Crypto’s future appears to be headed east

I just do not believe there to be a more pro-Western thinker than myself. Granted, I am a creature of the West, a cultural chauvinist of the highest order. Western society, far from a plague to be overcome, is a gift to all humanity: literature, art, film, architecture, cuisine, philosophy, even religion. The Enlightenment and its resulting liberality I count as monumental achievements for the species.

That written, of all the places to flower a crypto revolution in an otherwise mostly closed society, China was for sure not high on my list. Asia is such a loose word, and doesn’t mean much but it will have to do for the purposes of this particular column. The stereotype here in the United States is of cultures and nations repressed, controlled, still fighting for basic freedoms at least politically.

And that appears to be true on some level, as any cursory look at a given Eastern or Asian country would reveal. They often lack the liberality of migration, of allowing others “in” to their societies. Speech is a careful freedom, and does not seem to be a Right in the way we imagine. All of that, and to say nothing of the political struggles for more democratic participation.

George Gilder

Crypto’s future appears to be headed east“Only in China! After 40 appearances in nine days in four cities,” famed futurist George Gilder explained in a social media chat, “I return exhausted and edified by this nation of engineers and entrepreneurs, all inspired by the U.S. Silicon Valley example, now wilting in green Marxism and demented diversity politics.” Gilder’s latest book, Life After Google: The Fall of Big Data and the Rise of the Blockchain Economy (Gateway Editions, 2018), a follow up to his Scandal of Money, has since been released in China, and he gave a series of talks in support.

We were to do an on-camera interview in Las Vegas this Summer at the annual Freedom Fest (I ended up with a lovely and very impromptu discussion with Jeffrey Tucker), but instead spoke from an ironically weak internet connection hideaway in the Berkshire Mountains (I in Southern California). Days away, as of this writing, from his 79th birthday, he’d come back from a morning run, as I recall, and was eager to talk about his latest book. About to hit 80, and the dude runs marathons (plural) throughout the year. Jesus.

His entire life has him in close proximity, Gump-like, to the movers and shakers of American politics and business. He’s written speeches for Nelson Rockefeller, George Romney, Richard Nixon, along with dozens of well regarded books on a variety of subjects. He was one of the key figures who developed supply-siders’ ascension to the White House by way of the Wall Street Journal editorial pages. He was said to be President Reagan’s most quoted intellectual.

China? Really? Yes

Crypto’s future appears to be headed eastGilder received push-back on his assessment after he returned from China recently. The country, he responded, “thrived by reducing govt spending by 80 per cent (to a level lower than the U.S. as a share of GDP) and refusing to float their currency.”

When a few folks commented the Chinese might’ve picked up hints from his supply-side days, Gilder confirmed he believed progress began “after I visited in 1988 and urged them to ‘let a billion flowers bloom.’ I also told them to lower marginal tax rates. It was Bob Mundell, though, who told them not to float their currencies, and was rewarded by having the University of Finance in Beijing named after him. I was just made an ‘esteemed honorary professor’ at Shenzhen University of Technology. Voodoo marches on, in China, and underlies their economic miracle,” he wrote, using the famous George HW Bush’s characterization of Voodoo economics to describe supply-siders.

When another commenter listed grievances against the country, Gilder asserts, “China has increased its power and wealth by a factor of 10 or more since the Maoist days. Regardless of what we do, at a minimum they are going to be dominant in Asia. Objecting to

‘island building’ in the Spratlys or naval clout in the South China seas, or foreign aid (‘hegemony building in Africa’), or infrastructural prowess (no problem with finding ‘shovel ready projects’), their ‘art of the deal’ with Western tech companies for whom they do most manufacturing, [complaining] at all this shows an incomprehension of China’s earned position as a great power.”

Undignified, hypocritical, and quixotic

Crypto’s future appears to be headed east“We can change our own behavior but we probably cannot change China’s determination to be number one in Asia,” Gilder assured. “Attempts to stop them are undignified, hypocritical, and quixotic and a distraction from the war against industry being conducted in the U.S. on every campus and environmental cult and blue state office,” insisting the U.S. has far more of its own problems to tend than fretting over China.

Ultimately, in order to survive, he believes “the U.S. and China are destined to collaborate. Gratuitous trade conflicts based on ‘trade gaps’ are just self-defeating, particularly for us with most of our high tech manufacturing in China and Taiwan exporting to the U.S.”

Perhaps the biggest slur against the industrious nation is the charge it is merely faking, a Potemkin village at scale. And while some of that is no doubt true too, China is easily one of the most entrepreneurial economies going at the moment. It accounts for three times the initial public offerings (IPOs) than that of the U.S. When Taiwan is brought into the picture, whose business folk have pointed a majority of their investments at the mainland, greater China makes most of the world’s high tech goods.

Economically retarded, politically repressive, socially manipulative

“Taiwan Semiconductor Manufacturing Co.,” Gilder notes, “is the only mass producer of 7 nanometer chip geometries for the new Apple cellphone. Yes, the new government is economically retarded in some ways, politically repressive and socially manipulative. But the magnificent previous leadership under Deng Xiaoping et al provided a real foundation for an utterly solid trajectory of growth with an ever diminishing government spending as share of GDP (now at around 19 percent well below [the U.S.]). The new generation, unlike [the U.S.], is anti-socialist and throngs to their ‘free zones,’ which as I discovered in Shenzhen, have to be seen to be believed.”

He ends with a plea of sorts, an appeal to sanity. “It is foolish to deny the feats of the Chinese economy and the proliferation of entrepreneurial businesses, particularly in my areas of current focus, electronics and cryptocurrencies. For better or for worse, China is on a path to be the world’s largest and most powerful country. Making them an enemy is a suicide trip,” he concluded the chat.

South China Morning Post recently announced, as if channeling Gilder, “Hong Kong’s new regulations for cryptocurrencies have security at their heart, specifically the safeguarding of digital assets from theft or loss.” It might appear heavy handed, but the subtext is one of tacit acknowledgement crypto is here to stay, and that its people are clamoring for digital assets.

InVault

Third party custodians are key to institutional adoption in the wake of exchange hacks and wallet insecurities. “InVault,” the SCMP write, “a Shanghai-based start-up, claims to be the first such digital custodian to take advantage of the new licensing requirements to launch its services in Hong Kong.” It already holds about a million ETH on the mainland, and this new license will allow it to begin automated services next month.

They’re looking internationally as well, becoming leaders in the protection of crypto assets. CEO Kenneth Xu told the news agency, “We believe that globally, custodians for cryptocurrency assets will be regulated and operated under a trust licence.” Using the models of Coinbase and BitGo, they’re to be a kind of trust agency, a form of insurance.

“Xu said InVault is in discussion with two ‘mid-sized’ insurers which potentially could provide coverage that could be included as part of its custody services,” SCMP reports. “He said the biggest challenge for insurers today is how to accurately measure the risk profile of a custodian, and its internal systems, to price the cryptocurrency insurance premium accordingly.” It’s yet another step, albeit a quiet and unsexy one, in the country’s business culture to get economic’s future right. China! I would’ve never guessed.

C. Edward Kelso is a financial technology journalist. Follow him on Twitter.

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Crypto miner Canaan’s $400M IPO application in Hong Kong expires

The application from cryptocurrency mining equipment manufacturer Canaan for an initial public offering (IPO) in Hong Kong has lapsed, Reuters reported.

Six months ago, Canaan filed an application to debut in Hong Kong, seeking $400 million in funding from its offering. At the time, the crypto mining hardware manufacturer was buoyed by wider optimism around the cryptocurrency mining sector.

With the application lapsing as of November 15, it marks the final downgrade of Canaan’s IPO plans, which initially sought to raise as much as $2 billion from investors, before being revised to $400 million.

While the present application has now lapsed, Canaan would be free to re-apply for a listing at a later date. This would require updated financial information, and a new submission, both to regulators and the stock exchange, before it could be listed.

Sources close to the deal told the news outlet that Canaan’s business model and outlook were subject to significant scrutiny from the stock exchange and regulators, suggesting it was now impossible that the IPO could occur in 2018.

The news is highly embarrassing for Canaan, one of the world’s foremost crypto mining firms. Several rival firms are approaching IPOs of their own in Hong Kong, including Ebang and Bitmain, although the news about Canaan has cast further doubt on their viability.

At press time, Bitmain was still fielding questions from regulators including the Hong Kong Securities and Futures Commission (SFC) in a bid to progress their listing. A source close to equity markets in Hong Kong said that these IPOs would continue to experience difficulties at the hands of regulators, citing concerns over the nature of their business model. According to the source, “With the [BTC] price dropping so much this year, there’s a lot of uncertainties over their business. If we cannot forecast their financials, how can we sell their IPOs?”

The expired application comes a matter of weeks after the SFC said was preparing to impose new licensing conditions on companies managing cryptocurrency holdings, “in light of the significant risks virtual assets pose to investors.”

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Hong Kong rolls out regulatory standards for crypto exchanges, funds

The Hong Kong Securities and Futures Commission (SFC) published a statement detailing the new regulatory standards set to come into effect for cryptocurrency investors and businesses. Concluding a process that began with draft proposals in October, the statement stipulated for the first time the precise terms fund distributors and asset managers will be expected to adhere to.

The proposals were drafted as a response to perceived market threats from the inherent leverage of investing in crypto through funds, as well as in response to the body of unlicensed crypto trading platforms doing business out of Hong Kong.

Acknowledging that crypto hasn’t yet posed a threat to financial security, the SFC described how the new standards, and future standards, would shape the future of the state’s cryptocurrency sector.

According to the regulator, “While virtual assets have not posed a material risk to financial stability, there is a broad consensus among securities regulators that they pose significant investor protection risks. The regulatory response to these risks varies in different jurisdictions, depending on the regulatory remit, the scale of the activities and their impact on investor interests and whether virtual assets are deemed financial products suitable for regulation.”

Lawmakers in different jurisdictions have taken dramatically different positions on cryptocurrency regulation, as regulators struggle to retrofit this emerging sector around existing finance and securities laws.

As the SFC explains in its statement, the current position in Hong Kong means many investors still end up in the hands of unregulated platforms, with none of the legal protections afforded by the SFC.

“Under existing regulatory remits in Hong Kong, markets for virtual assets may not be subject to the oversight of the SFC if the virtual assets involved fall outside the legal definition of ‘securities’ or ‘futures contracts’ (or equivalent financial instruments),” the commission noted, adding, “Therefore, investors who trade in virtual assets through unregulated trading platforms or invest in virtual asset portfolios which are managed by unregulated portfolio managers do not enjoy the protections afforded under the Securities and Futures Ordinance (SFO).”

The new laws will broaden the definitions of “futures contracts” and “securities,” in an attempt to bring a bigger share of virtual assets within the remit of the SFC.

This increased scope of supervision could ultimately lead to more investors and exchange operators requiring licenses, as well as providing a more defined regulatory structure for the sector.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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CoinGeek-sponsored Bitcoin BCH Miners Choice Summit happens in Hong Kong on November 2

When the August 2017 Bitcoin Cash hard fork took place, it did not really create a new coin. Instead, Bitcoin Cash (BCH) was the rebirth of the original Bitcoin, designed to stay to true to the Satoshi Vision (SV).

With Bitcoin BCH, the roadmap is for massive on-chain scaling by significantly increasing the block size, enabling fast transaction processing, and keeping transaction fees very low. The key BCH developer groups have had some differences about how quickly BCH should scale, and the dangers of developer groups constantly trying to experiment with proposed technical changes to the Bitcoin protocol.

CoinGeek-sponsored Bitcoin BCH Miners Choice Summit happening in Hong Kong

Now we have Bitcoin SV, the new full node implementation for Bitcoin BCH that will restore the original Satoshi protocol, keep it stable, enable it to massively scale, and allow major businesses to confidently build on top of BCH. By trusting the original design of Bitcoin rather than constantly changing it, Bitcoin SV will support global adoption, enterprise-level usage of BCH, and allow miners to earn more longer-term revenue.

To gain more insight about Satoshi Vision, as well as Bitcoin SV and SVPool, miners are invited to attend the CoinGeek-sponsored Bitcoin BCH Miners Choice Summit, taking place at The Harbour Grand Hotel in Hong Kong on November 2.

The dynamic half-day conference will feature the industry’s most exclusive guest speakers, including nChain Chief Scientist Dr. Craig S. Wright and nChain Group CEO Jimmy Nguyen, along with CoinGeek Mining’s Bob Yuan, one of the most respected mining professionals in China. More speakers will be announced soon.

Recently, Dr. Wright launched his personal initiative—the public Bitcoin BCH mining pool SVPool—to all public miners on the Bitcoin BCH network. SVPool represents BCH miners who support the Satoshi Vision and want to generate more long-term revenue. BTC miners who believe in Bitcoin’s original vision are also invited to begin mining BCH with SVPool.

Wright explained: “If you believe in Bitcoin’s original vision, you believe in Bitcoin SV and SVPool. For too long, developer groups have repeatedly tried changing Bitcoin. The original Satoshi protocol for Bitcoin does not need to be fixed. It has everything BCH needs to massively scale, support tokenization, smart contracts and other advanced features, and become the only global public blockchain. Just like the Internet has a stable protocol, Bitcoin needs a stable protocol so businesses can build upon a rock solid foundation rather than constantly moving sand.”

The CoinGeek-sponsored Bitcoin BCH Miners Choice Summit is an event not to be missed. Seats are limited, so best to RSVP now to RSVP@svpool.com to confirm your attendance at this iconic event.

Miners are also invited to take part in the CoinGeek Week Miners Day, happening during the CoinGeek Week Conference in London this November. The SVPool and CoinGeek Mining team will be on-hand to discuss how you can do your part in making Bitcoin BCH realize its full potential. Secure your seat today via Eventbrite for the four-day conference that’s shaping up to be the essential Bitcoin BCH conference this fall.

The Bitcoin SV project was created at the request of and sponsored by Antiguan-based CoinGeek Mining, with development work initiated by nChain. The project is also owned by the Antiguan-based bComm Association on behalf of the global BCH community, and the Bitcoin SV code is made available under the open source MIT license.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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