How Bitcoin in China Is Subverting the System

Bitcoin it's a big deal in China it can be used to subvert government controls and the government can't shut it down welcome back to China uncensored I'm Chris Chappell for many Americans bitcoin is a niche thing it's hard to use as an investment because the value goes up and down like crazy and you can't even buy much with it well you can I guess there's a lot of places on the dark web but anyway for a lot of Chinese people bitcoin is something more see the Chinese Communist Party has put a lot of controls on people's money and monitors every transaction they make but bitcoin is a way to go around that system it can be used by Chinese dissidents and corrupt officials alike at the odds of Freedom Forum China uncensored producer Macanese de sat down with bitcoin expert Leo Wiese he's the president of the Bitcoin Association of Hong Kong Leo thanks for joining us thank you for having me so Bitcoin now bitcoin is one of many crypto currencies but it's by far the most popular and the biggest so let's focus mainly on that I believe it's the most liquid by far which is the most important important property of Bitcoin especially in the context of China so speaking of China obviously is Bitcoin legal in China I would argue that yes bitcoin is legal in China but we don't know exactly what that legal means we don't know exactly what the that's what I love about China right like it's legal and if something changes it will first change on the ground and before the law changes so we will first be able to observe how police how Ministry of security how the public the Public Security Bureau how they interact with Bitcoin traders with cryptocurrency exchanges before we see the law changing so what is the situation on the ground with Bitcoin Bitcoin exchanges have been heavily restricted to the point that centralized exchanges as we know them from the US Europe no longer exists cryptocurrency mining operations have been significantly sized down partly because the operators are afraid that they will have their equipment seized partly because they found other opportune he's overseas but also because they're very much afraid that this might at any point the legal situation might at any point change so there's really kind of two things going on there's the actual trading of Bitcoin and then there's the mining so I assume Bitcoin mines are a little bit like Chinese coal mines you know dangerous dirty conditions you know a lot of hard labor with migrant workers so we have an entire supply chain the the actual chips are very rarely made in China China still doesn't have the technological know-how to produce these incredibly accelerated 16 nanometer small transition transit transit transit Earth's but so I mean what are the actual Bitcoin mines look like the Bitcoin miner is a machine roughly the size of a shoebox with two fans that makes a lot of noise and consumes a lot of electricity and a Bitcoin mine would be thousand ten thousand a hundred thousand of those shoebox-sized machines stacked in a warehouse making a lot of noise and emitting a lot of heat the electricity has to come from somewhere preferably cheap which is most of the time hydroelectric power meaning those are dams there have been built by the central government to incentivize industry in especially places like Tibet in sindh Yong in Yunnan in Sichuan but these places haven't been these Saudi cheap electricity hasn't been enough in attracting businesses to those places but it is enough to get Bitcoin miners to actually want to utilize that electricity a factory very much needs a large and a big road leading to the to the hydrogen them and the Bitcoin miner doesn't necessarily need that they can haul the machinery in it with small pickup trucks they can put that machinery on the spot and all they need is a relatively low latency a data uplink to their server which can sit anywhere okay so where are these Bitcoin mines being set up are they in Beijing or they lay out in the countryside they would be out in the mountains where there's cheap hydrogen hydroelectric power meaning dams that especially right now in the rainy season and fill up with water and that water can be turned that water and energy can be turn into electricity very cheaply and there is no demand for this electricity meaning the Bitcoin miners can get this electricity for almost free or free so basically the Chinese Bitcoin miners are undercutting the American workers they are undercutting the US electricity prices which are far higher but in places like upper New York State or Washington State can also be low enough to be attractive to Bitcoin miners like Iceland I guess right there like I don't have a lot of interesting electricity to they have it's what makes Iceland a little bit different is that Bitcoin mine is their compete with aluminum smelts for example Iceland is easily accessible by ship and you can haul in aluminum smelt it down which mainly consumes electricity and all the aluminum breaks back out you cannot do that in yunnan of sichuan because the roads up to those mountains don't exist right but you also don't need to haul bitcoins anywhere exactly a Bitcoin can then consume that electricity wherever the electricity is in most cases we have to bring the electricity to wherever the humans are so what's the scale of Bitcoin mining in China it's probably half a percent of the total electricity consumption and so it would already show up in in statistics but it's not yet at the point where the government deeply worries about the yeah energy is highly political to do not yet at the point where they really worry about this they worry more about keeping their local governments happy and for these local governments it might be a very lucrative site business given that the central government failed to attract businesses to these areas which is which was implicitly promised by building these minds and taking away that income stream now is also a bit difficult well I mean local governments in China love these lucrative side businesses so yeah oh when it comes to actually trading in Bitcoin in China now you said it's legal but like kind of legal yeah so let's get into that a little bit what does the government think about Bitcoin they probably don't like it they don't like the idea they are probably only on a hypothetical level afraid of this severely undermining them I believe Bitcoin is still small enough that it does not yet pose a threat and but the hypothetical threat is there and what is the hypothetical kept except pathetical threat is that people are able to completely circumvent capital controls able to transact truly between each other without a central party being able to intervene the literal central party being able to intervene and the renminbi simply losing its significance as a yeah as money because people prefer something else because right now the great majority of financial transactions between businesses and consumers are made through WeChat pay and Ali pay and so now you have this this third option which is Bitcoin but they're not being tracked with the same the government may not have access to that data for example the government does not have access to this data but more importantly the government isn't able to shut down your Bitcoin account the government isn't able to monitor your Bitcoin transactions when it comes to national transactions that would argue Bitcoin is almost not used at all we Chad and oddly pay or even Bank wires are still relatively reliable it's not that common to have these accounts shut down they are accessible to a large portion of the population what is more difficult is interacting for especially small businesses with companies overseas where they might have difficulties transacting making those payments because of capital controls for example or simply because of their country that they do business with not having a well-established financial system all right we're on the other hand if you're say a Chinese dissident or maybe a corrupt official then the central authorities would have the ability technically to shut down your ability to to access your money yeah but if you have money stored in Bitcoin yeah then you could be using that foreign charities NGOs have been completely cut off from funding any type of social activism any type of change in China even very even very innocent organizations that we wouldn't think are on the hit list of the Communist Party from are being shut down for example making cities greener in initiatives to cut down on to cut down on road traffic initiatives to children dear they undermine the Communist Party by making the environment better yeah I mean that's that's really tragic yeah David the Communist Party definitely has a monopoly on keeping cities crappy so listen there are other cryptocurrencies there's the theory um there's my favorite of course is dogecoin yeah wonderful so how much much well much money yeah so well so what's the situation with those other cryptocurrencies there's one aspect of Bitcoin that Bitcoin itself is only good as a tool for people in China have been deprived of opportunities to invest their savings to invest their income the property market is largely seen as inflated the stock market has been yeah turned into more of a scam and banks are not really offering any any attractive investment tools so there is a lot of pressure for people to seek other investment opportunities and Bitcoin itself does not look like an attractive investment opportunity to a classical investor this is it's like gold it's not it's not an interesting it doesn't pay interest it doesn't run a profit it doesn't give you kickbacks and a lot of the other cryptocurrencies are designed to be more investment vehicles and I believe the ICO the ICO bubble the initial coin offering trend is was largely driven by China as a mean for people to invest in in startups there's a way for people to invest in all sorts of crazy ideas and projects and Bitcoin is very much a mean to be able to move that money into those projects Bitcoin buying bitcoins remin be exchanging those Bitcoin for aetherium and then using those aetherium inside the etherium platform – yeah fund projects i cos are completely banned this is this is probably also part of a larger trend of investment scams China has been riddled with multi-level marketing schemes like open ponds eyes investment opportunities that the bike sharing craze is probably also a good example there was magnitudes bigger than the ICO craze and the Chinese government is very much afraid of a large percentage of the population losing their money in such schemes because people people expect the government to bail them out in a way and these this these grievances with startups failing can easily turn into unrest can turn into protests and they'd rather shut down that entire investment ecosystem before they have any large group of in cryptocurrency investors protesting on the streets so they're not so much concerned about people losing the money as they are the unrest that could potentially follow from that so are the average the average Chinese citizen are they using Bitcoin to make transactions or is this only like a pretty small group my impression is that the number of people who are trading cryptocurrencies is relatively high this is probably similar to how people are playing video games on their phone it can be quite addictive to trade with leverage it has a bit of a casino feel China also is not very welcoming of casinos of gambling but people yeah demand these kind of products and cryptocurrency exchanges a certainly one convenient way – yeah – to gamble and a lot of this activity then happens on cryptocurrency exchanges that are based overseas which target yeah Chinese traders and investors through mainly through apps like we chat or abs on the internet and they people would then go to some of these local exchange platforms where they find in a peer-to-peer market find somebody else who is willing to sell them Bitcoin and they would then make a most of the times Ally pay but bank wires and WeChat also exist a transaction directly to the other person rather than to a central exchange in that way it's not see any track going and that way it's much harder to track and much harder to shut down right I mean I guess if you're using Ali pay to make the payment then it can be tracked it can be tracked yeah but Ali pay doesn't necessarily know what this payment was for and unless you make a lot of these transactions it might not show up on it might not cause any red flags right no the the capital controls in place now to keep money from leaving the country are something something like fifty thousand dollars a year is the maximum that you can transfer out of China so how does Bitcoin affect that on a in summary Bitcoin allows individuals who do not want to move millions but rather want to move tens of thousands a convenient way to have access to the same to the same money channels as people who move Millions so it's still possible to move millions and millions of US dollars out of the country some of this is fake invoicing some of this is insurance schemes some of this is yeah tricking the bank into some how approving this transaction some people who have a lot of money still have access to these channels people who don't have a lot of money do not they will have definitely trouble in a meaningful way with meaningful cost move a hundred thousand US dollars and let's say to the US to finance their kids education now because of Bitcoin they can go to these peer-to-peer markets by a hundred thousand US dollars worth of worth of Bitcoin and then directly in the US it's very easy to sell those Bitcoin you can pretty much be put directly into the bank account of the son or daughter in the US who can then use that to pay for their school tuition for example it's also popular to debit cards that can be loaded with Bitcoin and then in the US you can just go to any place that accepts Visa MasterCard and spend that those US dollars oh good so now the middle class in China have you know equal opportunity to you know take their money illegally out of China yeah and not only are they now able to move money out of China but this happens without a lot of coordination and that makes it relatively hard to shut down if there was a single organization that would coordinate in moving large chunks of money out of the country by pooling funds from let's say your pool you find hundred people who want to move out fifty thousand US dollars and then you move out five million in a single trance which you could do but it requires a lot of coordination and a lot of trust and with Bitcoin and there isn't really anybody in in charge of this you did you cannot find the kingpin you cannot easily find that one organization that leads to these thousand ten thousand people to then lose access to their money channels but rather you have to go after these ten thousand peoples individually so there's not you know one mr. bit sitting in a chair and he's got a blonde and a little cat there which is how it's in the traditional world when traditional worlds you have the junkets you have the insurance companies you have the banks and you can go to them and tell them what's acceptable and what not and if you if they you believe they're they're overstepping their lines then you can make them disappear but in Bitcoin you have to go after every single offender individually and that's quite difficult it's quite expensive and so far we simply haven't seen that happening but in China it's entirely possible that the government might go through these through these efforts right but despite all these issues you're saying bitcoin is still legal in China technically yeah they have not directly come out and said we do not want anybody to use this ever for anything we don't want anybody to own this we don't know exactly why that is I believe a big portion of this is that it still small enough it flies under the radar they do not want to give attention to something that the believe doesn't deserve that attention why prop something up in the international media and the local chatter there's this there's this popular saying in Silicon Valley invest in everything that China bans and for China to bambuco and would certainly give it a lot of legitimacy in in India in that this might actually be useful and it in the current situation does not unfortunately matter enough that they feel a need to ban it they might also not want to embarrass themselves by banning something that then will continue to exist in China I'm just thinking about their Silicon Valley saying because it's invest in everything that China bans but also invest in China regardless of whether the returns good whether they make you self-censor there's a big fear of missing out from tech companies when it comes to China that certainly seems to be the case there's also big fear of missing out for Chinese investors when it comes to overseas tech but what I like about Bitcoin is that it can be used by corrupt officials and political dissidents you know really entirely others role it's entirely neutral and it doesn't care who you are where you're from and I believe that's its biggest strength it allows people to have access to a global financial system without having to show their ID and without having to reveal their real name or their gender identity or their passport all right final question so everyone wants to know should I invest in Bitcoin so what do you think the future of Bitcoin is in the sense of how do you think the way China treats Bitcoin is going to affect the future value of Bitcoin I wouldn't think of putting money into Bitcoin or buying Bitcoin as investing I believe it's pure speculation and what you were speculating on is very important you're speculating on whether this can become money you're not necessarily speculating on whether this can become global money that replaces the US dollar but whether this can be used as money by people on the internet all around the world and in the context of China we do have a very reasonable fear that China would be increasingly cut off from the international financial system in the same way that Ukraine or Russia has been cut off in the same way that Pakistan and Afghanistan or Syria have been entirely and China will continue to want to be connected to the rest of the world they want to trade and in a way their survival depends on their ability to trade and if they cannot use the US dollar because they're being cut off from it and if the remedy is not accepted around the world then they will have to use whatever is liquid and whatever is useful and so if Chinese individual businesses or even the state want to continue to transact in a world where they're increasingly cut off it's quite likely that Bitcoin will be their money and it's quite likely that Bitcoin that then becomes money and our speculation turns out to be right so essentially the worse things get in China and the more inflation their currency sees the more demand there's going to be for Bitcoin in China yes and by its trading partners I believe eventually this will ultimately benefit the individual in China this will benefit to small businesses much more than the than the large ones the state will still try to intervene it will still try to control the it raises the very interesting questions of whether sanctions are just of whether sanctions against a totalitarian regime like China should be in place and if they should be in place then bitcoin is probably not a tool for good because it allows these individuals and allows these entities to circumvent these sanctions but it can still be a tool for the little guy exactly and I that's what I believe in and I believe these individuals have the right to transact and I believe the world or and China is better off if these people are able to engage in global trade because ultimately that this interconnectivity makes them far less likely to be an aggressor and it makes it far more likely that the power inside of the country lies with these individuals and lies with these organizations all right great thanks so much for joining us thank you for having me [Applause] you

29 thoughts on “How Bitcoin in China Is Subverting the System”

  1. 2 years ago, there was super price jump in bitcoin market in Korea and it was strongly related with China communist's black money and the market was manipulated by government faithful to China. They took advantage of this and much illegal funds streams was made with bitcoin market manipulations.

  2. The CCP's haste to go completely on to electronic credit is fueling the search for a currency that people can figuratively keep in their pockets, regardless of their social credit score.

  3. if you need a legit bitcoin investor or bitcoin loaner then hackchek on Instagram is the right person..go a life changing loan from him

  4. Chris be careful. Matt leads an interview in a suit this week and there is a China Uncensored central committee meeting next week, time for 'coup de tate'.

  5. China afraid of BitCoin? NO…
    At beginning, China tried to influence, use, manipulate and control BitCoin. When it failed to fully control it, it become afraid and block it.

    China regime simply afraid of anything it cannot control, or cannot fully control.

  6. I got my bitcoin wallet been funded with 15btc it’s like magic to me still wondering how possible it was ,[email protected],com she’s good in bitcoin mining and other hacking service. Contact her today ?

  7. anyway, there are much better alternative then Bitcoin. for instance: EOS. It is ranked by China to be the number 1 blockchain project, due to its speed of half a second transactions and its free to transact. however, just like bitcoin, EOS is completely public, your balance and what you do is all exposed online. if you want privacy, I would suggest PEOS, a token in the EOS network.

  8. little by little this guy seems to be waking up the US is just as corrupt as China… Anyway, get ready to join VOICE, it's facebook on the blockchain.

  9. "Monitors every transaction they make" and thus you see the reason and purpose of a cashless society ….. CONTROL

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