Unchained - Bobby Lee, CEO Of BTCC, On Why The Chinese Probably Aren't Using Bitcoin To Evade Capital Controls

Episode Date: March 21, 2017

Bobby Lee, CEO of BTCC, one of the world's longest-running cryptocurrency exchanges, talks about whether Chinese people are using bitcoin to evade capital controls, how bitcoin trading in China has changed since a government crackdown in early January, and how he came up with the idea for no-fee trading in the early days of bitcoin. Read the show notes. Other links: BTCC Mobi Bitcoin Foundation This episode was sponsored by OnRamp. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, everyone. Welcome to Unchained, a podcast engineered by fractal recording and produced by me, your host, Laura Shin, a Forbes contributor covering blockchain, cryptocurrencies, and fintech. Thanks for tuning in. If you've been enjoying this podcast, please tell others about the show. Share it on social media or with your friends who you think may be interested. Also, if you rate, review, and subscribe to Unchained on iTunes or wherever you get your podcast, that also helps get word out about the show. I'd also like to extend a big thank you to our sponsor, OnRamp. Branding isn't just a logo.

Your brand is the essence of who you are and what you offer your customers. OnRamp is a full service creative and design agency that provides its clients with concise and exceptionally designed branding, websites, and marketing materials that will resonate with your audience, affect its purchase decisions, and ultimately grow your business. You can learn more at thinkonramp.com. My guest today is Bobby Lee, CEO of BTCC, one of the most popular Chinese cryptocurrency exchanges. Prior to that, Bobby was an engineer at Yahoo and vice president of technology at Walmart in China. He is also the brother of Charlie Lee, the creator of Lycoyne. And for the record, Bobby and I go way back because we were in the same freshman dorm together at Stanford. Welcome, Bobby.

Hi, Laura. Thank you for having me. Let's start with the basics. What products and services does BTCC offer? Yeah, BTCC, we are a, what I consider a full spectrum, a Bitcoin company. We started as a BTC China in early 2011, as the very first Bitcoin exchange in China. And now we have the honor of being the longest running exchange in the whole world. We've been running for close to six years now. So besides offering an exchange, we also started offering an exchange.

we also started offering wallet services at the end of 2013. And we got into the mining pool business in 2014. And then we also launched a physical Bitcoin business last year in 2016. So we've done a variety of things in the cryptocurrency space, mostly focused on Bitcoin. And so what does that even mean, physical Bitcoin? Oh, physical Bitcoin is our BTCC Mint business, Basically, it's the idea of selling these tokens, the coins that we made out of titanium,

and they contain the actual private key of a Bitcoin account. So as you know, each Bitcoin account is actually just protected by the private key, and the address is just derived from the public key of the private key. So we embed the private key beneath a temper-evident holographic sticker. we stick that on the backside of a titanium coin, and that's the thing we sell. It's essentially a hardware wallet. It's a one-time-use hardware wallet where people can put funds in the Bitcoin, and then when they want to redeem it, they would peel the sticker and then just import the private key

into a Bitcoin wallet of their choice to move the Bitcoin's over to another address. So these are very popular Bitcoin collectibles that we've been selling since last year. Oh, interesting. Who's buying them? A lot of collectors are. We have a whole range of coins. Everything. The first ones we issued were the one bitcoins made a titanium. We went into larger denominations with a five Bitcoin. And eventually the biggest ones we sell are the blocks, the full Bitcoin blocks. One unique thing about BTCC Mint is that all the bitcoins in these collectibles are coming straight from our mining pool, meaning they're

brand new transactions. These are Bitcoin rewards from each block, each Bitcoin block. You know how we have the 12 and a half new bitcoins issued in each block reward today. It started with 50 bitcoins, you know, eight years ago. And then after the first block having went to 25, and then last summer via the second block having, now there's 12 and a half new Bitcoin issued in every block reward. So we sell these blocks that contain the full block reward plus the transaction fees. That's really interesting to create a physical momentum, I guess, of something that's created out of software. And I just wanted to clarify for listeners who maybe weren't aware of, you know, this thing about mining and the block reward. You know, what Bobby was referring to is that the software rewards the miners who essentially kind of like secure the transactions on the network by paying them in Bitcoin.

and when the software first launched, it was releasing 50 Bitcoin to a miner for every block of transactions that they would process. And roughly every four years or so that the amount of Bitcoin gets halved. So it went to 25 and then now it's down to 12.5. We have something very new and exciting. I'd like to tell you about, Laura, is a new wallet called Moby. We launched Moby this year. M-O-B-I-M-O-B-I.M-O-B-I-M-O-B-I-M-E. This is a new revolutionary hosted Bitcoin wallet that is global payments.

It natively supports all the currencies in the world. So in there, you could hold Bitcoin and also trade it and exchange it to U.S. dollars, euros, Hong Kong dollars, RimmingB, whatever currencies you want in the world, and even gold and silver. So it's a multi-currency wallet. And best of all, it's a mobile first application that uses mobile numbers. That means that you could receive and send money to anyone in the world with a smartphone, iOS, and Android. And all you need is a mobile phone number. So for people even don't have Moby, now anyone in the world can have a Bitcoin digital currency account.

And that's what the Moby vision is. We aim to be the first sort of bank ever to get a billion customers. We want to have a billion people in the world to have Moby Wall. And the idea is that we can all have cryptocurrencies in a pocket. It's a global world. We can move money to anyone we want and any currency we want. So please give it a try, moby.me. And what markets are your users in generally?

So it's a huge, it's really, even though we, as a company, BTCC started in China, I see ourselves as a global company. My vision for the company is that everyone will use Bitcoin, so we aim to provide the whole world. So our vision is that everyone would use Bitcoin. Our mission statement for BTCC is to provide the whole world with the most convenient and trustworthy digital currency services. And we truly think Moby is the next evolution of BTCC to help establish that. So Moby for the first time is a truly international global product rollout from BTCC. longer a China-only thing. You could say that our exchange and mining pool business were Chinese

businesses, but Moby is truly a global, global play. And we have it in over 15 languages on the App Store. So Moby today, you can download from the Apple iOS App Store. It comes in 15 different languages. It's got huge potential. I think this might be the killer app for Bitcoin. And the killer app for Bitcoin, we think, was hiding in plain sight, which is to use, to use Bitcoin as money. Think about that. No one has truly been able to use Bitcoin as money. What you're doing with Moby isn't that different from what Circle has been doing?

Well, I beg to differ. I think Circle, first of all, they explicitly pulled out of Bitcoin. So I thought that was... I mean, they're using it on the back end. But how many currencies do they support? I mean, what market do they use, you know? Yeah, you don't go buy Bitcoin there, but... Yeah.

So we explicitly support Bitcoin. Bitcoin in, Bitcoin out. You can even redeem your mint coins through MoBee. You can scan the QR codes or type in the private keys. And once you have the Bitcoin, Bitcoin is basically global currency. That's the point we're trying to make with Moby. Bitcoin is global currency. So we're not trying to hide it and use it in the back end.

I think that's just a marketing speak, right? But for us, Bitcoin is the real thing. It's a first-class citizen. It's the global reserve currency. So you could charge up money in Moby by putting in Bitcoin, by deposing Bitcoin into the Bitcoin address. There's a QR code. You can copy, paste the address.

You can send it to Moby. And you can always, at any point in time, move your money out of Moby. But once your money is in Moby, then it could be turned into any currency worldwide. It could send money to other people. So you can send, Laura, if you have relatives around the world, you can send them money. And you don't have to send them Bitcoin. You can send them money in the native currency. Or you can send in U.S. dollars.

Did you have to get banking partners in all these countries in order to do that? No. No. In the end, this is a cryptocurrency wallet. So all the money in there is all hedged by our team. So even though we promise you U.S. dollars, euros, and so on, in the end, in there, we store the money as Bitcoin. And then say when I cash out, how do I get the dollars? When you cash out, we would give you the equivalent bitcoins, bits, if you will.

One Bitcoin is a million bits. So let's say, Laura, I sent you $100. So in your mobile wallet, you would see $100. And all I have to do to send you $100 is to know your phone number. and I can send you $100 and you could download it and then reclaim it. And with that, $100 you want to cash out. You would say one day it would be integrated with Coinbase or even without integration, you could send it to Coinbase.

So you could then send the amount of Bitcoin's in there to Coinbase and then you sell it on Coinbase and you would get roughly $100. Oh, I see. Yeah. Okay. And because you know you have $100 worth of Bitcoin, you will no longer be rushed and eager to sell it on Coinbase. You might just keep the $100 in Moby and then spend it with your friends or other services

without ever cashing out. Does that make sense? Right. But it's being held in Bitcoin. Exactly. It's held in Bitcoin. So then the value goes up and down with Bitcoin. No, no, no.

For you, it's always $100. Regardless of Bitcoin price going up or down. Now, if you want for it to go up and down with Bitcoin, then you convert either some or all the $100 to $1 to Bitcoin. And then it will go up and down with Bitcoin. I see. Or if you prefer Euros or Japanese yen, you can convert to all those other currencies. Okay.

Well, this sounds really interesting. I guess we'll see how much it grows. Yeah. So I actually also then just wanted to ask you a little bit more about the mining when you say that you offer that as a service. You talked about it as a pool. How is that set up? Yeah.

So Bitcoin mining is an integral part of this industry of our ecosystem. So mining is the concept of, of, of, of using computer power, what we call hashing power, to contribute to the blockchain, building the blockchain and verifying transactions. And in reward, the Bitcoin network would reward miners with newly issued Bitcoin for their, for their services. So this has been going on for the whole eight plus years in the Bitcoin industry. And what we offer is a mining pool.

A mining pool is a service where we, We ourselves, BTCC, our company, we don't participate in the mining. We don't have any hardware. We don't invest any capital to do that. But because we have a lot of customers who do do that, we pull them together. And the idea is that they can get better pay out and better luck and more even distribution of their workload by joining a pool service. How it works is that it turns out Bitcoin's are mined on average of once every 10 minutes. So a block comes out every 10 minutes.

So six blocks per hour. 144 blocks per day. Now, you can only get rewarded if you actually find the block, quote unquote, find it. And the way to find it is to calculate the right hash number, the special hash number. And people all over the world with mining machines are sort of guessing at these different numbers. And once every 10 minutes, depending on the rate of difficulty, someone in the world would guess the right hash number. And by guessing the right hash number, they would get the full block reward. Now imagine if you're just a single miner somewhere, whether in China, United States or in Europe, your chance of getting it might be very slim. You might not get it once an hour and might not even get it once a day.

You might only on average get it once every five weeks. If that were the case, you would get 12.5 bitcoins every five weeks. But that's a huge volatility in terms of income. So what they do is these miners would join a pool. And then rather than getting the payout on actual, you would actually get a fractional payout on a per day basis and that smooths out your income. So that's the service we offer. And in return, we charge a small service fee for offering this mining pool service and then we actually put these new bitcoins into these Bitcoin collectibles from BTCC Mint. So it's a win-win for

everyone in the ecosystem. And so for your pool, what percent of the computing power on the Bitcoin network does that account for? Right now, it's about 8%, 7 to 8%, the mining pool ecosystem has changed a lot over the years. A few years ago, it was more centralized, but this year, in a good way, in the last 6, 12 months, the whole mining pool ecosystem in market share has been very decentralized. So it's a good thing overall for the Bitcoin ecosystem. And why has that happened? There are many players getting into the space.

So we hear about, so mining is very decentralized. There, you know, there talks about a lot of miners are in China. That may be true, but the reality is there are thousands and thousands of people mining, you know, with terra-hashes and petahash's equipment, spread out all over the world. A lot of it could be in China. A lot of it is elsewhere in the world. And this is what makes Bitcoin healthy, because as we all know, the virtue of Bitcoin is, it's decentralized global. nature in that no single, there's no single point of failure so that no single company, no single individual can succumb to government pressure or any other pressure that can bring

down the Bitcoin network. As you mentioned, you are running the longest running exchange in the world. So you have quite the history in Bitcoin. How did you get started into all this? Yeah. It's actually through my brother. As you mentioned earlier, he's famous for creating light coin. So he tipped me off on Bitcoin.

in early 2011. At the time I was with Walmart, I had my role in China with Walmart e-commerce. I had a good job. My brother told me about Bitcoin. At first, I was intrigued. And again, he heard it, I think, read about it from Slashdot or something the year before in 2010.

So by early 2011, I heard about it. And he was starting mining Bitcoin with his, you know, with a setup of GPU cards, graphics cards. And so I got my, I started mining in the summer of 2011 as well by, getting some graphics cards from him, from Charlie. So he was mining in California. I was doing some Bitcoin mining in Shanghai that summer of 2011. I mined about 20 bitcoins in all.

At the time, didn't think much about it. I remember setting up these machines, these graphics cards. Of course, it generated a lot of heat with all the power supplies and the fans and all that stuff. So it heat up a whole room in the apartment. So eventually I turned it up. off in the fall. But that was a lot of fun. We were just, you know, poking around. At the time, it was Bitcoin. It was a digital currency. You know, Bitcoin actually has not changed in the last few years at all. It's still what it is in terms of the essence of it. But truth be told,

at the time in 2011, six years ago, I didn't read, I did not fully understanding, fully comprehend the impact and the fundamentals of Bitcoin, which is why it took me a long time before I actually was willing to put my own money to buy Bitcoin. So I didn't actually touch Bitcoin until 2013. That's when I decided, after I left Walmart, I decided I wanted to get a new career in something. And rather than go back to the traditional tech sector, I thought that I could do a startup. And in the back of my mind, I've always thought Bitcoin was intriguing enough to do a startup. I promised myself in the summer 2011. If I ever were to do a startup, it would be in Bitcoin. And that's why by the end of 2012, early 2013, I thought, hey, this might be the chance.

Let me come in and do something. And that's when I got together with my two co-founders in China to sort of take BTC China to a new level. So we agreed to cooperate. I came in as CEO and co-founder, and we raised venture money for BTC China. So we were actually the first company in all of Asia to get VC funding. So that was in the summer of 2013. And then of course, that whole year was a huge bull year for Bitcoin having seen the bull market in April of 2013. And then once again, a huge bull market run in the fall of 2013 going up to eventually, you know, $1,200 U.S. dollars per Bitcoin.

With Amex Platinum, almost every purchase made with your card can be covered with points, including new tastes, new fits, and virtually everything in between. That's the powerful backing of Amex. Conditions apply. Yeah, so let's talk about kind of those early days, you know, because here we are in 2017, for, you know, most of the last few years, China has been kind of a main hub of activity in Bitcoin. But what was it like back then in those early days, you know, were people hearing about it? and who were the people involved?

Yeah. So in the 2011 days, those were way, way early. Like it was just some software or something we're doing on the internet. Like I didn't even bother talking to anyone else about it. My wife was asking me, what's this? Why do you have this machine running? I was just, oh, you know, I'm just running some servers and stuff like that. So it didn't really talk too much about it.

It's only when I got serious about Bitcoin, you know, for my career. That's when I started talking to other people about it. So I distinctly remember in 2013, I was studying getting my EMBA degree at C-IBS out here in Shanghai. I remember in early 2013, I would ask my classmates. And I even ask people largely in a huge auditorium, like who has heard of Bitcoin. And it would be no one, like no one person out there has ever, ever heard of Bitcoin. And that's when I thought this is very interesting because it's a huge opportunity. It felt exactly like how the internet was.

You know, when I was at Stanford with you, Laura, in the early 90s, 1993, 94, no one has heard of the internet, right? Only the academics, only the really nerdy people had heard of the internet back then. So I thought this is an opportunity of the lifetime, is that the fundamentals were sound. I being, you know, having studied computer science myself, I understand cryptography. I understand the problem of double spending. And I intuitively understood the concept of the fact that this is a huge breakthrough for Bitcoin having solved the double spending problem for digital currencies, virtual currencies online. Because digital information is so easily copied, how can you have a currency where things are so easily copied?

Well, the solution was to have a global blockchain and have the blockchain keep track of the accounts movement of Bitcoin's back and forth. And then having proof of work as a way to guarantee. the blockchain, the longest blockchain. So all these things coming together is a tour of the force. It's really, really innovative. Like individually, every single component of Bitcoin has been done. You know, been there, done that. But collectively putting these pieces together to form a new concept of digital currency online,

that was a huge, huge invention, a huge innovation that I likened to the invention of electricity, you know, and the invention of computers. So in 2013 were other people in China kind of hearing about it or was it just really under the radar? It was way under the radar. So I started giving talks and talking to people about it. I remember we had a Stanford Alumni Club gathering and I dedicated a whole session to talk about Bitcoin. That was in, I think, May of 2013. So, you know, slowly, slowly, that was a breakout year for Bitcoin.

in China and worldwide. That's when the media started covering it about what is Bitcoin, you know, why is this even, why are we even talking about it? You know, the idea that, oh, there's a new digital currency, a new cryptocurrency, you know, people were still calling a virtual currency back then. Today, we know that the term virtual currency is a misuse of that name because Bitcoin is much more of a digital currency of digital cryptocurrency, cryptocurrency, cryptocurrency, unlike the virtual

currencies from the 90s and 2000s from the early days of the internet. And so when Bitcoin became kind of, when it broke

into popular consciousness here in the U.S., that was the same thing that happened in China there. Is that also the same time

when suddenly, you know, the vast majority of trading in Bitcoin was occurring in China? Yeah. 2013 was also

the year for the for the breakout in trading for Bitcoin. So we had we had always been the the very first and largest exchange in China and Bitcoin trading was was just in the probably let me try to think a few a few thousand bitcoins a day. And remember Bitcoin prices were much, much lower back then too. So that was in the summer and then we introduced zero fee trading in the fall and that's when the volume

started come up big time. So it was a gut-staffirmed. see move, the idea was to spur trading, actually. The idea was to spur trading was to sort of borrow from the internet model in the early days of giving out free email accounts and, you know, free news, you know, sort of the Yahoo days. The idea was to spur trading. It had implication on a revenue model, but I thought it might be a good thing to to actually give this thing a big injection. And I think it worked for the most part because we introduced zero fee trading in the least. late September, right before the October holidays. And then by October, we saw training volumes keep going up and up and up. And, you know, I can't say if it's causation or correlation,

but certainly that's also when the prices started coming up. From about, if I recall correctly, it's about $150, $1,000, $250, $300. And then, so that was like a three-month bull run from October all the way through December, went up to eventually to $1,200 U.S. dollars. And as we know, Chinese people are always looking for investment opportunities. So that was a fun crazy year when the Chinese people got interested. Well, they first got word of Bitcoin. They now, you know, there's this site online that now you could actually deposit money and trade these things called Bitcoin and actually make money.

So a lot of day traders came out of that. And it was very exciting to be part of that in 2013. And so at that time, were you making money then? the conversion into and out of yuan and then the trades within Bitcoin were free? Yes, we made money in other ways. We charged withdrawal fees for C&Y. So we made up for that. Yeah, that was a very fun year. And so, you know, we have these conceptions in the West about how there was just so much trading activity in China. But was it just kind of like a really rabid niche group in China that was interested in it? Or was it like, you know, the vast majority of

Chinese people were actually buying and trading Bitcoin or, you know, who was it attracting? Yeah. So certainly it was not all of China. That would be a very dishonest to say it was all of China. I mean, China has, you know, 1.3 billion people. Right. So it wasn't all of China. Now, I would say it's slightly more than a niche. So a niche, you know, whether you think it's 10, 15, 50 people, it's probably in the hundreds and thousands, in the hundreds up to a few thousand people. So it's not in the millions and tens of millions. Now, certainly I would say that millions of people heard about Bitcoin.

But as we all know, just because you hear about it, it doesn't mean that you're trading it. There's a huge, there's always a huge factor. Sorry, how do you say it? There's a huge drop-off rate. So you hear about it, and then the drop-off rate is like, 10th of the people who hear about it actually understand it. And the 10th of people who understand it actually go decide to want to take action.

And then of that, only a 10th of them actually do take action and end up being traders. Okay. But was there a particular profile of the type of person who, you know, took that step? Yeah, absolutely. Absolutely. The profile we saw were, you know, young men, you know, in their, in the 20s and 30s, in the 20s, mostly. These are the IT people, the people who are geeks and computer science people who understood the powerfulness of Bitcoin and the implications and who also may have had access to some capital. They would buy and sell and buy Bitcoin to hold.

There was also a narrative in the news about these old retired ladies, what they call Tama in China. It's a term where they are as a class of people, these mothers and grandmothers, who are retired, they have a lot of savings, and they would go out and make savvy investments in either gold, real estate, and now they caught onto Bitcoin. But that was more of a narrative that there's a huge Tama following who are investing in Bitcoin. But I think that was more fluff than reality. There might be in a few Tama, but certainly not an army of them doing Bitcoin investments. And then another thing that you often heard, or maybe it's still the case is that a lot of Chinese people were interested in Bitcoin because it enabled them to

evade the capital controls that limited how much money people could send out of the country. Was that something that you saw? Yeah, it's the capital controls issue is complicated. It's always been a topic. People always, always come and ask me about it. Like, oh, how do I use Bitcoin to evade capital controls? Excuse me. The, the, unfortunately, I don't think. I also have not seen that happen at any scale. You know, people may buy Bitcoin's on $100 or $1,000 to move around in the world. But we definitely have not seen any sort of evading capital controls in any large means,

anything in excess of $100,000 or a million dollars. And the reason is two things. One is Bitcoin is still very, very hard. Even to this day in 2017, Bitcoin is still very hard, you know, how to get an account set up in exchange. Where are these exchanges around the world? Which ones are trustworthy? How do you deposit money? How do you wire money over there?

How long does it take? And how do you buy the Bitcoins? And how do you move the Bitcoins out? How do you store the Bitcoins? How do you transfer to another exchange abroad? How to open an account over there and so on and so forth? So it's a huge huge hassle for the vast majority of the people. So I would say only the elite subset in the Bitcoin industry actually know how to do that

and buy sell Bitcoin across multiple exchanges worldwide. even myself, I have an account on BTCC, but I don't have any other accounts at any other exchanges. That's just a reality. So even I don't have the ability to do that. So the other reality is that if you look at China, China definitely has a capital control policy. The Ramin B is not a freely exchanged currency. And part of that is because China has built up a huge reserve of foreign currencies, approximately $3 trillion.

That's a little bit less than that now. But in any case, China is hugely concerned over the last year about this outflow of money. And so when people in China go change money from U.S. dollars to Chinese currency or from Chinese Rwembe to U.S. dollars at a local bank. When they do that at a local bank, it actually affects the currency reserves because the foreign currencies that are provided by the bank are basically held and controlled by the same. central bank who hold the foreign reserves. So for Bitcoin, it turns out there is no capital flight for Bitcoin because everything is neutral. And the lesson here is that when people buy even a lot, let's say they buy one million R&B worth of Bitcoin in China, the reality is they're buying it from someone who's selling the Bitcoin. So first of all, the buyer's money, the local

Rwimming B, would go into the account and the hands of the sellers. So the reality, so the the Rambi doesn't leave the country. So the Bitcoin is always in the cloud. These are Bitcoins don't have a geographic location attached to them, right? As we all know, Bitcoin's are held in Bitcoin accounts. Bitcoin accounts are protected by the private keys. So they're just all registered in the blockchain, which is global. There's no Chinese blockchain versus, you know, international blockchain versus American blockchain. So it's just one Bitcoin blockchain. So if you think about it that way, whenever there's a large Bitcoin transaction buying and selling, the money stays in the same country.

It's just changing hands between one person to another person in the same currency and the same banking system. And then the Bitcoin stay in the blockchain. It's just changing ownership and title of it. Right. But then what if the person exchanges their yuan for Bitcoin and then they open an account on Coinbase and then they cash out in U.S. dollars? And you know what I mean? Sure. Then obviously it's...

Sure. Sure. You absolutely right that they could do that. But my point is that when they do that, someone else is on the other side of the trade. It would be similar to someone else buying the Bitcoin. coins on Coinbase and then selling it on BTCC in China. You see, it's net neutral. Does that make sense?

I'm not arguing no one's doing it. I'm arguing it's all net neutral. Yeah, for the individual who's doing it, you know, they are able to have their holdings in, you know, what is, starts out as yuan. They're eventually able to convert those into some other currency. Sure. That's what trade is all about. If you think, if you come back to the idea of trade, global trade, that's a trade

is all about cross-border trade. So Bitcoin does engage in cross-border trade, but it's not like a massive export event or massive import event. It's all neutral. It's all trade neutral. That's a great thought. Let's just pause things right here to bring in an important word from our sponsor, OnRamp. The best companies in the world obsess about branding. Killer branding will transcend your company and strategically and competitively position you in the market. Done well, a remarkable brand will affect buyers and their purchase decisions and give your organization a voice that sets you up for the long-term success.

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at think onramp.com. I'm speaking with Bobby Lee, CEO of Chinese cryptocurrency exchange, BTCC. So one thing that's been in the news a lot in terms of, well, for Bitcoin people, has been some of the Chinese government's actions around the industry, particularly this year. So can you just describe for me how the Chinese government's attitude toward Bitcoin and cryptocurrencies has changed, you know, what was it when you founded BTCC and then how has it evolved since then? Yeah. So what we know in the industry is that Bitcoin is actually truly a sort of monetary financial

instrument. The reason is because it has the properties of money. It has the properties of a store of value. However, for the first time in history, we have a monetary money instrument. that is not actually issued and controlled by government. Even though gold is decentralized, but eventually governments co-opted it and used it as a base of money. So coinage and minting gold coins back, you know, for the centuries, right? Whereas today, Bitcoin is still untouched by government in the sense that no government authorities

have actually recognized Bitcoin as money or used, sorry, yeah, no one has recognized used Bitcoin as money and no one has so far expressed willingness to do so. So Bitcoin stands unique in that position. So this also says that central banks around the world are still refusing to acknowledge that Bitcoin is money or Bitcoin is at the same level as what we call the fiat currencies. And in terms of China, as with many other countries, you know, in the early days in 2011, 2013, it wasn't even on the radar. It's just this brand new sort of geek thing on the internet, you know, pretending to be money when it has no legal status. So that was the situation up through early 2013. And by the end of 2013, the PBOC got attention of Bitcoin.

And that's when the first sort of regulatory inklings came out. And in December, essentially, they stated that Bitcoin is actually a virtual good. And thus so, people are allowed to own it. People are allowed to trade it. You know, websites are allowed to offer exchange services such as BTC China, BTCC. However, because it's only a virtual good and not actually a monetary instrument, all existing financial institutions such as banks, third-party payment companies, insurance companies and so on, they are not allowed to touch Bitcoin.

So that was the sort of edict ruling issued in December 5th of 2013. So for the last four years, for the last, yeah, three and a four years, we've been running under that guideline. So unfortunately, the PBOC still has not issued any new update to that ruling since December 2013. Okay. But earlier this year, there were certain steps that they took, I guess regulators, you know, talk to several the exchanges about, I think it was maybe K-R-R-R-R-E. ICAML type things, which are know your customer anti-money laundering processes and maybe the fact that you guys were doing no fee trading. What were some of the talks that you had with them?

Yeah, I can't go into the details. Those are all privileged conversations. But it's true that early this year in January, the PVOC Central Bank, they had officials come visit us and many other exchanges, there started to be a renewed interest in the topic of Bitcoin and potentially regulating Bitcoin. So we're, you know, obviously, like you mentioned, the main concern was about the financial risks of trading in Bitcoin. You know, people, you know, if price to go up, people can make money or people can lose money, right, if prices come down. So there's a lot of concern there. There's also concern for money laundering. So we want to make sure all the exchanges put in the right best practices to prevent money laundering.

So a lot of anti-money laundering rules to make sure those are followed. As well as know your customer, the idea is to make sure the customers are legitimate and trading on their own names and not to have fraudulent activities or any sort of other impostors and stuff like that. So these are real legitimate issues that the banking system has faced over its many decades of operating. And likewise, Bitcoin exchanges need to. improve these areas. So we've been working closely with the central bank to try to essentially elevate our service offering to the level that we need to, given the importance

of Bitcoin. And what are some of the changes that BTCC has instituted as well as, you know, some of the other bigger exchanges? Yeah. So earlier this year in 2017, we we stopped offering margin training services. We also eliminated the zero fees, the zero trading commissions. We re-instiguate training commission on all buy-sell. The idea was to sort of calm down the market a little bit. I think it was a little bit overheated maybe at the end of last year. So these were moves that we took voluntarily to try to appease the situation a little bit. And how have Chinese crypto traders and investors, how have they changed their behaviors since then? Well, it's very prominent change, which is a trading volume that come down a lot.

I mean, essentially, we had a lot of inflated volumes from zero fee trading, and that all went away. A lot of wash trading, that all went away. So now, I would say the market is quite subdued, the trading market, the exchange trading market. Now, what's interesting is we now there's developed into two markets. There's the on-exchange market in China, and then separately there's a exchange market in China, and then separately, the OTC market. So the prices have actually diverged. So that's an interesting phenomenon.

So the on-exchange market, the Bitcoin price is lower. And then the OTC market, which is the so-called off-exchange over-the-counter market, where people buy sell themselves on the street without going through a third-party exchange, that price is actually much higher. So there's some... And why is that? It's a market dynamics, I would say. The on-exchange market, you know, has requirements mandated by...

the PBOC, including the KYC, you know, all that stuff. So there's more overhead. So people are discounting, there's a discount on the price due to the fear of burden, if you will. There's some extra burden, extra inconvenience, maybe extra concerns. Whereas an OTC market, it's just two individuals. It's a peer-to-peer change, right? It's just you, one person on the street corner, you know, selling Bitcoin to another

person walking up to him on the street. corner and they could exchange in cash or whatever currency, whatever they want. It's just, it's just consent amongst two adults, right? So that price apparently is much higher than the market price. So that price actually more closer to the U.S. dollar price in Bitcoin as well. So the more, the so-called global international price. So something that I find interesting about this conversation is that I don't remember, was it a year ago or I think it was a year ago. I did a story where I interviewed you about some of the cultural differences between how Chinese investors approach Bitcoin versus how you see people approaching it here in the U.S. Can you describe what those differences are in kind of like what they were historically versus what they are now?

Do you think maybe the differences are less stark now? I don't exactly recall what I told you specifically, but I'll say this. Bitcoin is a global thing. And the thing itself, Bitcoin itself, is, it's a big invention, Bitcoin, okay? Because it's a big invention, it's due to its complexities. Let's put it that way. Bitcoin is a lot of things in it. It's got a lot of things, a lot of factors in it.

That's why it's so complex. That's why such a small portion of the world actually know about Bitcoin and understand Bitcoin. It's very, very complicated. And because it's global, We have countries all over the world, all these cultures and people all over the world. It turns out different people see Bitcoin differently, meaning that some cultures value Bitcoin for its store value. Other people value for it being digital. Some cultures value for being a payment system, you know, and so on so forth.

So how do you feel the Chinese view it as opposed to Westerners? Yeah. So Westerners may view it as a payment system. But Chinese people, they truly see it as a. monetary instrument as a store of value. We see it as a system where it has a 24-7, 24 hours a day, seven days a week, sort of trading. Nothing in the world trades, I mean, except for I think only Forex, foreign occurrence exchanges, trades 24-7. So Chinese people see it much more like Forex.

And so what behaviors did they exhibit that are different from what you see Westerners exhibiting? Yeah. So because the Chinese people see it as 4x and. because China is unique in the world to have actually a capital control system on the Reming B, they see Bitcoin as sort of a vent to escape the capital control system. But the vent goes both ways, right? It's both to escape the money and also to info the money. That's why there's a huge potential.

That's why I always get asked the question. Is Bitcoin being used to EVA capital controls, right? So because of that, it's also a store of value. value. So people in China, just like the rest of the world, we've seen depreciation of a monetary system in terms of purchasing power. We've seen the loss of purchasing power in our currencies. We've seen a huge ramp up of money printing over the last eight years. And that's why, if you think about why is Bitcoin moderately successful today, why is Bitcoin even a topic today is precisely to mirror the failures and deficiencies of the government-issued monetary system,

which is the U.S. dollar, the paper money, right? So I know this is sort of getting into a philosophical discussion, but the Chinese people see it that way. They see it fundamentally that, oh, Bitcoin is an escape. It's sort of like the exit sign. It's sort of like the thing that you can use to leave the existing system, which has its problems. So that's why it's been pursued that way. So in China, for example, something practical, practically no one uses Bitcoin to pay for things in China. It's not even used as a payment system, right?

And the other reason for it is China actually has very mature payment systems like AliPay and now WeChat pay. So China has very mature payment systems, even though Visa and MasterCard is not established in China, but China has China Union pay the credit card standard here. So one other thing that I think, you know, has been influenced a little bit by cultural issues between China and the West is that there's this stalemate that we've seen in Bitcoin over how best to scale the network. And, you know, correct me if you disagree, but the miners who are, you know, largely Chinese, not all, but largely. And then the core developers who are largely Western, I think they play the biggest role here in this decision over how to grow the network. Do you think that there are cultural differences that are influencing this decision-making process and making it difficult for them to get past this impasse?

Well, I don't want to pinpoint to cultural differences. I think it's natural that whenever there's a contentious issue, that there are, multiple sides and multiple factions. I think just by definition, anything that has multiple factions is contentious. So for anything that's important enough, inevitably, you reach a point in time where there will be an issue that's important, and two large populations take opposite viewpoints, right? This is just human nature. It's nothing to do with culture. It's nothing to do with language or nothing to do with, you know, east versus west. It could be north versus south. It could be, you know, whatever. And it's happened in Bitcoin. And in many ways, it's a great thing, right? Because Bitcoin

has grown up to be large enough to have an issue that's contentious. So I see the positive aspects of it. And now the question is, well, what's going to happen? Well, the other single best thing about Bitcoin is no one explicitly has power. There's no single person, no single group organizationally that explicitly has power. So the so-called checks and balances, the concept of checks and balances are inherently built into the Bitcoin system. So like you said, there's the miners, there's developers, there's exchange operators, they're the users, there are multiple, multiple stakeholders and factions, if you will, and no one single group of people have ultimate power over Bitcoin. And if there's a stalemate, there's a stalemate. That means Bitcoin won't change,

and that's also the strength of it, that Bitcoin is not easily changeable. Another blockchain network that's generated a lot of interest in the West is Ethereum. But I believe that trading of its currency ether is pretty low in China. What are Chinese attitudes towards Ethereum? I can't speak for all of China in terms of attitude towards Ethereum. But I can tell you my personal views is that it's this power loss situation. It's basically the power loss situation. I don't know the exact formal terminology is basically basically, basically, basically, basically,

Bitcoin is hard enough. Okay, let me just put it out there. Bitcoin is hard enough. It's complicated enough. It's really esoteric already. When we talk about the real world, the common world, the common society, okay? Bitcoin is just ways esoteric. So what I've dedicated my life over the last few years is to promote and advocate for Bitcoin.

It's a tough enough job. And it turns out Ethereum is just one of many other cryptocurrencies that came after Bitcoin. And we talked about there was light coin, there's doggy coin, you know, there's Ethereum. There's a whole bunch, ripple and a whole bunch of other, there's, you know, hundreds, literally hundreds of other of these cryptocurrencies that are, that came after Bitcoin. And some of them are popular, like Ethereum, you know, there's a few more that are quite popular. But for me, it's like, I want to spend time and get Bitcoin, make Bitcoin successful first. It's only when Bitcoin is mainstream that the other coins have a chance. That's my perspective.

So this could also explain why for Chinese people, the majority of the interest and attention so far has been on Bitcoin. And there are attention and trades in these other coins. But the reality is that there's a lot of other pump and dump, you know, multi-level marketing schemes on these other all-coins. So it gives the all-coin category a bad reputation. You're a board member of the Bitcoin Foundation, and it's had some stumbles over the years. In 2015, it almost disbanded. The money was mismanaged. What has it been doing since then?

Yeah, Bitcoin Foundation is interesting. I joined, I forgot, I think it was 2014, yeah, as a board member. It had an interesting start. It was founded by the early people in Bitcoin, and many of them, well, anyway, I don't want to go dig into the past. But the point is that there has been some concerns from the public about the early people in Bitcoin Foundation. So today we have a healthy board of, I think it was six or seven board members. And it's a new group of people. Today, we're still trying, to be honest, we're trying to find the right bearing, final bearing in terms of how to contribute and help.

What we know is we as the Bitcoin Foundation, we're focused on Bitcoin. I think over the last year, we see a lot of industry and society efforts have put more attention on blockchain. There's a lot of hype around the word blockchain. We have decided to stay true to the core and to promote Bitcoin, Bitcoin, the cryptocurrency itself, Bitcoin, the global decentralized digital currency. So we're making an effort to do that. And obviously, whether it's funding, whether there's support, obviously some of these are challenges. But in the end, I think we have a good group of people who are behind it, and we're going to try to make a difference in this world, especially in this challenging times with block-sized debates, with the government regulatory stuff. So it's never a boring day in the Bitcoin space.

So speaking of it never being a boring day, what are some developments that you expect to see in cryptocurrency this year? This year, I'm looking for more and more adoption and understanding of Bitcoin. Bitcoin reached $20 billion in circulation value, what they call market cap this year. I think it's a huge accomplishment. I think the good thing is it's a one-way street. And I truly think that, meaning that the adoption, the understanding of Bitcoin is a one-way street. Meaning once you know something, you cannot never unknow it. So every day that goes on, every day with more newspaper and media coverage, with more podcasts spreading out, more and more people are learning about the concept of a digital decentralized cryptocurrency.

And that's what Bitcoin is. And when more people learn about it, it's not, they won't immediately buy into it, right? Obviously, it takes some time to digest it. For me, it took two years. It took a good two years for me to digest. and understand Bitcoin for me to dip my toes into it in any meaningful way. So for many people, if it's not two years, it's at least six months or three months. So with the larger and larger population, Bitcoin and digital currencies will become mainstream. It might take a generation.

You know, certainly the millennials, for them, you know, Bitcoin and digital currencies is natural. It's completely natural. They just don't understand why gold is valuable. For them, digital currencies will be a complete natural thing. So for that, I'm very, very excited. You know, we are on a multi-decade mission, right? Bitcoin is going to keep being issued for the next 130 years to reach the 21 million target amount. So we're only at 16 million. It's going up pretty fast, but it's going to slow down very fast as well.

So today, we are seeing only 1,800 Bitcoin's being issued per day. That's a very, very small amount. That's roughly a little bit over $2 million. in new excess Bitcoin capacity, not capacity, Bitcoin value added to the world. So that means the world today is handling over $6,700 million of net new inflow. That's a very small amount for a huge, huge concept of a decentralized digital currency. You know, the equivalent amount of gold is in the billions, right?

So for that, I'm excited for the continue increasing awareness over the coming year. and with awareness comes price appreciation. I think it's a direct correlation. Great. Well, thanks so much for coming on the show. How can our listeners find out more about you and BTCC? So come to our website, BTCC.com. So thanks for joining us today.

And for all the listeners out there who try Moby, when you gave you a free visa debit card, you could just order it with Moby, and then you could spend money anywhere in the world, by using the Visa debit card. You can even get cash at the ATMs. So that's an amazing thing about MOB. Okay.

Thank you, Laura. It's been a lot of fun talking to you on this podcast. Yeah, same here. If you're interested in learning more about Bobby, check out the show notes, which are available on my Forbes page, Forbes.com slash sites slash Laura Shin. Thanks so much for tuning in to Unchained, which comes out every other Tuesday.

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