
        > It’s obviously significant to the government: they’ve cracked down on it It's significant in that ICOs have lots of fraud. The motive is important because if capital controls were the motive, the greater Bitcoin community has nothing to learn from it. If it's fraud, introspection is required. Barring that, non capital controlled countries should pay attention.
        ShabbosGoy 9y ago
        I'm a little confused by your comments. Bitcoin does not have a trusted party system, unlike Ethereum. Why does the Bitcoin community have to learn about fraud? I agree that some ICOs are clearly fraudulent in nature. But it's no different than the early days of Kickstarter. Hell, look at Juicero. I think the advent of ICOs as an alternative vehicle for fundraising is making certain entrenched interests very nervous.
        JumpCrisscross 9y ago
        > Bitcoin does not have a trusted party system, unlike Ethereum. Why does the Bitcoin community have to learn about fraud? It does have a small group of people with disproportionate influence (case in point: the adoption of segwit) and who are incentivized to perpetuate the system. It is in their interest to find a solution to the fraud. The "capital flight" excuse is cute, but it won't convince other countries' regulators. Particularly if nothing is done and a bunch of moms and pops get defrauded on a significant scale by an ICO.
- banderman 9y ago
  What about all the casinos in Macau?
  - cepp 9y ago
    There is now a daily restriction on the amount of cash you can withdraw in Macau (if you are from the mainland) in addition to your yearly withdraw and currency exchange caps. These modifications were made earlier this year to prevent capital flight.
baybal2 9y ago
>What about Gold / other foreign investments such as US securities? Certainly, there is not a small industry for people hauling different debentures in and out of the country.
- cepp 9y ago
  There certainly is but the downside is that often these high-value, small goods come at an extreme markup compared to anywhere else in the world. Take, for example, Tiffany & Co. whose products are on average 30% more expensive when paying in RMB vs USD. This means that at best you will make 70% of what you are trying to extract. It's for this reason that this is not very attractive since there are many other schemes/methods by which you can get a better extraction rate.
  - baybal2 9y ago
    >Take, for example, Tiffany & Co. whose products are on average 30% more expensive when paying in RMB vs USD. Naturally, China has high VAT. But if you are just a small time criminal who just wants to secure his "koosh of a lifetime" that he will never be able to earn even if we will spend multiple lifetimes working?

JumpCrisscross 9y ago

The principal mode of Chinese capital flight is through Hong Kong- and Macau-based invoice factories. A lawyer in those jurisdictions writes an invoice for $50 million and the Chinese firm “pays” it. Bitcoin is irrelevant to Chinese capital controls. Disclaimer: I am not a lawyer. This is not legal advice, nor advice of any other kind. Do not launder money.

irq11 9y ago
”A lawyer in those jurisdictions writes an invoice for $50 million and the Chinese firm “pays” it. Bitcoin is irrelevant to Chinese capital controls.” ...all of which is easily traceable by the government. Do enough of it, and you’ll eventually be disappeared for a friendly conversation with the police. It’s also expensive, and has a central point of failure (the lawyer). That is why bitcoin is the up-and-coming escape mechanism for yuan. Obviously, not everyone was doing this, but it was becoming a trend, hence the crackdown. It was absolutely not “irrelevant”. (Aside: I love the way that bitcoin people are incredibly imaginative when it comes to visions of borderless, regulation-free financial systems, but can’t see their way past even the most trivial of fraud incentives involving their system.)
- JumpCrisscross 9y ago
  > all of which is easily traceable by the government This goes back to my original point regarding capital controls: previously discreetly tolerated, their violation is now openly acknowledged. If you stroll through Hong Kong you'll find invoicing services being openly advertised. Why they're tolerated is more murky. My guess is it's a vital tool for China's movers and shakers. In that regard, one could argue that hiding under their bulk is a safer bet than flagging oneself as politically impotent by using outside channels. > It’s also expensive, and has a central point of failure (the lawyer) I haven't heard of any big frauds in the invoicing business, though there's no incentive to publicize it. These lawyers are typically providing other services to the capital providers, so it's--all in--probably less expensive than trying to surreptitiously purchase and dump large numbers of Bitcoins. From what I've heard, they're typically associated with internationally-reputable firms. There's an interesting conversation about the strengths and detriments of invoicing versus Bitcoin for purposes of laundering money. But this isn't that conversation. The reality is most capital flight occurs through the former, to the point of making the latter numerically irrelevant. Capital controls were almost certainly not a significant factor in China's moves against Bitcoin. Disclaimer: I am not a lawyer. This is not legal advice, not advice of any other kind. Do not launder money.
  - irq11 9y ago
    ”This goes back to my original point regarding capital controls: previously discreetly tolerated, their violation is now openly acknowledged. If you stroll through Hong Kong you'll find invoicing services being openly advertised.” Like all other forms of rule enforcement, things are tolerated until they aren’t tolerated anymore. You’re trying to extrapolate a story far beyond the evidence — just because “most” laundering happens another way doesn’t mean that bitcoin isn’t significant. It’s obviously significant to the government: they’ve cracked down on it.
    - JumpCrisscross 9y ago
      > It’s obviously significant to the government: they’ve cracked down on it It's significant in that ICOs have lots of fraud. The motive is important because if capital controls were the motive, the greater Bitcoin community has nothing to learn from it. If it's fraud, introspection is required. Barring that, non capital controlled countries should pay attention.
      - ShabbosGoy 9y ago
        I'm a little confused by your comments. Bitcoin does not have a trusted party system, unlike Ethereum. Why does the Bitcoin community have to learn about fraud? I agree that some ICOs are clearly fraudulent in nature. But it's no different than the early days of Kickstarter. Hell, look at Juicero. I think the advent of ICOs as an alternative vehicle for fundraising is making certain entrenched interests very nervous.
        JumpCrisscross 9y ago
        > Bitcoin does not have a trusted party system, unlike Ethereum. Why does the Bitcoin community have to learn about fraud? It does have a small group of people with disproportionate influence (case in point: the adoption of segwit) and who are incentivized to perpetuate the system. It is in their interest to find a solution to the fraud. The "capital flight" excuse is cute, but it won't convince other countries' regulators. Particularly if nothing is done and a bunch of moms and pops get defrauded on a significant scale by an ICO.
banderman 9y ago
What about all the casinos in Macau?
- cepp 9y ago
  There is now a daily restriction on the amount of cash you can withdraw in Macau (if you are from the mainland) in addition to your yearly withdraw and currency exchange caps. These modifications were made earlier this year to prevent capital flight.

baybal2 9y ago

>What about Gold / other foreign investments such as US securities? Certainly, there is not a small industry for people hauling different debentures in and out of the country.

cepp 9y ago
There certainly is but the downside is that often these high-value, small goods come at an extreme markup compared to anywhere else in the world. Take, for example, Tiffany & Co. whose products are on average 30% more expensive when paying in RMB vs USD. This means that at best you will make 70% of what you are trying to extract. It's for this reason that this is not very attractive since there are many other schemes/methods by which you can get a better extraction rate.
- baybal2 9y ago
  >Take, for example, Tiffany & Co. whose products are on average 30% more expensive when paying in RMB vs USD. Naturally, China has high VAT. But if you are just a small time criminal who just wants to secure his "koosh of a lifetime" that he will never be able to earn even if we will spend multiple lifetimes working?