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Central bank faces 3 dilemmas when dealing with bitcoin

OKCoin and Huobi announced suspension of bitcoin/litecoin withdrawal for one month. BTCC said bitcoin/litecoin withdrawal processing would be subject to AML review that could take up to 72 hours. Yunbi says that bitcoin withdrawal would take “longer” time and suspicious account would be frozen today.
yunbi 1
All of the statement lends foot on cracking down pyramid scheme like MMM. Chinese government has issued a warning specifically against MMM. MLM is no doubt a crime that should be hunted down. EGD scam cracked down in China 10.9 billion yuan involved.

It’s still too early to say the dust has settled down, but one may notice that the price is slightly higher on the exchanges that still allow withdrawal like BTCC, Btc38, Yunbi. What’s the next move of PBoC? Jiang Zhuo’er shared his view, saying that central bank faces dilemma treating bitcoin.

Dilemma1: is bitcoin money or not?
Although government has no authority to define what is “money” as much as government has no right to defind “metal”. But they have authority to define “fiats”. Although bitcoin has been categorized as “commodity” in the 2013 notice, central bank’s regulation on bitcoin seems a bit awkward. The “meeting” or “inspection” summoned by central bank are temporary measures, which have the following defects:
1. Weakening impact. The market has displayed resilience to authoritative measures, impact of which is weakening every time.
2. Limited vectors. Each time the authority has to find new reasons. This time is for development “AML system”. There are maybe more.
3. Every move of authority will drawn attention from mainstream media. Streisand effect still works.

He quoted a weibo on describing the impact of regulation. Bubble burst happened multiple times in history, a summary could be found here.

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Dilemma 2: how to deal with bitcoin exchanges?
If not for the decentralization nature of bitcoin, the exchanges would have been shutdown much earlier. However, regulators have to face a more complicated OTC trade beyond their control if “obedient” exchanges are shutdown.
Russia banned bitcoin trad in Feb 2014, resulting in a boom on bitcoin via localbitcoins.com. Then money flight and underground trading would become totally out of control.

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On the contrary, a legitimate exchange may better serve as watchdog. Check out the story of BTCC’s blocking of a 2 billion RMB money laundry case in 2015.

Jiang points out that:

It’s easy for authority to shutdown exchanges. The exchanges may survive as a result of the robustness of bitcoin network rather than the mercy given by regulators.

Dilemma 3: how to control bitcoin price via exchanges
The suspension of bitcoin withdrawal could be viewed as long-term boost to the ecosystem.
Most of the Chinese community have not experienced similar loss like Mt.Gox and would rather keep their coins in the exchanges instead of local wallet. Victims of exchange incidents would pay dearly and chose to leave the community.
Through the  recurrence of exchanges incidents, users will gradually learn the importance of self-controlled storage of bitcoin. Once they withdraw coins to their own wallet, there will be shortage of supply in the market and small amount of inflow capital will drive up the price easily.

There have already some speculations on 8btc forum about the tightening controls of bitcoin like shutting down mining farm, suspension or closing of CNY deposit/withdrawal. But more are looking for OTC trade tutorial.

COMMENTS(20)

  • hl5460
    1 month ago hl5460

    Jiangzhuo’er, presented, 3 questions to the authority.Dilemma1: is bitcoin money or not?Dilemma 2: how to deal with bitcoin exchanges?Dilemma 3: how to control bitcoin price via exchanges?https://www.reddit.com/r/Bitcoin/comments/5t5rjm/central_bank_face_3_dilemmas_when_dealing_with/

  • googlebtc
    1 month ago googlebtc

    Dilemma1: is bitcoin money or not?”Yes, I think it is money in the future to allow people to make payments quickly without limit

  • Xester
    1 month ago Xester

    Quote from: hl5460 on February 10, 2017, 06:38:13 AM
    Jiangzhuo’er, presented, 3 questions to the authority.Dilemma1: is bitcoin money or not?Dilemma 2: how to deal with bitcoin exchanges?Dilemma 3: how to control bitcoin price via exchanges?https://www.reddit.com/r/Bitcoin/comments/5t5rjm/central_bank_face_3_dilemmas_when_dealing_with/

    Not only banks but even government are facing crisis when they are describing bitcoins. They are arguing if bitcoin is a currency or a commodity/property. That is only on the level of definition but how about on the whole currency and its technology that would be more complicated. But I am happy that the central bank of the Philippines has acknowledge bitcoin as a payment system.

  • pinkflower
    1 month ago pinkflower

    Quote from: googlebtc on February 10, 2017, 06:46:41 AM
    Dilemma1: is bitcoin money or not?”Yes, I think it is money in the future to allow people to make payments quickly without limit

    It would be in our best interest if it werent defined as money. There are a lot of laws that they can throw at you and claim that you broke if its defined as money. How can you define it as real money if it is only a numbers in a computer screen and not manufactured and distributed by a governments Minting Corp.?

  • Pursuer
    1 month ago Pursuer

    Quote from: hl5460 on February 10, 2017, 06:38:13 AM
    Jiangzhuo’er, presented, 3 questions to the authority.Dilemma1: is bitcoin money or not?
    we keep saying bitcoin is money (and it really is) but in reality bitcoin is used mostly as a commodity and if I am not mistaken in US bitcoin is considered a commodity when it comes to the law. and there is not much dilemma here.Quote
    Dilemma 2: how to deal with bitcoin exchanges?
    this one is not at all a dilemma!a bitcoin exchange like a forex exchange, a stock exchange, or simply it is like any other business and dealing with it is the same as dealing with any other business that deals with fiat.I really don’t see how can this be any problem.Quote
    Dilemma 3: how to control bitcoin price via exchanges?
    this one is a challenge, it can be done but it is getting harder as bitcoin popularity grows and the number of exchanges all over the world increases.I believe the question in this one is “why would they want to do that?” “what would be the befit of it?” or “what is the motivation of controlling the price?!”government is concerned with legal/illegal things people do with bitcoin and fiat since they are connected through an exchange. such as money laundering and other illegal activities. and whether bitcoin price is $1000 or $0.01 all these things can be done. so there is no point in controlling the price.

  • hl5460
    1 month ago hl5460

    Quote from: pinkflower on February 10, 2017, 06:56:26 AM

    It would be in our best interest if it werent defined as money. There are a lot of laws that they can throw at you and claim that you broke if its defined as money. How can you define it as real money if it is only a numbers in a computer screen and not manufactured and distributed by a governments Minting Corp.?

    I understand the difference between “money” and “fiats” through bitcoin.

  • hl5460
    1 month ago hl5460

    Quote from: Pursuer on February 10, 2017, 07:06:16 AM

    this one is not at all a dilemma!a bitcoin exchange like a forex exchange, a stock exchange, or simply it is like any other business and dealing with it is the same as dealing with any other business that deals with fiat.I really don’t see how can this be any problem.

    Probably you should check out the original post: http://news.8btc.com/central-bank-face-3-dilemmas-when-dealing-with-bitcoin

  • Pursuer
    1 month ago Pursuer

    Quote from: hl5460 on February 10, 2017, 07:09:19 AM

    Quote from: Pursuer on February 10, 2017, 07:06:16 AM

    this one is not at all a dilemma!a bitcoin exchange like a forex exchange, a stock exchange, or simply it is like any other business and dealing with it is the same as dealing with any other business that deals with fiat.I really don’t see how can this be any problem.

    Probably you should check out the original post: http://news.8btc.com/central-bank-face-3-dilemmas-when-dealing-with-bitcoin

    that is what I never understand.everything else is regulated, Forex,…. markets are regulated and under the control and observation of government. and also Over-the-counter trades are always concerns in any market.so why is it always a big deal and something that becomes much bigger than it really is when it comes to regulations on bitcoin exchanges!

  • AGD
    1 month ago AGD

    1. I bought a lot of different goods with Bitcoin and I earn Bitcoin with services that I provide. So: Yes, Bitcoin is money to me.2. and 3. They can control some of the world wide operating Exchanges, but they won’t be able to do that here: https://bitsquare.io/

  • topesis
    1 month ago topesis

    Control of exchanges can be successful that is even until we have discentralised exchange. Ones we have discentralised exchanges and the trust level in the them increase with time, central banks know they are only chasing shadows.

  • Pettuh4
    1 month ago Pettuh4

    Quote from: hl5460 on February 10, 2017, 06:38:13 AM
    Jiangzhuo’er, presented, 3 questions to the authority.Dilemma1: is bitcoin money or not?Dilemma 2: how to deal with bitcoin exchanges?Dilemma 3: how to control bitcoin price via exchanges?https://www.reddit.com/r/Bitcoin/comments/5t5rjm/central_bank_face_3_dilemmas_when_dealing_with/

    Dilemma 1: Bitcoin is not a currency only but a commodity so I will say it’s a currency and commodity at the same time.Dilemma 2: you deal with Bitcoin exchanges by opening your own exchange to counter the status quo.Dilemma 3: you don’t control Bitcoin prices through exchanges  if you don’t have an exchange

  • Carlsen
    1 month ago Carlsen

    I have just read about this guy Jiang Zhuo’er.From What I could find, he is the owner of mining farms in China and apperently against the activation of segwit.Am I the only one who finds it strange that he asks the authoity how bitoin price can be controled via exchanges?

  • newIndia
    1 month ago newIndia

    Quote from: hl5460 on February 10, 2017, 06:38:13 AM
    Jiangzhuo’er, presented, 3 questions to the authority.
    Hello Red Li, who is Jiangzhuo’er?Quote from: hl5460 on February 10, 2017, 06:38:13 AM
    Dilemma1: is bitcoin money or not?
    It is a store of value and a medium of exchange, but not a legal tender as it is not issued by any authority. So, it can be used as ‘money’, but not a ‘currency’.Quote from: hl5460 on February 10, 2017, 06:38:13 AM
    Dilemma 2: how to deal with bitcoin exchanges?
    Only FIAT part can be dealt with and be regulated. Enforcing KYC is the best option from Government’s point of view.Quote from: hl5460 on February 10, 2017, 06:38:13 AM
    Dilemma 3: how to control bitcoin price via exchanges?
    Bitcoin’s price is NOT determined in one country’s exchanges. So, no government will be able to control bitcoin price.

  • alani123
    1 month ago alani123

    In my opinion, the notion that PBoC can control bitcoin could very well be FUD. I’m sure that the demand for bitcoin in China has to do with bitcoin’s “hard to tame” nature. Suggesting that PBoC could manipulate bitcoin could very well be part of an effort to manipulate bitcoin’s price itself.

  • hl5460
    1 month ago hl5460

    Quote from: AGD on February 10, 2017, 07:40:10 AM
    1. I bought a lot of different goods with Bitcoin and I earn Bitcoin with services that I provide. So: Yes, Bitcoin is money to me.2. and 3. They can control some of the world wide operating Exchanges, but they won’t be able to do that here: https://bitsquare.io/

    Bitsquare requires VPN to log on in China. And VPN provider need to comply with regulations as well in China by the end of 2017.China just banned all unauthorized VPN providers https://thenextweb.com/asia/2017/01/24/china-cracks-domestic-vpn-usage/

  • BTCLovingDude
    1 month ago BTCLovingDude

    Quote from: hl5460 on February 10, 2017, 08:51:25 AM

    Quote from: AGD on February 10, 2017, 07:40:10 AM
    1. I bought a lot of different goods with Bitcoin and I earn Bitcoin with services that I provide. So: Yes, Bitcoin is money to me.2. and 3. They can control some of the world wide operating Exchanges, but they won’t be able to do that here: https://bitsquare.io/

    Bitsquare requires VPN to log on in China. And VPN provider need to comply with regulations as well in China by the end of 2017.China just banned all unauthorized VPN providers https://thenextweb.com/asia/2017/01/24/china-cracks-domestic-vpn-usage/

    there is always a way. they can never ban bitcoin the same way they can never ban VPN. look up all the new ways of tunneling some VPN providers off-shore are offering.for example there is SSH tunneling which makes all the communication (traffic) look like same as visiting an https website. and unless they ban all the https websites (which will include half the internet such as banks,..) they can never block that kind of VPN and these VPN providers are off-shore, no log policy with bitcoin payment.

  • requester
    1 month ago requester

    Quote from: hl5460 on February 10, 2017, 06:38:13 AM
    Dilemma1: is bitcoin money or not?

    To be honest Bitcoin is not actually a currency because it doesnt have any rules or regulation to control it Its neither private nor govermental property, secondly it is just a digital value exchange medium and many websites and articles had published that it is a digital assetand have particular value.

  • hajimasan
    1 month ago hajimasan

    Quote from: hl5460 on February 10, 2017, 06:38:13 AM
    Jiangzhuo’er, presented, 3 questions to the authority.Dilemma1: is bitcoin money or not?Dilemma 2: how to deal with bitcoin exchanges?Dilemma 3: how to control bitcoin price via exchanges?https://www.reddit.com/r/Bitcoin/comments/5t5rjm/central_bank_face_3_dilemmas_when_dealing_with/

    Bitcoin is not a money but it is just a value exchange medium as requester had mentioned it right.Secondly to deal with exchange with various exchange websites for UNO should announce new rules  and law for bitcoin and other such currency because each country will have different views and it would make unfit for the whole world so UNO will o the task better and standard.Third: its not that possible to control the price of bitcoin because with low supply and increasingly heavy demand its not possible to keep something at stable stage.

  • millgates
    1 month ago millgates

    If bank want to cooperate with people who use bitcoin, they must leave the dilemmas and follow what the customer want.

  • Gloiri
    1 month ago Gloiri

    Quote from: hl5460 on February 10, 2017, 06:38:13 AM
    Jiangzhuo’er, presented, 3 questions to the authority.Dilemma1: is bitcoin money or not?Dilemma 2: how to deal with bitcoin exchanges?Dilemma 3: how to control bitcoin price via exchanges?https://www.reddit.com/r/Bitcoin/comments/5t5rjm/central_bank_face_3_dilemmas_when_dealing_with/

    Well bit coin is a Currency you can’t say its money or not, exchanging deal with forex , trading its all depended  and about price exchanges you don’t have access to control prices

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