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Currency and control: why China wants to undermine bitcoin | China

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Few would dispute that China’s recent crackdown on cryptocurrency trading and mining has contributed to the recent plunge in the value of bitcoin and other cryptos.

But while the argument rages about whether the volatility of cryptos is a sign of fundamental weakness or merely a bump along the road, the initiatives coming out of Beijing are being seen by experts as a sign of China’s attempts to incubate its own fledgling e-currency and reboot the international financial system.

The People’s Bank of China aims to become the first major central bank to issue a central bank digital currency. While the PBOC’s counterparts in the west have taken a more cautious approach, it has held trials in several major cities including Shenzhen, Chengdu, Shanghai and Hangzhou.

The benefits of an e-currency are immense. As more and more transactions are made using a digital currency controlled centrally, the government gains more and more ability to monitor the economy and its people.

The rollout is also seen as part of Beijing’s push to weaken the power of the US dollar, and in turn that of the government in Washington. China believes that by internationalising the yuan it can reduce its dependence on the dollar-dominated global banking system, just as its Belt and Road Initiative is building an alternative network of international trade.

Alarm in western governments is such that the threat posed by the digital yuan, which could put China out of reach from international financial sanctions, for example, was discussed at last month’s G7 meeting.

But another crucial motivation is the increasing alarm in Beijing at the size of the crypto industry in China, where a huge amount of cryptocurrency was being “mined” until the recent crackdown.

The threat of an unregulated alternative monetary system emerging from blockchain technology is a clear and present danger to the Communist party, according to observers.

Jim Cramer, a former hedge fund manager and CNN business expert, said the government in Beijing “believe it’s a direct threat to the regime because … it is outside their control”.

Seen from the perspective of central banks, cryptocurrencies are a threat to financial stability, argues Carsten Murawski, professor of finance at the University of Melbourne in Australia, and if digital currencies are to be developed then authorities want control.

“All central banks want to control them – the PBOC, the US Federal Reserve, the European Central Bank,” he says. “They have no interest in parallel currencies floating around. Some countries may not be too worried but in China it could be more of a concern.”

On Thursday, Fan Yifei, a deputy governor of the PBOC, said China was concerned about the threat posed by these digital currencies developed outside the regulated financial system. “We are still quite worried about this issue, so we have taken some measures,” Fan said.

The value of bitcoin shot up to a record high earlier this year of almost $65,000, having been worth less than $10,000 in the middle of last year, sparking a frenzy of interest in the cryptos as an investment to hedge against more traditional assets such as stocks and bonds. Comments by Elon Musk, the boss of Tesla, that he would not allow bitcoin to be used to buy his cars added to the volatility and it is now trading in the low $30,000s.

But that has also attracted the attention of authorities such as those in China concerned about the largely unregulated market.

“In many countries it is completely unregulated – it is the absolute wild west,” says Prof Murawski, who also pointed out that there might not be the usual legal avenues to pursue if people thought they had been defrauded.

“So that’s another reason to control cryptos: to protect the consumer. Uninformed investors could lose a huge amount of money.”

A technology trader advertises high-speed computers that can be used for cryptocurrency ‘mining’ in Hong Kong
A technology trader advertises high-speed computers that can be used for cryptocurrency ‘mining’ in Hong Kong. Photograph: Alex Hofford/EPA

In China, the rollout of the digital yuan has speeded up this year in tandem with the outlawing of crypto trading. In May, the PBOC banned banks from doing business or providing accounts for anyone trading in cryptocurrencies. It was followed by the outlawing of bitcoin mining in several provinces, including Sichuan. On Tuesday, China’s central bank warned companies against assisting cryptocurrency-related businesses as it shut down a software firm over suspected involvement in digital currency transactions.

Fan said on Thursday that cryptocurrencies such as bitcoin had become “tools for speculation” and were bringing potential risks to financial security and social stability.

Online businesses have been allowed to prosper in China, but the government in Beijing has been ruthless in cutting them down to size if they appear to be getting too big to control. Jack Ma, the high-profile billionaire founder of the Alibaba empire, disappeared abruptly from public view for months last year, and his company was fined and ordered to downsize. Regulators have also targeted tech giants Tencent and Bytedance, the respective parents companies of WeChat and TikTok, and this week ordered ridesharing app Didi be pulled from app stores and launched an inquiry.

Dong Shaopeng, a senior research fellow at Renmin University of China in Beijing, said some online industries such as cryptocurrencies had reached an “alarming” size.

“It’s time for the government to block such transactions from capital sources, so that money will stop flowing from real industries to those transactions,” Dong told the Global Times.

Prof Murawski says yet another reason why China wants to clean up the cryptocurrency business on its own patch is the possible threat to the electricity system.

The process uses a huge amount of electricity and has tended to be set up in areas where cheap power is available. In China that has included Sichuan, which benefits from abundant and cheap hydro-electric power. But as profits rise thanks to the popularity of cryptos, governments may becoming less willing to allow miners to accrue huge benefits from a system that uses so much electricity it can threaten the stability of the power grid.

The crackdown on cryptos is not limited to China. Britain’s financial regulator said last month that Binance, one of the world’s largest cryptocurrency exchanges, cannot conduct any regulated activity and issued a warning to consumers about the platform.

But cryptos remain an extremely attractive asset for many investors who see nothing to fear from China’s crackdown and that mining will simply migrate to other more accommodating jurisdictions with little impact on the market.

Michael Saylor, co-founder of the business intelligence company MicroStrategy and one of cryptos’ biggest cheerleaders, recently bought an additional 13,005 bitcoins for roughly $489m at an average price of $37,617 per coin. And the Silicon Valley venture capital firm Andreessen Horowitz just launched a $2bn crypto fund and announced it was “radically optimistic about crypto’s potential to restore trust and enable new kinds of governance”.

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We speak to Purism’ CEO about the Librem 5 USA smartphone • The Register

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Interview In June, Purism began shipping a privacy-focused smartphone called Librem 5 USA that runs on a version of Linux called PureOS rather than Android or iOS. As the name suggests, it’s made in America – all the electronics are assembled in its Carlsbad, California facility, using as many US-fabricated parts as possible.

While past privacy-focused phones, such as Silent Circle‘s Android-based Blackphone failed to win much market share, the political situation is different now than it was seven years ago.

Supply-chain provenance has become more important in recent years, thanks to concerns about the national security implications of foreign-made tech gear. The Librem 5 USA comes at a cost, starting at $1,999, though there are now US government agencies willing to pay that price for homegrown hardware they can trust – and evidently tech enthusiasts, too.

We first wrote about the Librem 5 smartphone in 2017, considering it a privacy-centric device with a Linux OS. The Librem 5 USA, as noted, tries to use American companies with US fabrication “whenever possible.” It has a 5.7-inch 720×1440 screen with 3GB of RAM, 32GB of storage, and a user-replaceable 4,500mAh battery.

The goal is to produce a phone that can be trusted from the hardware to the OS and apps, something that Apple and Google have become vocal about, too.

The Register spoke with Todd Weaver, founder and CEO of Purism, about how things are going.

Weaver said Purism is about two weeks away from actually holding stock and selling phones, which isn’t something the company, which began with crowdfunding, has previously had to do. In the past, people have pledged funds with orders, and it has later fulfilled them; now it’s building inventory in anticipation of sales.

“We’re actually transitioning to holding stock and pushing sales,” he explained. “We’ve never had to do that before. We’ve never had to do outbound sales.”

The phone, to start at the hardware level on up, all the way to the operating system, is our manufactured hardware

Previously, said Weaver, the company’s growth has been a result of inbound requests for its products based on the material it has published about its projects.

“The phone, to kind of start at the hardware level on up, all the way to the operating system, is our manufactured hardware,” said Weaver. “It runs on a CPU that is not normally in phones.”

That would be a quad-core Arm Cortex-A53 i.MX8M running at 1.5GHz. Weaver said Purism isolated the device’s baseband modem from Wi-Fi and Bluetooth “so that you can actually turn it off with a hardware kill switch. That basically becomes the ultimate in security.”

A key thing to realize here is that baseband modems are effectively small computers running in handsets and handle the cellular communications; if a modem is compromised or made to run rogue firmware, it can potentially take over the rest of the device, hence Purism’s desire to isolate it, if the user so wishes. In fact, it has three hardware kill switches: one to cut off Wi-Fi and Bluetooth, one for cellular, and one for the microphone and cameras. All three will cut off GPS, too.

The main printed circuit board assembly (PCBA) is made by Purism in the US, and its microprocessor, from Dutch semiconductor maker NXP, is also made stateside.

The chip, Weaver explained, “is normally in airplanes, in commercial-grade devices, and in cars. It’s a quad-core CPU. But the reason we had to do that was we wanted to properly isolate. So in every other phone that’s made, the baseband modem – the cellular modem – is attached to memory and CPU. Fundamentally the carriers have firmware access that’s lower than the operating system.”

To make the phone secure, Weaver said, to protect privacy and individual freedoms, Purism had to consider security at the hardware level and move up the stack.

“There are all sorts of ways that has to be solved,” he said. “We solve it from the hardware, software, applications, data, and even services.”

The point, said Weaver, is to be able to just take the device and have peace of mind and control over your own digital life.

“We started in 2014, initially just crowdfunding laptops,” said Weaver. “My goal was to produce phones. But I knew that I had to increment through because we had to show that we can manufacture devices. We can do hardware, software, and services. Our model is very similar to Apple in that regard – we produce hardware and we have an operating system that’s married to it, so that it works.

“And then we also include services that fully respect you. If you had an iPhone or an Android phone and a Purism phone like Librem 5 sitting all next to each other, the iPhone will leak probably about three gigabytes of data without doing anything. Android devices are worse. Ours will leak exactly zero bits – nothing is sent without your explicit interaction, to make a request for weather information or browsing the web.”

Research last year suggested Android and iOS beam back telemetry to base even when users opt out of these transmissions, and a complaint was raised in 2020 over what appeared to be Android’s mysterious wireless data transfers.

While working toward phone manufacturing with the release of the Librem laptop, mini PC, and servers, Weaver explained his company was refining PureOS, its Linux distribution. “It’s our operating system that doesn’t have any mystery code in it,” said Weaver. “It’s all the source code, from the bootloader on up.”

Librem 14

Purism’s quest against Intel’s Management Engine black box CPU now comes in 14 inches

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Purism, said Weaver, has been working on modifying the PureOS Linux kernel to conserve energy when idle.

“A lot of the things Android initially did to Linux, we are doing to mainline Linux, so that we can actually have these things idle down better,” he said. “Basically, it’s a better way to do nothing.”

He also said the processor tends toward the toasty side. “We pushed really hard with NXP, modified a bunch of Linux kernel development, so that we could get that cooler. It’s just that CPU runs hot. The next iteration, we’ll be using probably I.MX9 … that’s still probably two years away.”

Weaver also said some thought is being given to the possibility of soldering the currently modular modem in place, which would allow for thinner devices and would please government agencies that see a removable component as a security issue.

Asked what sorts of things are possible with a Librem phone that Android and iOS devices don’t offer, Weaver cited the way tethering works. Mobile providers often charge extras for tethering, but with a Librem 5 phone data is just data. He also pointed to disk encryption with user-controlled keys and chat applications that can handle multiple protocols, such as SMS, MMS, XMPP, and Matrix.

For people who want an alternative to Android or iOS, Weaver said it’s an easy sale. “I almost have to back them off to say that, you know, not all your apps are going to run there,” he said. “It’s got calls, text messaging, browsing the web, a calculator, but not Snapchat.”

It’s got calls, text messaging, browsing the web, a calculator, but not Snapchat

Given the benefit Apple and Google get from their respective app stores, it’s not surprising that Purism is trying to deal with what Weaver calls “the App Gap” – the vast number of mobile apps not available on PureOS at the moment.

“Initially, we developed a lot of the core applications,” said Weaver. “We also wrote a library that allows for all the existing GNU/Linux-based applications to shrink down and run on our mobile phone. So by doing that, you don’t have to write a new application, it’s just include our library, and it will now work on the phone.”

That takes some effort, Weaver conceded, and Purism has produced documentation and helped Linux developers adapt their existing apps.

Purism is also enhancing its PureOS Store by partnering with a group that’s funding Interledger, an open payment network federation system.

“We’re actually going to be adding to PureOS Store, which is equivalent to Apple’s App Store or Google’s Play Store, where we allow for people to charge a subscription or charge for an app,” said Weaver. “And then we also have the ability to pay bounties even, for apps that are really needed that aren’t yet developed. So basically, the solution to fill the App Gap is cash.”

“You have to incentivize developers by ‘Hey, you can get paid,'” he elaborated. “The ecosystem grows and also actually puts money towards that effort. Our business model – by selling hardware with high enough margin, having services that are attached – allows us to basically reinvest to fill the App Gap.”

Privacy has always been a tough sell in the tech industry, at least in a mass market context. But over the past decade, the Snowden revelations about the extent of government information gathering, constant privacy scandals, the online ad industry’s unrepentant intrusiveness, pushback against Big Tech and surveillance capitalism, and the always sorry state of data security have buoyed interest in privacy. Add to that trade tensions with China and the supply chain nationalism that has followed, not to mention competition and privacy regulations emerging in the US, UK, and EU, and it looks like an opportunity.

“We’re not make-or-break off any one of those issues,” said Weaver, “but by fundamentally targeting civil liberties, individual freedoms, and privacy rights, then all of those things come out, and as they do, we see an influx of sales.”

“We have devices in every letter-agency in the US and some governments from outside the US,” said Weaver. “And those devices can vary from air gap laptops, to phones and even phone service.”

Weaver declined to discuss Purism’s financial situation in detail, but said the Librem 5 crowdfunding campaign raised $2 million.

“Since then, we’ve grown by triple digits year over year and even during COVID-19, we had a growth year,” he explained. “So overall, our sales have continued to increase. And we’ve grown mostly from revenue, but we’ve also taken on north of $12 million in investment.”

Weaver said the total available market is huge – billions of people have cell phones.

‘When you’re looking at somebody who cares about privacy rights, or they care about ‘I don’t like Big Tech,’ or ‘I don’t like the duopoly a mobile phone the space,’ or ‘I don’t like the intrusion,’ or I would like to advance civil liberties,’ every one of those areas is a potential customer,” said Weaver. “And those areas are immense. So we have not had a demand problem. We have had a supply problem, from parts to actual availability.

“We lost probably about two years on specific parts to actually manufacture this device in the US. China still has a shortage. We’ve never had that lack of interest. Once we get to the point of actually holding stock, then we’re going to be able to resume promoting.”

Soon, then. ®

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This start-up is offering stressed techies the chance to switch off at its cabins

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Slow Cabins is coming to Ireland and aiming to tap into the trend for low-impact, sustainable, digital-free tourism.

A hospitality rental company targeting techies who want to digitally detox is preparing to welcome its first guests in Ireland.

Founded in 2017, Slow Cabins seeks to offer people the opportunity to spend time away from their tech lives in relaxed, remote and eco-friendly surroundings.

It is currently taking bookings in Ireland and will open its first cabins here from 1 August. As well as Ireland, the start-up has operations in Belgium and the Netherlands.

All of its cabin locations are secret to purposely encourage guests to switch off and detox from their day-to-day stresses. Guests book their cabins without knowing the exact location, but all cabins are located within a two-and-a-half hour drive from major cities.

Within about two weeks of the trip, guests receive details with the exact location of their cabin. Even then, they may have to park their cars and hike to get to their accommodation.

The idea behind Slow Cabins comes from low-impact and sustainable tourism. Cabins are equipped with queen-sized beds, log burners, solar panels, dry toilets, fire pits, grills and large windows. Each cabin is powered naturally by sunlight and water.

“Recent European studies show that our resilience improves and stress levels decrease by up to 70pc after a stay in nature,” said Slow Cabins Ireland director Matthew Parkinson.

“Getting away from it all brings peace, energy and a sense of perspective. And that’s where Slow Cabins have an interesting role to play in a fast ‘always-on’ society. Profit is not our only goal, but rather a means to create more positive social and environmental impact,” he added.

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Best podcasts of the week: Sam Smith charts 40 years of progress on HIV and Aids | Podcasts

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Picks of the week

A Positive Life: HIV from Terrence Higgins to Today
BBC Sounds, episodes weekly from 1 Jul
Sam Smith presents this series about the legacy of Terrence Higgins, one of the first people to die of Aids in the UK. The opening episodes tell the story of Terry, “the swashbuckler of life”, with London friends sharing their grief and confusion at his death. There’s optimism, too, as Smith hears from those who fought to make treatment available, and those living with HIV 40 years on. Hannah Verdier

The Last Bohemians
Widely available from 6 Jul

LA’s unsung heroines of rock’n’roll get their moment in the spotlight in the new series of Kate Hutchinson’s fierce female-applauding podcast. As always, the more offbeat characters are the best, starting with Angelyne, the “billboard queen” and hustler. Punk widow Linda Ramone and surrealist Penny Slinger are also coming up. HV

Dear Poetry
Audible, episodes weekly

Luisa Beck believes in the healing power of poetry and she’s spreading the love in a new podcast, with writers suggesting soothing texts to solve people’s problems. At one memorable point, author Luther Hughes gives a 21-year-old looking for love a poem with a powerful message: “You are that bitch – it’s gonna happen when it happens”. HV

Project Unabom
Apple Podcasts, episodes weekly

Notorious serial bomber Ted Kaczynski was the subject of an 18-year manhunt, and this podcast looks at what happened in that time. Host Eric Benson recalls Kacynski’s threats to stage more attacks if the Washington Post didn’t publish his manifesto, and shares interviews with a Dungeons and Dragons club that became the FBI’s initial suspects. HV

Algorithms
Audible, all episodes available

Comic Sadie Clark creates a podcast from her Edinburgh show – once called a “bisexual Bridget Jones for the online generation”. It opens with main character Brooke’s mum (Alison Steadman) spying explicit photos of her online. One breakup later and she’s using the dating app she writes the algorithm for, with pleasingly clumsy results. HV

There’s a podcast for that

Kristin Davis, Sarah Jessica Parker, Cynthia Nixon and Kim Cattrall filming Sex and the City: The Movie in 2007.
Kristin Davis, Sarah Jessica Parker, Cynthia Nixon and Kim Cattrall filming Sex and the City: The Movie in 2007. Photograph: James Devaney/WireImage

This week, Hannah Verdier chooses five of the best TV companion podcasts, from Dolly Alderton’s Sex and the City show to a Scrubs rewatch with stars Zach Braff and Donald Faison.

Obsessed With …
The BBC’s companion series to talked-about shows including Killing Eve, Peaky Blinders and Normal People is always high quality. Line of Duty brought out the big guns with Craig Parkinson, Vicky McClure and Martin Compston all giving their theories ahead of the big reveal, while Sophie Duker secured Michaela Coel for the finale of I May Destroy You. But watchalongs don’t always need high drama, as Evanna Lynch and Riyadh Khalaf proved as they bravely tackled the slowly shifting quadrangle of Conversations with Friends.

Sentimental and the City
If you initially had problems with And Just Like That’s faux-wokery but then grew to love it like a Botoxed old friend, Caroline O’Donoghue and Dolly Alderton hear you. These are women who know their stuff, with O’Donaghue uttering the words: “I don’t like the look of Big on that Peloton and I’m worried” after seeing just the trailer. Their Sentimental Garbage miniseries on the Sex and the City sequel is a place where debate about the divisive depiction of ageing, sexuality and diversity sits perfectly with lighter moments, like giggling over Charlotte’s robot lines.

Squirrel Friends: The Official RuPaul’s Drag Race Podcast
There’s not exactly a shortage of RuPaul-related pods out there, but this one comes from inside the Drag Race community, with hosts Loni Love and Alec Mapa who’ve been there and done the guest judging. Cackling and spilling of the hottest tea comes as standard as they recap All Stars season seven, dissecting all the entrance looks, performances and personalities. Their love for RuPaul never waivers, as they dish out compliments, one-liners and behind-the-scenes gossip after every episode of the hit show.

The Stranger Things Podcast
All-American father-daughter duo Addi Darnell and Darrell Darnell gently mock each other while going into the intricacies of the disturbingly lovable drama in podcast episodes that are even longer than the latest instalments. Is “whet your appetite” a thing? What’s the difference between hellfire and heckfire? And why is Eddie still languishing in high school when his teachers must be so desperate to see the back of him? No fan question is left unanswered in the deepest dive out there.

Fake Doctors, Real Friends with Zach and Donald
With nine seasons of the US medical comedy-drama Scrubs settling into its new home on Disney+, it’s the ideal time to rewatch your favourite episodes – along with its two main stars . JD and Turk (Zach Braff and Donald Faison) are now six seasons into their recaps, screeching with laughter at on-set moments and fondly remembering the times they broke down and cried. Their friendship and unmistakable chemistry is as tight off-screen as on, but occasionally they stop nattering for long enough to welcome guests such as Heather Locklear and Seth Green.

Why not try …

  • The stranger than fiction story of “Ohio’s bear king”, complete with music from Grandaddy’s Jason Lytle in Beast Master.

  • A special dose of summer spookiness, with a trio of new episodes from Danny Robins’s Uncanny.

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