Chinese investment banker says what nobody in the USA could seem to understand yesterday

It’s times like these that you are glad that you can read Chinese, and not have to deal with clueless English newspapers. I summarized the PBC announcement

@Is the news out of China about banks & bitcoins good or bad news?

It’s excellent news for bitcoin. Essentially bitcoin exchanges in China and bitcoin itself is going to be treated as a “commodity” rather than a “currency” and therefore not going to be subject to banking and currency control regulations. The only restrictions on bitcoin exchanges is that they will be subject to the standard internet censorship rules and they will need to get the identity of all users to prevent money laundering. Existing financial institutions will not be able to trade bitcoin, but this is a great thing for entrepreneurs.

Also, more excellent news out of Hong Kong. An HK bitcoin exchange basically shutdown and stole everyone’s money. This is excellent news because within days, they have been caught and are likely going to go to jail. I’m very, very optimistic about Hong Kong “leading the way” for bitcoin.

The other good news is that the Chinese government understands bitcoin. According to the notice.

Bitcoin has the following four characteristics:

1) there is no central issuing authority 2) the total amount is limited 3) it is not geographically limited for acceptance 4) it is anonymous

According to the PBC, bitcoin is not a “true” currency because

1) there is no central issuing authority 2) there is no legal requirement that anyone accept bitcoin

Bitcoin is therefore a virtual commodity, and therefore is not subject to the laws regarding currency transactions, nor should circulate as a currency.

Also here are his thoughts on the overall climate in China regarding Bitcoin:

1) The PBC has basically given the green light for bitcoin trading and exchanges. They are trying to keep bitcoin trading “separate” from the other parts of the financial system so that if bitcoin blows up, then nothing bad will happen. The thing that I think they are worried about is a Lehman style situation in which something blowing up in derivatives brings down the rest of the economy.

The strategy of creating a ring fence around new markets is a very standard one in China. Hong Kong is an entire city that is ring fenced.

2) Not terribly much. It only started to get on the radar screen a month ago.

3) The main driver is that there are tons of money in China and no one knows what to do with it all. The traditional investments (real estate and stocks) have been closed off by government action since the government has made it clear they will kill any bubble in the real estate and stock markets. So the money is going into all sorts of “non-traditional” investments. Bitcoin is just one of them.

4) Geeks. So far it’s not the type of thing that random people will buy.

5) It’s not very mainstream. However, its taken the Chinese geek community by storm and there are a lot of geeks in China. As with a lot of Chinese things, the fraction of people in China who are geeks is small, but a small fraction times a billion is a lot of people.

6) No harder than it is to buy anything else online.

Bitcoin has not gotten much mainstream attention and its still something that is with geeks, but you have the perfect storm of a lot of other things. The main thing is that bitcoin has hit China exactly at the time where China is looking at restructuring its entire economy and financial system to move out of low tech industries into high tech ones. It also hit China at just the right time in the credit cycle. China has recovered from the 2008 crash and is just starting to enter into another boom phase (which will last about two to three years before the economy crashes again).

EDIT: Source and

EDIT #2: From comments below: both Baidu and China Telecom are regulated by the Ministry of Industry and Information Technology (MIIT). Which is now the same regulator for BTC. Until MIIT tells them (and other tech companies) HOW to go about accepting this “virtual commodity,” they ARE running afoul of their regulator by accepting BTC. It’s not illegal for China Telecom and Baidu to accept BTC, but why would they continue to do so in the same manner as they have in the past? Last week, there was no regulator. Today, there is. It would be idiotic and very much unlike how China works, if they continued to accept BTC w/o guidance from the MIIT.

The specific verb used by Baidu Jiasule, ‘暂停’ means to ‘temporarily suspend’ or ‘pause’. It’s not how they would usually express a permanent end to the service.

A temporary pause could turn out to be a permanent halt, but that isn’t the message they wanted to put out at this time.

A reasonable explanation for this is that they’re being careful, because they don’t know, yet, how the new rules will be interpreted. So they’re waiting to see what happens.

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