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The Coming Trade War and the End of the American Empire

Trump’s current policy is a well thought out plan to detach the United States from the rest of the world and bring about the end of the American Empire

Trump’s foreign policy involves withdrawing the United States and leaving East Asia to China, the Middle East to the Israelis and Saudis, and Europe to the Germans.  This will have the effect of ending the liberal internationalist world order that as existed since 1945, and reversing US foreign policy since 1918.

Trump’s policies are likely to be permanent because while they are strongly opposed by US policy elites, they are likely to prove extremely popular among ordinary Americans.  Once they come into effect there appears to be no political opposition or counter-ideology.

The notion of the United States pulling back from the world is extraordinarily unpopular in the policy centers of Washington D.C., New York City, and Silicon Valley, however, it is extremely popular among ordinary Americans.  If Trump loses in 2020, it will likely be to Democrats more aligned with Bernie Sanders than Hillary Clinton, and unless there is a massive popular movement in favor of interventionism, this is likely to be the end of American global leadership.

There will almost certainly be a trade war between the United States and China, but both sides will act to insure that this does not spill into a shooting war.

The economic policy makers in China are US-educated economists who are attempting to avoid the mistakes that the United States made in the 1990’s.  In the 1990’s, American jobs moved offshore to East Asia, which killed working class communities in the Midwest.  China is currently facing a similar economic transition as low-skill jobs are moving to Southeast Asia and ultimately Africa.  However, Chinese economic policy is extremely interventionist, and so China’s policies are to first *encourage* the movement of low-skill jobs to One Belt/One Road nations, while at the same time actively using state efforts to create new high technology jobs in industries such as solar, blockchain, and robotics.

The “Made in China” policy is simply non-negotiable as it is intended to prevent the hollowing out of Chinese industries that the United States faced in the 1990’s.

The trade war will have extreme impact on financial services and will cause financial services to move away from New York and San Franscisco to Asian centers like Hong Kong and Singapore.  Bitcoin is likely to replace the US dollar as the medium of exchange for trade.

The trade war will end the flow of US dollars to China, and without US dollars, there will be no “recycling” of funds into New York and San Franscisco.  This means that trade flows will stop between US and China, and be replaced with trade flows between China, Russia, India, and Africa.  Because of the lack of US dollars, some form of cryptocurrency will be the new settlement mechanism.  Bitcoin is likely to become the main settlement mechanisms.  As Hong Kong and Singapore become the new financial centers, it is likely that currency mechanisms based on the cryptocurrency based on the Hong Kong dollar and Singapore dollar will become important trading mechanisms.

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The ugly truth about bank accounts in Hong Kong

In an earlier post, I talked about why I taught that nothing will get done with bank accounts for tech companies in Hong Kong.  It turns out that the HKMA had a sharing session in which nothing got done, and I predict that after many working groups and meetings that nothing else will get done.

One thing that I do is that I like talking to a broad spectrum of people.  I’ve talked to people in law enforcement on this issue, as well as with “professional money movers.”  If you are already annoyed at the situation of tech companies not being able to get bank accounts, you will likely be more annoyed to know that “professional money movers” don’t have particularly large difficulty to get bank accounts, and most of them find bank accounts to be an annoyance but they get one in the end.

Here is why….

Bank accounts are highly unprofitable for banks.  Compliance regulations make them even more unprofitable, and banks would frankly prefer not to open any accounts.

A lot of the discussions are made with the assumptions that banks want to open bank accounts, that they want customers, and that the problem is to get rid of the barriers that prevent a win-win solution.  The problem is that that assumes that banks want to open accounts which they don’t.  In fact running a day to day business account is highly unprofitable for the bank.  The only reason why banks have bank accounts is so that they can cross sell services.  The dream of a banker is that after losing money from your checking and savings account, one day you will come in and want a property loan or credit card at which point the fees start rolling in.

The trouble is that with tech businesses, there aren’t really any products and services that a commercial bank can offer.  Tech businesses get their funding from angels and VC’s, and so there are no loans that the banks can offer.  Worse yet, tech businesses have employees that are pinching pennies, which make them terrible customers for banks.

This puts the fact that banks have been trying link accounts with terrible wealth management products in a different light.  Without *something* to justify the cost of an account, it’s hard for a bank to justify the cost of opening one.  Now in an era where bank accounts were unprofitable but cheap, you could justify it as charity.  But now every bank account is a potential time bomb.  Which gets to the next annoying fact…

The purpose of examining documents is not to catch the bad guys, but to protect the bank and intentionally make it difficult for *anyone* to open a bank account.

So one misconception is that banks look at documents in order to screen out bad actors.  In fact this is not true.  The trouble is that a business that is laundering money for criminal activity *looks exactly the same* as a business that isn’t.  Someone that wants to run money through a business can just take an existing business and become a silent partner.  Worse yet, it’s quite common for the underworld to run money through legitimate businesses *without the business being aware of it*.  Criminals can and do hack into a corporate network to route payments in a way that the business just sees some odd charges in their bank statement.

So *every account* is a time bomb for a bank, and the bank has no way of knowing which accounts are good and which ones are bad.  So why do they insist on a ton of documents?  It’s to protect the bank.  They know that there is no way of preventing a bad company from slipping through, so they want to demonstrate that *when* a bad company gets caught that they submitted a massive amount of documentation so it wasn’t their fault.

In addition, there is some benefit in making things inefficient for the bad guys, so that they can’t easily open a million accounts at a million banks, but the *only* way of making things inefficient for the bad guys is to make things inefficient for everyone.

This is also why banks now have massive bureaucracy that do nothing but shuffle papers.  They want to show that *when* there is a bad company, that the bank hired a million risk managers and AML/KYC people.  The fact that these people do nothing except to make work for each other still looks good when something goes bad.

This has a number of consequences.  The first is that corporate accounts particularly with tech companies are things that banks don’t like to do because in order to protect themselves, they have to examine the owners of the companies, and their owners, and their owners and so forth.

The second consequence is that banks won’t tell you want the criterion for getting your account approved quickly are, because once you know what the banks are looking for then it’s pretty easy to submit documentation that gets the account approved relatively quickly, and this makes it harder for the banks to reject accounts.  The trouble with all of this is that the “bad guys” already know what the rules are.

But wait, won’t regtech make this more efficient, well…

Banks have terrible technology infrastructure and “regtech” is useless….

One thing that you’ll find is that bitcoin exchanges do AML/KYC a lot better than banks, and that’s because bitcoin exchanges built the entire technology stack from scratch.  That means that a bitcoin exchange has an 360-view of the clients.  The management of a bitcoin exchange can pull up customer records with a button press, and can look at deposits, withdraws, and look at customer service information, and all of the documentation that has been submitted by the customer.

A bank can’t.  Banks don’t have integrated IT systems, and so if you send a bank a paper documents it gets buried in a filing cabinet and it’s not integrated with the banks other systems.  Because banks have such terrible IT, it turns out that regtech is useless since you can’t simply “bolt on” a new system into something that’s already totally broken.

For something to change, the bank has to spend tens and probably hundreds of millions of dollars to rearchitect their entire IT system.  They just don’t have the money to do this, and the authorization to do something this lies with the head office in Beijing, London, or New York, which gets to the final problem…

None of the decision makers are in Hong Kong or care about the Hong Kong tech industry…

The problem that Hong Kong with banking has has nothing to do with Hong Kong.  It all started when HSBC was fined a huge amount of money for helping very bad people in Mexico move drug money.  As a result the US and UK fined HSBC a ton of money and imposed conditions on the bank worldwide.

Hong Kong is particularly hard hit by these rules for two reasons, and we can compare these with Singapore.  In Singapore, the regulator has a great deal of power, and the CEO and senior management of the big banks live in Singapore, and so they can modify the policies to be friendly to Singapore business.  In Hong Kong, the regulator has very little power, and the people with real power don’t live in Hong Kong, and have no real interest in helping the tech industry here.  Hong Kong could die and it wouldn’t bother anyone at the international banks with any real power.

So let me predict what is likely to happen….

You’ll have a lot of conversations in banks with people that have no power, and they will be kind, friendly, and totally useless, because they don’t have the power to do anything.  What’s worse, because the people that you talk to at the banks are operational, they are so used that that they can’t even *think* about how to fix the problems.

As far as suggestions:

  • pull law enforcement and “street finance” people into the conversation – The big thing that I’ve done is I’ve talked with people in law enforcement and also people that do “street finance.”  It’s really important to get those perspectives into the conversation because the people that really do catch bad guys think that all of these banking rules are stupid.  Also it’s important to get people involved with “street finance”.  You want to be a nice white collar, middle class professional solution.  The trouble is that the banks think that you are a shady character and the lump you in with the underground financial world.  Get into that world.  You’ll find that the world of “street finance” in Hong Kong is where the real deals get made, and you’ll find that the people involved are honest, moral, ethical people that happen to run businesses that the professionals don’t like.  If you are in tech in Hong Kong, you are now part of that world, and it turns out that the people with real money in Hong Kong (i.e. the superrich) have more interaction with street finance people than you’d think.
  • Make it easy for businesses to function without local bank accounts
    • Set up government services so that you can go without a local HK bank account.  This involves setting up government services like grants and government payments so that they can be done with bank alternatives.  There are some bureaucratic details on how this can be done, and it’s tricky for political reasons, but the good thing is that everyone that can veto this project lives inside of Hong Kong, so deals can be made.
    • Make it easy for companies to function without a local HK bank account – This means setting up fast payments with Singapore and Taiwan, and also integration with banks in places like Gibraltar, Estonia, and Slovenia.
  • See if Beijing is interested in helping to fix the issues through Mainland banks – It is totally hopeless to get HSBC or Standard Chartered to help support Hong Kong technology.  It *might* be possible to put this onto the agenda of the Central Government so that they put “helping the Hong Kong tech industry” on the agenda of Mainland banks.
  • Provide information about street financial solutions – The thing about Hong Kong licenses is that all of them are for sale.  If you need a SFC license, a bank account or anything else, you can buy it in Hong Kong.  There is in fact a business for someone to recycle old companies in Cyberport and Science Park for bank accounts.
  • Play hard ball. What is going to have happen is with all of these working groups is that the people from the banks will just pass messages to the people with real power.  I want them to pass this message.  We are going into the new world of finance with or without you.  We are going to circumvent your systems, and make mincemeat out of your processes, because that’s what we need to do to stay in business.  You can either come up with solutions, or not.  I don’t care, because if you don’t come up with solutions, you are going to be dead in the new world that is being created.

The people involved in this process are well meaning and nice, and maybe too nice.  They’ll have dozens of meetings and position papers but nothing real has happened for the last few years, and I suspect nothing real will happen in the next few years.  Personally, I’m actually quite happy for lots of people to waste their time attending useless committee meetings that do nothing since it means that they won’t get in my way.

One final thing.  A lot of my views have to do with me working on both Wall Street and the money changers.  I’m pretty convinced that in the world of Hong Kong street finance, there is less criminality and a stronger sense of business ethics than there is on Wall Street, and once reason I like paper money is that I’m convinced that paper money in Hong Kong is a lot cleaner than the stuff that goes through the banks.

 

How to get a bank account in Hong Kong

The important thing to understand about getting a bank account is that you are dealing with banking bureaucrats that cannot think.  They are programmed to respond to certain ways given certain conditions, and they will get very confused if you give them a situation which they have not been programmed to handle.  They will ask for more data which will confuse them even more.

So in order to get a Hong Kong bank account, the easiest thing to do is to find someone that is based on Hong Kong have them set up a HK corporation with they being the sole owner.  When you go to the bank, they will ask you two questions “what is your business?” and “what will you use the account for?”  The answers are “computer consulting” (or “biotech consulting” or whatever), and you will use your account for normal business operations.  You will have more luck if you go to a bank that caters to local businesses (i.e. Hang Seng or Nanyang Commercial Bank).  You will also have more luck if the person opening the account is a Cantonese-speaker and is good at sales and marketing.

Once you’ve set up the bank account, then you build out the company.  You set up so that you have identical boards of directors, and also set up a contract between companies A and B.  You want to avoid ownership changes until everything is running.  At that point the bank will ask more questions, but unless something is really bad, they are unlikely to close the bank account.

This will work if you are running an “ordinary” high tech company.  Anything involving fintech is hard, and anything involving payments is really, really hard.

The alternatives is to open a bank account in Singapore.  It turns out that you can do banking transfers between Singapore and Hong Kong in two hours.  The other alternative is to just buy a dead company with a bank account.  The market price for a dead company is USD 30k.  The thing is that it takes about six months for the bank to notice and then if you are doing anything weird, they’ll close the account.  At that point you just buy another company.  One reason I get so impatient and sometimes angry at the system is that I spend a lot of time with professional money movers, and they know all of the tricks, so they’ll just go from company to company, and all of this bureaucracy is merely annoying.

One thing that someone in Cyberport and Science Park should do is to recycle dead companies.  If you are moving money and you buy a defunct company, then your account will get shut down.  If you are a Science Park biotech company that buys the assets of another Science Park biotech company, there is at least the possibility that the account will survive.

Things should get a lot easier over the next six months.  There are a number of crypto-solutions that are in the pipe.  All the tech is there, but they aren’t user friendly.

 

Comments on HKMA info sharing meeting on bank accounts

I was at an HKMA info sharing meeting on the problem with opening bank accounts.

Also by way of background, here is a paper on Hong Kong banking regulation

http://www.hkimr.org/uploads/seminars/229/sem_paper_0_173_goodstadt-paper060112.pdf

There were about 80 people there, and there was literally an inner circle of people sitting at the conference table and an outer circle of participants.  The format was quite interesting and gives in an insight as to how Hong Kong government works (or doesn’t work).

The Hong Kong has a philosophy of being passively non-interventionist, so instead of giving directives to the bank, the HKMA tries to moderate discussion between different groups.  In this case, it’s the tech companies versus the banks.  So the representatives from HKMA started by giving a few introductory notes on what they were doing to resolve the problem.  There was also a speaker from the HK government that mentioned that the issue of bank accounts was a major issue that was hurting HK’s competitiveness as a innovation hub.  Then you had people from tech associations talk, followed by individual tech companies, then you had a speaker from the banking association, and then individual banks.  In particular the big three banks, HSBC, Standard Charter, and BOC(HK).  The people that were representing the banks were all operational people in charge of setting up bank accounts.

The most surprising thing that I heard was something that illustrates the changing nature of HK politics, and it was that when the Hong Kong government speaker mentioned that the issue of bank accounts was a major problem because President Xi Jinping has made it a major national priority to have Hong Kong become an international innovation center, and the bank accounts issue was a major barrier.  Personally, I think this is significant because, I really don’t think that HKMA would have giving this issue as much priority as they did if it wasn’t for Beijing’s interest in the issue of HK’s as a innovation center.  So I think this is an example of how Beijing is playing a soft, mostly positive, but definite interest in events in Hong Kong.

On another note, I was present and so was another member of the bitcoin community at the invitation of Charles Mok, the IT representative, who happens to be a member of the pan-democrat political opposition.  If the people were simply chosen by the government, I don’t think that the bitcoin community would have been there.  One reason I mention this and I’m posting this in my blog, is that there is another conversation between Beijing and the moderate political opposition in Hong Kong, and one thing that I wanted to do was to show that having a “loyal opposition” is in fact a good thing for Hong Kong governance.  I also hate closed door meetings so that’s why I’m talking about this.

As far as the tech companies, you had the typical horror stories.  The interesting thing was that that you need an bank account to get an SFC license, but the SFC won’t issue you a license without a bank account.  One thing that I found interesting was that most of the people that were complaining were people new to Hong Kong, and so they were unfamiliar with the “local workarounds.”  They weren’t aware that there is a market in Hong Kong for dead companies with bank accounts or that most people just buy a securities license rather than apply for one.  One other thing that people mentioned (which is the one thing for which there may be action) is that banks were getting people to buy terrible wealth management products as a condition of getting a bank account.

I spoke up and I mentioned that I thought that the focus of the meeting was misplaced.  I think it’s hopeless to fix this problem, and that the objective should be to come up with services that allow businesses to bypass the banks, and also services that allow people to use bank accounts in other jurisdictions while still maintaining a presence in Hong Kong.

The response from the banks made me more confident that nothing will get done.  The focus was on streamlining the process with the hope (which I think is useless) of making it quicker for the banks to make a decision.  What I found frustrating but unsurprising is that no one addressed the fundamental issues that cause banks to behave in the way that they do.

The meeting ended with a summary of what the HKMA was doing.  People decided to form a working group, and it is my firm opinion that the working group will get nothing done.  It’s possible that the issue of banks forcing SME’s to by wealth management products to get accounts will be addressed.  The only situation in which something were to happen is that if somehow this issue gets a lot more political attention than I see being likely.

As far as the meeting.  I felt good.  Dealing with the Hong Kong government can be extraordinarily frustrating if you don’t have the right mindset.  But the way I do it is that I imagine that I’m in a Doctor Who episode, in which I’m a time lord stuck on a planet run by robots.  The regulators and the operational people at banks are robots.  They are literally programmed to do certain things and respond in certain ways.  I was trying to tell people about the cool technology and amazing things that you can do with time machines and spaceships, and you just get totally blank looks.  The robots are nice.  They are friendly.  But when you talk to them about spaceships and flying saucers (and bitcoin) it’s something that they just don’t comprehend, and its something that they simply can’t process.

The one thing that was on my agenda, was that I’m worried that by pushing a lot of the crypto activity off of the banking system, that it opens Hong Kong to systemic risk.  I mentioned that to a regulator and asked if there was anyone at HKMA that was looking into this, and he gave me the expected response, which is that they are looking at what other regulators do and adopting best practices.  Basically, it was like going to the middle ages, and telling some random person that you are afraid that your flying saucer will cause a metastable collapse.  It just didn’t compute.

One of the things that I found funny was how ironic some of the people were without realizing it.  For example, the position of the banks was that they could do their jobs better if the business gave them complete records of the business, which neglects the fact that businesses that haven’t been in operation don’t have records.  Also there’s the usual Hong Kong silliness when in talking about innovation the main attitude was “let’s copy other people.”  The notion that Hong Kong might just do something new and creative or that Hong Kong may have some unique issues is completely alien to the regulators here.

But as far as the deep reasons why nothing will get done…..

The basic fact of the matter is that banks don’t want to open accounts because every business account costs them money.  If something goes wrong, then the banks get massively fined.  On the other hand, banks don’t make money from business accounts.  Interest rates are zero, and if it’s so impossible for the banks to hand you a bank account, heaven help you if you want a business loan.  The only think that banks in HK really make money on is property loans and terrible wealth management products for people that don’t know better.

Someone said that it’s not worth penalizing 99% to catch 1%.  It’s worse than that.  AML/KYC simply does not catch any bad actors.  So it’s penalizing everyone to catch no one.  From the banks point of view, the purpose of the exercise is not to screen out bad people, but to make sure that bank has an excuse if someone bad slips through.  If the bank rubber stamps a bad person, then they get fined tons of money.  If they make people give them 100’s of pages of documents, then if something bad happens, they can tell the regulators that they made the applicant go through hell so they shouldn’t be fined.  The fact that the process does not in fact catch bad guys is irrelevant.

The thing about the politics of banking is that too much documentation is never enough.  You can always request more documents, and the purpose of the documentation is not to do anything useful.  It’s just to protect the bank in case something goes bad.  It’s always going to take forever to make a decision, because you have an army of people whose job is to make sure that nothing gets done.

The other thing that people don’t understand is that it’s not bad businesses that banks are afraid of.  It turns out to be impossible to tell the difference between a business that is being used for illicit purposes, and the bad guys have an army of hackers that can hack accounts of perfectly legitimate companies to push money through their accounts.

So if banks had their way, they wouldn’t issue any accounts at all.

There as also systemic issues.  The big one is that no one that matters cares about the damage this is doing to Hong Kong.  The reason Singapore and Taiwan banks have a better balance is that their CEO’s live in Singapore and Taiwan.  The people that make the final decisions for the big global banks are outside of Hong Kong.  They are responding to mandates from the US and UK, and if this kills business in Hong Kong, then so be it.

Technology will not help and regtech is useless.  The issue is that banks have IT systems from the stone age.  One person mentioned this frustration at having to enter the same information online to a bank that he submitted on paper earlier, and that’s because different parts of the bank simply don’t share information.  To fix this would require tens if not hundreds of millions of dollars and some senior directives from C-level officers, and those people simply do not live in HK.

So what’s the solution?

  • I’m working with people that are coming up with some really cool tech.  It’s still a bit immature, but it should get rolled out over the next year.
  • More networking between startups and connection with local businesses.  It turns out that most banking issues have “local workarounds” and getting startups to talk to each other and local businesses will help them figure out these workarounds.
  • Remove need for banks – It turns out that most banks are simply payment processors, and the HK government could to quite a bit to help remove the need for a bank account.  The big thing is to allow SVF’s and stored value cards to be used for disbursing and paying government grants.
  • Integration with international systems.  We need to make it as smooth as possible to integrate with bank accounts in Singapore and Taiwan.  Also bitcoin can be used as a bridge technology

But this has a happy ending.  There is a parallel banking system forming not just in Hong Kong but worldwide, and one thing that is good is that people will be so busy in working groups that don’t solve anything to be able to block any of the cool stuff.

So back to the flying saucer……

 

 

Napoleon Rise and Death

Trying to figure out how all of this impacts finance and money.

Mining motherboards notes

Some random notes on mining motherboards

First of all, I’m an open source geek so I use only AMD cards, because AMD is trying to put together an open source stack and it turns out to be really useful in this situation.

I had problems with more than eight RX570 cards on my linux machine using the  ASUS B250 Mining Export motherboard.  However, I found the people from AMD extremely helpful and after some back and forth

https://lists.freedesktop.org/archives/amd-gfx/2018-February/019100.html

They were able to track down the problem to a BIOS issue with the ASUS motherboard, but at that point I’m stuck, because even though I know what mailing list to contact in order to get to the AMD engineers, I don’t know who to talk to at ASUS.

So I to test out if this is the problem, I wanted to get a new motherboard.  I went to Wai-Lai computing in Wai Chai and wanted to get an ASRock 13 card motherboard.  The manager there told me that people had been complaining about BIOS issues for that motherboard and suggested the GA-B250-Fintech board.  Information like this and the fact that I can get the board immediately is why I buy a lot of my parts from a retailer even though I had to pay about USD 30 more than mail order.

My first efforts at getting multiple cards running maxed at 6.  However, it wasn’t clear whether it was a cabling problem or not.  One thing that is really nice about the ASUS motherboard is that it has this power-on display of what cards are working, whereas I didn’t know if there was a limit in the motherboard or if my cabling was bad.

So I reinstalled everything back into the original ASUS motherboard, got everything working then very careful switched back to the new motherboard making sure that I didn’t disturb the cabling.  And I was able to get 9 cards working.

Also I got my power bill and was pleasantly surprised, because it turns out that my electric bill wasn’t higher.  The reason for this is that it’s been cold in Hong Kong, so the power that is going into my ethereum mine would have gone into space heaters otherwise, I end up getting coins for essentially free.

Sometime next week, I’ll head up to Shenzhen to buy some more mining cards.  The reason I want to buy those in Shenzhen, is that they’ll sell you generic no-brand RX570 cards, whereas the retailers in HK (who cater to gamers) will only sell branded products.  It does turn out that the branded products are noticeably higher quality than the generic cards and you can overclock branded GPU cards to get higher hash rates, but the cost factor works for generics.  For motherboards its different, because different brands have different nice features.

One thing that I liked about the Gigabyte boards is that they have a nice power button switch that makes things a lot easier.

Compliance Chinese style with wechat and bitcoin

So I do a lot of OTC p2p bitcoin transactions with Mainland China, and it turns out that I do all of my transactions on wechat.  People might find that odd.  Why are you transacting on wechat if it is being monitored by the Chinese government.

The funny thing is that I do all of my OTC p2p CNY bitcoin transactions on wechat *because* is it being monitored by the Chinese government.  The thing about the Chinese government is that their first reaction if you are doing something they don’t like is not to send you to jail.  The first thing they will do is to “ask nicely” for you to stop.  Someone, I may get a message from wechat administration asking me nicely to stop doing what I’m doing, and at that point I’ll stop, but the fact that wechat is being monitored by the Chinese government gives them the ability to see what I’m doing, and to object to it if they want.

But you need multiple channels.  Suppose for example, I was moving bitcoin for the Dalai Lama.  Now the Dalai Lama is not Beijing’s favourite person, so if I were to talk about that I’d use telegram or signal.  Now I’m sure that Beijing could crack that if they wanted to, but it’s not something I’d want to immediately broadcast.

It’s part of a weird regulatory system.  I’m sure that everything that I do on google and whatsapp is being monitored by the NSA, but under US law, the US government has to pretend not to be listening in, and they can’t use that information for anything else.  Whereas in the case of wechat, the Chinese government is not hiding what it is doing, and they are under no legal restrictions as to what they can do with that information.  It turns out that this makes it easier to set up a financial services company.  In the case, of the US, they have to put in new mechanisms to do compliance on bitcoin which can get extremely expensive.  In the case of China, because they are already monitoring chat for other reasons, you can use that mechanism for compliance monitoring.

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