China Threatens Overseas Tax Havens, Will Investors Flock to Crypto?

China Bitcoin Exchange Regulation

Since early 2018, the government of China has tightened policies targeting millionaire investors in the country holding their wealth overseas to avoid large taxes, and it may lead local investors to alternative assets like crypto.

Chinese investors rely on the Swiss offshore banking industry, Hong Kong real estate market, and foreign stock markets to hoard millions of dollars worth of properties, assets, and cash outside of mainland China.

But, local financial authorities have started to crackdown on investors that amass significant wealth in overseas markets.

Will Investors Move to Crypto?

In recent months, the Chinese government has begun to cooperate with agencies in 83 countries that follow the Common Reporting Standards (CRS) established by the Organization for economic Cooperation and Development (OECD).

The involvement of the Chinese government with the OECD and CRS is expected to lead to direct communication and cooperation with Virgin Islands, Bermuda, Luxembourg, Switzerland, and the Bahamas, five regions that investors often depend on to save massive amounts of capital in the offshore banking sector.

Last month, China disclosed that all 83 countries under CRS and OECD will share data related to financial accounts held by Chinese citizens, allowing the government to target high profile millionaire investors.

The go-to market for Chinese investors in the real estate sector of Hong Kong. Individuals based in China can easily set up a shell company in Hong Kong and receive a bank account with the name of the firm to move funds from China to Hong Kong, with which the investor can invest in properties in the region.

The influx of investors from China to the real estate market of Hong Kong led premiums on apartments to rise substantially, creating a real estate bubble that has made it more challenging for local residents to acquire properties.

It is difficult and ineffective for the Chinese government to restrict money flowing from China to the Hong Kong real estate market as it would require a highly impractical process of banks cooperating with the government to censor and monitor every large transaction.

But, it is possible for the government crackdown on individual investors holding large amounts of foreign assets and cash in offshore savings accounts.

Cryptocurrencies like Bitcoin and Ethereum remain as the only alternative outside of the Hong Kong real estate and stock market for local investors to store significant capital in. The lack of correlation between crypto and the broader financial market could appeal to investors as a safe haven against the global economy.

OTC Market Active

Hong Kong and Taiwan-based digital asset exchange executive Terence Tsang stated in an interview that the over-the-counter (OTC) crypto market of China still remains active subsequent to the imposition of a blanket ban by the government.

“The latest warning and potentially increased monitoring of foreign platforms is targeted at a batch of smaller exchanges that had claimed to be foreign entities, but are in fact operating in China claiming they have outsourced their operations to a Chinese company,” Tsang said.

Featured image from Shutterstock.

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Famed Nocoiner Nouriel ‘Dr. Doom’ Roubini Once Again Shows His Contempt for Cryptocurrency

Nouriel Roubini continues to scream himself hoarse, espousing the same flawed rhetoric about cryptocurrency and blockchain technology. The New York University professor and Economist dominated the news recently with his ongoing diatribe against virtual currencies and decentralized technology.

The Same Well-worn Cryptocurrency and Criminality Rhetoric

From last week’s Blockshow conference in Las Vegas to his testimony before the US Congress and a series of rants on Twitter, Dr. Doom – as Nouriel Roubini is known in financial circles – has been reliving many of his greatest hits as far as virtual currencies are concerned.

According to Roubini, cryptocurrency is nothing but a ‘stinking cesspool,” and they have poor fundamentals. Speaking before Congress on Wednesday, Roubini characterized the digital asset community as:

Scammers, swindlers, criminals, charlatans, insider whales and carnival barkers (all conflicted insiders) tapped into clueless retail investors’ FOMO (“fear of missing out”), and took them for a ride selling them and dumping on them scammy, crappy assets at the peak that then went into a bust and crash — in a matter of months — like you have not seen in any history of financial bubbles.

Everyone from the DEA to security experts all say that cryptocurrency is a poor form of money for money launderers, drug traffickers, and even jihadists. He makes no mention of how virtual currencies are contributing to better financial inclusion on a global scale.

From lower remittance fees to creating easier access to foreign payments in places like Africa and Southeast Asia, cryptocurrencies have contributed to improving the wellbeing of historically disenfranchised localities. However, you won’t hear Dr. Doom acknowledge these things.

Decentralization is a Myth

Not content with simply haranguing crypto, Roubini also came gunning for blockchain technology, declaring it to be “the most over-hyped – and least useful – technology in
human history: in practice, it is nothing better than a glorified spreadsheet or database.” According to the NYU professor, the solutions developed on the blockchain do not scale, aren’t secure, and were, for the most part, centralized.

Roubini then goes on to make many factually incorrect claims saying Bitcoin fees are $55 whereas, transaction fees are an average of about $0.06. He also attacked Ethereum co-founder, Vitalik Buterin personally, accusing him of being a paper billionaire. Alas, Buterin has never owned more than 0.9 percent of Ether tokens.

Most of Roubini’s claim to fame comes from ‘predicting’ the 2008 global financial meltdown. Well, so did Peter Schiff. A broken clock is right twice in a day but Roubini is no oracle. His research firm, RGE, lost millions of dollars a few years back.

The NYU professor is an obvious nocoiner who misses the mark completely when it comes to understanding tokenomics. Even in mainstream economics, he isn’t exactly a know it all, failing to acknowledge signs of recovery post-2008 crisis.

Roubini is a one-trick pony who only knows how to be a prophet of doom. The cryptocurrency and blockchain technology market should concentrate on developing the industry rather than paying heed to the nattering of a Fed-sponsored, anti-crypto FUD peddler.

Where do you stand on the cryptocurrency and blockchain utility debate? Let us know your thoughts in the comment section below.

Image courtesy of Twitter (@CryptoKekec), Flickr

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Nouriel Roubini Tries to Attack Bitcoin by Saying Fees Cost $55, Fails

Global economist Nouriel Roubini expressed his rage against Bitcoin and blockchain while displaying his profound lack of understanding in the field.A Political Rap against CryptoRoubini was present at an informational hearing round “Exploring the Cryptocurrency and Blockchain Ecosystem” organized by the US Senate Committee on Banking, Housing, and Urban Affairs, alongside Peter Van Valkenburgh, the Director of Research at Coin Center, a nonprofit crypto advocacy organization. The purpose of the hearing was to listen to both the sides as the House of Representatives draft bills to regulate the US crypto industry.Roubini ranted against crypto on several accounts during his testimony, calling Bitcoin “the mother of all scams” and blockchain “the most hyped technology ever.” He continuously reminded the Senate that only criminals use crypto, that mining is bad for the environment, that decentralization is ridiculous, that most tokens are non-compliant securities, that utility tokens take society back to the stone age, that blockchain is no better than spreadsheets, and that no corporation or government would like to run a state on a public ledger.Roubini also tried to present evidence that how a thriving industry like crypto is poised to fail, saying, for instance, that Bitcoin transaction fees are $55, and that it cannot scale to cater for global financial volume.“Paying 55-dollars of transaction costs to buy a $2 coffee cup is [obviously] never going to lead Bitcoin to become a transaction currency,” the economist wrote.Community ReactionThe crypto community treated Roubini’s accusation as [yet] another attempt of a great economist to malign Bitcoin without actually understanding the underlying technology. But the fact that he made those accusations before the US Congress upper chamber raised concerns, given it could be misperceived as they go ahead drafting a regulation.4/ For example, in his written testimony, Nouriel says bitcoin fees are $55. That’s just wrong. He says crypto can’t scale, but ignores layer 2 solutions. He says 51% attacks are frequent & easy, but provides no support.It’s hard to have a productive conversation on this basis.— Jake Chervinsky (@jchervinsky) October 12, 2018To begin with, to say Bitcoin transaction fees are as high as $55 shows Roubini’s lack of understanding. Bitcoin commission had crossed the $50-mark in January 2018. He chose not to mention that the commission fees nosedived later to as low as $1 per transaction. Nevertheless, it is true that buying a coffee by paying $55 in commissions is not an ideal situation, but sending thousands of dollars over blockchain by paying the same fees is more than excellent. It is only about choice, in the end, and blockchain offers it to the consumers around the world.The economists who share Roubini’s opinion first need to understand how a decentralized network like Bitcoin governs at the first place. The system is run by mathematics in which each participant is rewarded based on a pre-written formula that is already in the code. On the top of that, nodes that run the Bitcoin network are paid in BTC, not the dollar. When transaction fees reached $55, the value of Bitcoin was higher, and the number of users was less.Therefore, in Bitcoin, users have the flexibility to define use-case, which Roubini chose to ignore as he continued his biased rant against the technology. If a crypto user has to pay his merchant, he always has the flexibility to opt for cheaper stablecoin while considering Bitcoin as his store of value.And as far as scaling is concerned, Bitcoin is software in the making. The core team has already released two working solutions to cater to larger transactional volumes. Roubini should look into it before deciding to continue his attacks on crypto.