Unchained - Why LocalBitcoins Stopped Cash Trades and Has a New CEO - Ep.136

Episode Date: September 10, 2019

Sebastian Sonntag, the new CEO of LocalBitcoins, and Mika Impola, software developer at LocalBitcoins, explain why the peer-to-peer bitcoin trading company has a new CEO, why it stopped cash trades and what kind of response they've received from the community about it. They describe how the service works, how it has changed over time, the range of payment options available amongst sellers on the site, and how peer-to-peer trading differs from country to country. Plus, we cover why it suspended buying in Iran, how regulation is changing the site in general, how it handles forks and what Sonngtag's plans are for the company. Thank you to our sponsors! Simbachain: https://simbachain.com/ Kraken: https://kraken.com/ CipherTrace: http://ciphertrace.com/unchained Episode links: LocalBitcoins: https://localbitcoins.com/ LocalBitcoins blog: https://localbitcoins.com/blog/ LocalBitcoins names a new CEO: https://localbitcoins.com/blog/localbitcoins-names-a-new-ceo/ LocalBitcoins stops cash trades: https://www.coindesk.com/localbitcoins-removes-cash-for-crypto-trading-option New Finnish AML regulations: https://localbitcoins.com/blog/aml-features-update/  LocalBitcoins’ new ID verification system: https://localbitcoins.com/blog/id-verification-update/  LocalBitcoins trading volume across countries: https://coin.dance/volume/localbitcoins LocalBitcoins trading in Venezuela: https://coin.dance/volume/localbitcoins/VES/BTC LocalBitcoins suspends buying in Iran: https://www.coindesk.com/localbitcoins-bans-bitcoin-buying-in-iran-in-blow-to-rising-crypto-commerce Bitcoin Cash hard fork decision: https://localbitcoins.com/blog/bitcoin-bcash/ Bitcoin Maven: https://www.latimes.com/business/la-fi-bitcoin-sentencing-20180709-story.html Hack on LocalBitcoins forums: https://www.coindesk.com/localbitcoins-reveals-security-breach-with-some-crypto-wallets-affected Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi everyone. Welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Laura Shin. In case you haven't heard, I have another crypto podcast called Unconfirmed. It's shorter, newsier, and comes out Fridays. If you haven't yet, go subscribe now wherever you get your podcasts. Also, find out what I think are the top stories in crypto by sending up for my weekly newsletter at Unchained Podcast.com. Are you passionate about blockchain but fall short on the technical skills to build and deploy blockchain applications? Then check out Simba Chain, the smart contract as a service blockchain simplification layer on SimbaChain.com, and their new enterprise offering on the Microsoft Azure Marketplace. Krakken is the best exchange in the world for buying and selling digital assets. It has the tightest security, deep liquidity, and a great fee structure with no minimum or hidden fees. Whether you're looking for a simple Fiat on-ramp or futures trading, Cracken is the place for you. Cypher Trace cutting-edge cryptocurrency intelligence powers anti-money laundering, blockchain analytics, and threat Intel.

Leading exchanges, virtual currency businesses, banks, and regulators themselves, use CipherTrace to comply with regulation and to monitor compliance. My guest today are Sebastian Sontag, the new CEO of Local Bitcoins, Amika Impola, software developer at Local Bitcoins. Welcome, Sebastian and Mika. Hello, nice to see you, Laura. Most listeners have probably heard of local bitcoins, but they may not be fully aware of what it does or how it works.

Sebastian, can you describe local bitcoins? Yeah, so local bitcoins in the sense, of course, it's a place where people can trade with Bitcoin, so they can buy and they can sell Bitcoins. But the local bitcoins in core is that it's from people to people. And of course, it's a bit different than X-Gycoins. So our idea is that it's a bit similar to Craiglist, but especially the US users probably know pretty well. So it's kind of a place for Bitcoin people to meet and create an advertisement that I want to buy Bitcoin, I want to sell Bitcoin.

But that is basically what the local Bitcoins is about. And Mika, can you walk me through one example of how a buyer and a seller transact on the platform? Yes, so the buyer, let's say that I want to buy Bitcoins and so I go to the local Bitcoin site and create the account to our service. And with that account, I get this Bitcoin wallet as part of it, this account. And with this Bitcoin wallet, I can transfer Bitcoins in and out. So after that, I can search for for advertisements on, on. on local bitcoins.com and when I found a, find a suitable advertisement, let's say, for example, that I want to use Swift to settle the payment for the

bitcoins. So I will search for advertisements that advertise selling of the bitcoins with Swift payment. So after I have found a suitable advertisement, from the side, I will start trade by replying to that advertisement. And what happens then is that

the amount of bitcoins that I am about to buy will go to our escrow wallet. And then, well, as we are now doing the payment with the swift, I will make the

transfer to the seller of the bitcoins. using the Swift network. And once we both, me as a buyer and the seller of the Bitcoins, agree that the Swift payment is done. We both mark the payment and the trade as done. And at that point, the local Bitcoins.com service, escrow wallet releases the Bitcoins to me,

to my local Bitcoins account wallet. where I can then withdraw them if needed. And so you named Swift as one example of ways in which buyers can pay. But what are, I was going to say, what are all the ways in which buyers can pay? But obviously, you don't need a list to every single one, but just give some examples of the full range. Yeah, well, Swift, Kiwi, Ali, Pay and PESA, it really doesn't matter what is the like settlement type I mean if if users have some unknown or new payment method in the in in their local area they can also agree to use that one so we don't in a sense limit so limit the the other part of the trade

So it's just whatever the seller is willing to accept? Yeah, well, mostly, of course, there are some aspects there, which we are limiting there, because of the safety of the users and so on. But it's pretty much open for the users to decide that how they exchange the other currency, not the Bitcoin, but the other currency. And what would be an example of a way that's unsafe to pay with? Yeah, so the cash trades was actually disabled during the spring. And there was actually kind of a lot of news, especially from our competitors,

noticing that we have removed the cash trades from them. They were actually small discussion in the company, if we should keep it and how people will see it. But then again, it was very limited how many people were still using it. So we really didn't see that it as important anymore. But it was also that there are problems with the cash trace. Because when you are using escrow service, the whole idea is that you don't completely trust the other party. If you would trust completely the other party,

then you don't need the escrow service. You can transfer Bitcoin directly wallet to wallet. But when you need the escrow service, there is not a complete trust between the parties. And of course, if you have to meet the purse, face-to-face to trade the cash. It's a really problem with this safety issue, but then it's also really hard to prove that the cash has been traded. What if the other party says that I did transfer the cash, the other party says, no, it did not happen. So there is really hard way to

prove these kind of cases. So essentially it was kind of because it would be like difficult to resolved disputes, so that that was kind of removed as one of the options? Yeah, that was actually one of the reason. There was also regulation push. It was not really happening the regulation during that time. But the main reason was that it was the safety and the dispute. It did cause us cause, but then again, kind of the benefits and use was very limited. Actually, Mika has some numbers also related to how popular the cash rates was.

Mika, what percentage of transactions were cash trades? When we eventually decided to stop supporting cash trades on our platform, the amount of revenue that was generated from the gas trade was less than half percent of the company's revenue. So it was just this really small branch that we kind of like decided to cut down. I mean, there is no justification for the overhead of the service. And was it more popular, though, in certain geographies? Like in a particular country, for instance, might it be, you know, I don't know, like 20% of the transactions there? even if it was only half a percent of your revenue overall?

There wasn't a clear market area or anything like that where it was used more than in the other places. It was more like where we had users anyway. There were always a couple of cash traders also there. So it wasn't like, it was quite, steadily spread amongst the markets. Okay. We were like present.

But you know, these gas trades in all, it's really confusing topic to me. I mean, when I'm out there in the wide encountering other bitcoins and they learn that I work for the local bitcoins. We usually start talking about local bitcoins. And many times they talk about this thing that people meet, in some places and they exchange gas for Bitcoins. And that's really like confusing for me because I don't see local Bitcoins doing that.

I mean, we haven't do. That is not what local Bitcoin does. Well, it's not completely true. Yes, you can do also that. But people who does that is so small percentage of our users, users that you could also think of it as non-existing. But I do understand where this all is coming from. I mean, in the summer of 2013, the majority of our traders were cash traders.

But already in the end of the 2013, gas traders were only one-third of the customer base. And when we come to the year 2016, the number of gas traders was like less than 5% of our users. So we might be considered as a platform where gas rates were done long time ago. But I mean, well, long time ago. In a Bitcoin world, three years is a very long time, I think. That is definitely true. But I mean, there comes time to every company to like streamline the business and concentrate to the core of the business. And when you have something that is used like or is generating less than half percent of the company revenue and you are in this streamlining mode, those things just like get cut off.

Yeah, I also vote for that because, of course, the company mission is to bring Bitcoin to every city of the world or allow everybody on the planet to trade with Bitcoin. So in that picture, the cash trade is not important. It's the other matters that really matters. Yeah, I mean, I think probably some of the anger that you kind of experience from a subject. of the users or some Bitcoiners about this, is that I think there are people who view your service as somewhat political, at least in concept, the idea of allowing people to trade peer-to-peer typically means, you know, more anonymously. And under certain jurisdictions where perhaps people don't have very much financial freedom, that could be a very, very important service. And so, you know, for them, I think that they view this as like an important kind of,

it's almost like for them a political stance or something. But in a way, maybe I feel like the passion that they feel about that is sort of similar to just in general where you notice in politics that there tends to be some people who feel passionately about one thing and then the majority of the population unfortunately doesn't even if it's kind of a worthy stance and so yeah so I think that's what I'm hearing you know when you talk about the disconnect between what your users are saying and then how you see things from the business perspective and also that of course what we have noticed is that it might be that in developing countries, what are kind of the core things that people are needing there

in case of Bitcoin is a bit different than in Western world. So, for example, the cash trades, I understand this, that there is the idealistic way of viewing it. But if you are in developing countries and you kind of want to, for example, save money and save it from the inflation, I don't know. if they consider cash option or not, it's more important that there is the option to kind of save yourself from the hyperinflation, for example. But that's actually why I was asking about whether or not cash trades were more popular in certain geographies, because in some of the developing

countries, are there kind of like, are there enough options for payments for people? Do you know what I'm saying? Like, like in certain geographies, is it the case where, you know, cash is one of the main ways that people transact. And if so, you know, is that kind of preventing people in that country from getting access to Bitcoin? Yeah, that is actually really interesting question. Of course, like I said, and actually Mika mentioned that, of course, we based our decision on data and we were looking that it's going down. And even though there were more people from everywhere on the world coming inside, they were using less cash trades. But that is really interesting because, of course, there might be that there is huge market out there who are only able to use cash trades.

And that is, I really feel that it's really important because if there is that kind of user group, there should be a Bitcoin service for them as well. Yeah, I would like to argue that if we consider those countries which are experiencing hyperinflation, they don't like to use cash. because you have to use so big piles of cash, it's easier to use some kind of bank transfer or mobile money. And also what we see in developing countries is that they are in many ways leapfrogging to mobile money and mobile minitz and all these apps that you can use on your phone. phone and people are actually using those kind of payments methods instead of cash. Yeah, that makes sense.

Yeah, but this is a really interesting topic. And of course, if I understood correctly, the US of the UN is making research on this. But of course, there is this kind of societies and research organizations also researching, because I have to admit that me or the company, of course, we are not really the specialist to understand how in developing countries people are behaving. So, of course, if we would understand a bit better, how they are using Bitcoin and how they kind of wish to use the Bitcoin in future, of course, that is also our vision that we could

give them a service. But it's really hard, of course, to really know how people in different markets and different areas are using. Yeah, and I actually think one other kind of. difficulty in trying to do this research is that I imagine when people are not under duress, that then, of course, they're happy to use these different services. But if you look at what happened in Hong Kong recently with the protests there, as you know, a lot of Hong Kongers were using cash to pay for their subway tickets to go to the protests rather than using any sort of payment method that could be identified back to them.

And so, you know, these, like, you, instead of just generally looking at, you know, like developing countries or something, it would need to be maybe more specific, like geographies that are undergoing some kind of political upheaval where they don't feel comfortable transacting with their identities, something like that. So I understand it would need to be something where you would need to be in kind of the right place at the right time to get the full picture. Yeah, it's exactly like that, yeah. Yeah. So, but I think that is why, you know, some of, there's some pushback on this because I think some people who like the idea of peer-to-peer trading of local Bitcoins then understand that if it's not offered the cash transactions, then in times of duress, then people won't have that option.

So actually, let's just go back, though, to the very beginning of how local coins got founded? I think the founder of the company, Jeremias, Jemias, saw the, or tried to, try to like find ways to buy Bitcoin or sell Bitcoin and kind of like didn't find any good services. And so he decided to create this, this, this correct list type of place where you can advertise buying or selling and thus the first version of the local bitcoins was created and it was really like done in a few weeks or something like that and and in the beginning of local bitcoins there was no way of creating any revenue and it was maybe in half year after the beginning or one year after the beginning that the escrow service was introduced and with

the escrow service the company was able to generate the revenue as as we charge like one percent of the amount of escrowed bitcoins during the trade and basically that's that's the basis of the company that we still are running, providing the advertisement space and providing the escrow as a service when users are making the trade. And you charge that fee to the seller, right? Yes. Okay. And so are there any other services that you have begun to offer over time?

or is that really, you know, just kind of your bread and butter, and that's the main way that local bitcoins makes its revenue? There has been like local Bitcoins ATMs at some point, and we have this invoicing service at some point. Maybe there are others that I am not that well aware of, but we are kind of like been focusing and streamlining and to the main product and trying to do it as good as we can. And how has usage and reach of your platform changed over time?

Yeah. So, yeah, we did actually check the volume. So how much there is transaction ongoing on the platform. And this is probably really interesting for the listeners as well. So there are public sources where you can accomplish. different exchanges and trading points and services like local bitcoins, coin dance. And there we can see that, of course, before 2017, the market was much smaller, but it was growing steadily.

And of course, 2017, the growth was insane during that year. But the interesting part, at least to my eye, is that, of course, there was the price search, it ended like, was it $17,000 per Bitcoin? Then it did drop down, but the volume of local Bitcoins has been, it has remained pretty much the same as average of 2017. And that is insane. And Mika actually noticed something really interesting about if the Bitcoin price remains. So if you can share it. Yeah. So, I mean, I think, that we have this steady growth. We have had this steady growth from the beginning of the company,

and it just seems to be growing and growing. But one thing that affects the speed of the growth is that if the Bitcoin price is moving, we seem to have more growth. So when the Bitcoin price is going down, we have a little bit more growth. And when the Bitcoin price is going up, we have a lot more growth. When the Bitcoin price stays somewhat stable, we still have a growth, but it's not that big when the price is actually moving a lot of.

So basically, basically, you could say that we are growing with the Bitcoin. it. Yeah, that makes sense, obviously, being kind of like an on-ramp, you know, as the price grows, that reflects more people coming into the system. So, and, you know, obviously we've been talking about kind of the way the platform has changed over time. And Sebastian, so why did local bitcoins change its CEO at this time? Previously, the CEOs were, you know, is Jeremiah, the founder and then also, I think, Nicholas, I guess, is his brother. Yeah. And so you're kind of like the first sort of outside CEO.

So why did that change happen? Yeah. So the background story, Yeramias and Nikolaus, they founded the company. And Jeremias was CEO until 2016 or 17, around that time. And since then, the CEO has been Nicholas. And now, actually, already last year, Nicholas has been talking that he's more interested, kind of the vision where the Bitcoin market is going, where Bitcoin is going. Of course, the company, it has really grown on a huge one.

It's not any more kind of a startup mode. There are kind of a lot of position, lot of human resource management and whatever. And Nicholas says that he's more interested to deal with the Bitcoin, understand that one. It was actually bit the same story with Jeremians, what he has been saying. they are interested kind of the big picture and not really maintain the human resources and stuff like that. That is one thing. And of course, it's also that when you have a pair of fresh eyes, of course, you get

a different view of the company. So a new person, it's easy to notice if they are kind of position that needs to be filled out. If they are kind of lacking something, if some people are stressed out because they have too much to do, if there are some people who don't have enough to do. So of course, it's easier for somebody new to come and help that one. Sebastian, you recently started as CEO. What were you doing before and how did you get into Bitcoin and come to local Bitcoins? Yeah, actually, I have a PhD in technology way back on the years. I was already interested in Bitcoin, already 2012 or something.

I was mining Bitcoin myself. But then I got more interested after technical career to business side. And I went for the business management. And I founded a couple of companies. And then I've been in the past three, four years in the management of different companies, also board members in different Finnish companies. But I have been following the Bitcoin and especially the local bitcoins closely, because local bitcoins is the biggest Bitcoin company in Finland.

And of course, earlier I was not as interested when it was in gray area, especially these companies. But now when the regulation is coming, finally their companies are turning from the gray area to white area. So, of course, it's also easier for me to as a business manager to come to these kind of companies who are going to be really official companies. and what else is there to say? I really think that Bitcoin is, of course, itself is really interesting.

It seems to be helping people around the world. And local bitcoins itself is a really, really interesting company. It's the, how would you say, missionary or settler of the area. So it's really bringing kind of Bitcoin to those people who don't have access yet. And Mika, what about you? how did you come to work at local bitcoins? Yeah, so I think I found Bitcoin's first time around year 2012, and in the beginning of, it was this on and off thing for me.

I would spend some time studying it and then forgetting it for a while and so on. And I did some mining. I traded a little, made a trading pot, and that didn't work, and got some altcoins and so on, lost Bitcoins to scammers, and hackers and just by my own mistakes. So basic stuff, stuff, the normal mistakes. The process of learning Bitcoin and figuring out what it actually is by experimenting with it. But I think it was in the beginning of 2015 that I finally decided to get into Bitcoin

and push a career in a Bitcoin. and I started by getting some ATMs and trying to find locations to them. It didn't go anywhere, but I made some friends and quite soon after that, I ended up working for local Bitcoin's own ATM project. And well, that project, the company decided to concentrate to the main product and the EGM project was like shut down. But I stayed around and started working and helping on the website. And coding and mostly maintaining our server and Bitcoin infrastructure is what I've been doing ever since.

And actually, just to go back to earlier when we were kind of discussing the philosophical stance or the political stance, and you talked about how they really wanted to do the peer-to-peer. trades. So why was it that they didn't think, oh, why don't we just pull this liquidity and create kind of a more typical exchange? What's the reason for that? Yeah. So the mission actually, it was pretty old one, this, that they bring Bitcoin to every city of the world. And of course, they really feel why they are in Bitcoin, at least of course, this is my view, why they have Bitcoin. They might have a different story. So take a bit of soul. hearing me saying what they wanted. But of course the mission was early on to bring Bitcoin

to every city of the world. And of course if there is an exchange, like there are a lot of exchange, it really makes sense, because the price kind of sell and buy prices close to each other. Of course, the transaction cost are low. But then the problem is that there is usually only one way to buy it, you buy directly from the exchange and so on. And if you go, in different areas, different markets, the problem is with financial inclusion. So we already mentioned, for example, that if you are Venezuelan or, well, actually I have to admit that, for example, for my parents, even in Finland, it might be a bit hard for them to kind of buy something from the stock exchanges, but then exchanging with the people to

people, it's not easier. But especially if we go areas like Venezuela, it seems that it's easier. for people to trade. Each other tend to go with the stock markets. And it's probably due to how the not Bitcoin currency, but the other currency is involved. All right. So in a moment, we're going to discuss some other kind of news issues with local Bitcoin such as stopping services in Iran and some of the changes to its platform.

But first a quick word from the sponsors who make this show possible. Will the world follow France and advocate banning privacy coins? Will government-backed stable coins become the new fiat? Are distributed and peer-to-peer exchanges just a flash in the pan? The answer is maybe. Virtual currencies can flourish and create a new, private, and more versatile economy. But that grand vision can't happen without keeping crypto clean. And that requires support of government and accountability for bad actors.

Privacy enhanced compliance using cryptographic controls has the potential to preserve anonymity without compromising legitimate investigations. CipherTrac is working on this vision of the future. Sign up to stay up to date on the Privacy Enhanced Compliance Initiative and receive authoritative crypto-aML reports quarterly. www.com.com slash keep crypto clean. Today's episode is brought to you by Cracken. Cracken is the best exchange in the world for buying and selling digital assets. With all the recent exchange hacks and other troubles, you want to trade on an exchange you can trust. Cracken's focus on security is utterly amazing.

Their liquidity is deep and their fee structure is great, with no minimum or hidden fees. They even reward you for trading so you can make more trades for less. If you're a beginner, you'll find an easy on-ramp from five Fiat currency. And if you're an advanced trader, you'll love their 5x margin and futures trading. To learn more, please go to crackin.com. That's KRAK-K-E-N.com. Today's episode is brought to you by Simba Chain. Do you have a blockchain idea that could benefit or organization, but are you not sure where to begin?

Then go to SimbaChane.com. SimbaChane's API-based approach simplifies blockchain for developers and provides a simple web application that empowers business analysts, domain experts, managers and executives to design their smart contracts. Simba chain supports Ethereum, Quorum, Stellar, and many more to come. They turn business analysts into API designers and non-blockchain developers into blockchain developers. Check out SimbaChine.com to quickly build your blockchain application.

Back to my conversation with Sebastian Sontag and Mika Impala. So we were just talking about kind of why the founders wanted to do peer-to-peer exchanges. And I just also wondered, do you know from the user's perspective, like the buyers and the sellers, why they choose to do trades this way rather than on an exchange? Yeah. Don't really know the reason. I don't know if you have done studies on the reason and probably differs from the market and from people to people. And to be honest, I don't know if it's our place to really ask people. Of course, if we want to develop the service forward, of course, we have to understand better why and how the service is being used, but we have not really studied that

too well. And of course, when mentioned that the background with the founders of the company and why they had this trade system is that it was really early on when they found it. They were really kind of really early adopters with Bitcoin and with the company. So of course, that time there were no exchanges and they find their position with this peer-to-peer trading. And of course, because they are and there are a lot of competition between Bitcoin exchanges, it doesn't really make sense to try to turn local Bitcoins yet another exchange. And back in May, I had Vera Xavier, local Bitcoins community manager and Elena Tonio, a chief customer success officer on my other podcast unconfirmed.

And at that time they told me they were seeing about 40 to 50,000 trades a day and about maybe a half million active users every month. What are the usage numbers now? Yeah, they have been stayed pretty much the same. I mean, like I earlier said, that seems like we grow, grow with the Bitcoin. So I think the Bitcoin price has also stayed pretty much the same. Yeah. So that's why the growth of the users is not that much from the main.

Yeah. Also, it's a short period of time. And what's the breakdown between developed and developing countries? Yeah, it seems when we were checking that what currencies people are using for the kind of when they are trading the money, we have noticed that it might be a bit more users in developing countries than in the... Oh, interesting. Yeah. And when you say that, are you talking about number of transactions as opposed to the amount of the transactions?

Or just number of users? I was actually, yeah, it's a volume, so not number, but really kind of how many bitcoins is exchanged. Oh, wow. Okay. Well, that's actually pretty remarkable because then, you know, you would expect that in developing countries, the amount of Bitcoin is higher per capita simply because they're probably wealthier countries. But if in the developing countries, they're kind of exceeding the amount, you know, not just from a number of transactions perspective, but from the BTC amount, then that means that there's pretty significant trading on your platform in developing countries. Yeah, and I would guess that the one reason is due to these exchanges, because of course, it's possible and it's easy for to use them in the developed countries. But of course, if you're in developing countries, it's a bit more hard to use exchange. That might be one reason.

Right, right. Also, I would like to make a point, maybe to the earlier question or also that is really, related to this, why we have a user so much in the developing countries, is that I imagine that in developing countries, you don't necessarily have, for example, a bank account, so to speak, but you have maybe some mobile payment method like MPs, BESA, or something like that that you use on your phone. And there isn't really exchange. is providing on and off-ramps from that mobile payment method. So if you want to get out of that, if you want to get Bitcoins,

you would have to have that bank account that you don't have. So you need to use us because through us, you can find someone who is using the same mobile payment method. And thus you have like this direct route to, transfer your value from that mobile payment method directly to Bitcoins and wherever you'd want to go from there. Yeah. Yeah.

It's, I guess what is probably very appealing about local bitcoins is that it's pretty, I don't want to say customizable to your local geography, but what I mean is it's very flexible. So, you know, if you're in one country and you have this particular way where you keep your money, then instead of being limited to whatever few payout options and exchange offers, you can just keep browsing, you know, this kind of Craigslist site to find somebody else who will accept your payment option. One other thing I definitely want to urge the listeners to do is in the show notes, I'll put a link to the charts of local bitcoins trading broken out by country because when I looked at this, I just, it was so fascinating. There are certain trends that you see. And then there's just like certain outliers where you know whatever was going on with trading in that country was just

particular to what was going on in that country. And what I mean by that is that the charts basically show trading volume, you know, by country over time. And so there are a few trends I noticed where these tend to be stable economies and essentially the trading was all fairly low volume for quite a long time. And then a spike in trading at the end of 2017, early 2018. And then a drop back down to fairly low levels kind of. And for people who want to look this stuff like Switzerland, Norway, New Zealand, they all kind of exhibited. that sort of chart. And then there was another type of pattern I noticed amongst somewhat kind of probably, I guess, what you would call troubled economies, where the volume just sort of somewhat steadily goes up.

Like for instance, Argentina, Mexico, Venezuela. But then, you know, aside from those trends, there are just a whole bunch of charts that really don't look like any of the others. And it was just really fascinating to see that. So there's no question to. this unless you guys have a comment on on that but I was so fascinated when I was looking at these charts oh and actually the one other comment I wanted to make was that the U.S. has a very, very fascinating chart because it just shows so much more trading than any of the other charts which you know, I guess kind of reflects that the U.S. is the biggest market at least for peer-to-peer trading of Bitcoin. But anyway, do you guys have any?

comments about these charts? Well, yeah, I also encourage people to go and look those charts and maybe like once a week go and see what's happening there because you can actually get this feeling that you saw this little spike in some of the charts and then you start wondering and what is going on in this country and you Google and then you find out. It's like you can a little bit predict the news from those charts. Do you remember any particular news events that you noticed via looking at the chart? Yeah.

I actually noticed that, of course, I was already interested in local bitcoins and we already had this interviews ongoing and so on. But there was this Venezuela. And of course, there were a lot and a lot of news ongoing about. about the Venezuela. And in the same time, I could see from the coin dance that, hey, there is more and more transaction ongoing in Venezuela. So at least for me, this was a really astonishing moment, kind of that it can really help people in that area. But I have a question about the Venezuela one, which I saw the New York Times reporter who covers crypto tweeted about this, because since the chart is denominated in Venezuelan Bolivaris, then

obviously the value of that is decreasing. So is it, does the chart reflect actual increase in trading volume? Or is it simply reflecting that it takes more bolivarees to buy a Bitcoin than it used to? Do you know what I'm saying? Yes. But if we are still talking about the coin.comtes service, you can actually switch the nomination to PTCS. see from the right upper corner of the chart. So then it's, of course, gets a little bit difficult.

Then you need to remember what was the price of the Bitcoin back then and so on. But we do provide a public, coin. of dance is using our public API to create these charts. So if there are some ways to improve them, you are welcome to try out and get the data for yourself and try to figure out how to present it more nicely. One thing about this, of course, it's also really interesting what we have been following is that how the Bitcoin itself behaves now. there is a turbulence on the world markets.

And it's really interesting, of course, there's also news from the big economic magazines as well, that it's interesting that the Bitcoin has started to act a bit like the gold or this kind of metal that keeps the price. And it's really interesting because we have on the history, 2017 and even before, learned that the Bitcoin is really volatile and whatever. and now it starts to work a bit more like a gold, which is probably not the most volatile asset you can get. Wait, I'm sorry, you're talking about cold?

Yeah. Yeah, well. And that is probably the reason why, for example, in Venezuela, so if you kind of want to retain the value of whatever, for example, salary you are getting, and it might be, I don't really, because that is, the problem that we don't really do studies that the why Venezuela are using, but it's just my hunch that it might be a reason that it's because there's hyperinflation. So you need some way to kind of retain the value of your salary and so on.

And Bitcoin might be an easy way to do that. Yeah, I remember, I think it was Vera in the last podcast I did, she was saying that some of the activity you're seeing from Venezuela is Venezuelans trading Bolivaris into USD via Bitcoin. And then when they need it, when they need the money using Bitcoin to trade it back to Bolivaris. And actually what I did just now, I just looked up the BTC volume of trading in Venezuela. and it did spike quite high earlier this year in like March roughly it looks like or maybe February. But it's back down now, frankly, actually. So that's kind of interesting.

I wonder what's going on there. Oh, I know. It's because the Bitcoin price has gone up. Duh. Okay. Okay. So actually, let's move on to some other kind of changes that have been going on in your business. you know, local bitcoins obviously stopped offering services in Iran as well, which I mean,

I don't know, you know, to my mind, and I think a lot of people who watch the crypto space, it sort of feels like there's kind of been a lot of changes at local bitcoins recently with stopping cash services now, stopping services in Iran, you know, bringing in this new CEO. So what would happen with the Iran service and how does that kind of fit into whatever new trajectory local bitcoins is on. Yeah. About the, well, the CEO process didn't really reflect at this, but a lot of these changes that has happened is there is a push from the regulation.

Of course, finally, well, finally, but anyway, the governments are seeing a Bitcoin and of course they are acting, they are pushing the regulation and so on. And for example, Iran, we are using a lot of U.S. services for different purposes. And now because the Iran is on the list, they were companies, U.S. companies who we are buying services, they were stating that we cannot continue doing business if we do business in Iran. And even though, of course, we didn't use these services in Iran, but only that we were giving a service in Iran was enough for them to be afraid. And of course, now we had to choose between two evils if we continue supporting, for example, Iran,

or there is a possibility that we have to shut down the whole service. And of course, if our mission is to bring Bitcoin to every city of the world, putting Iran down is not really serving that mission. But if we have to turn the whole service down, that is. even worst scenario. So we had to choose between two evils. And of course, the regulation is happening and also we are regulated and we will go under the regulation. Yeah. And it's a new Finnish regulation that comes into effect in November, right? Yeah. And I know on the platform you are now implementing some changes to meet that

regulation. How does that affect the users? Yeah, so most notably they are this, know your customer. And that's why they are, they will be tiers. We have already announced that they will be tiers. And of course, depending that the tier, we have to know a bit more about the customer. Of course, one could argue it's only because of the regulation. But then again, if you read the ruling or the reasoning behind this regulation, is that the better the companies know the customer, better they are able to secure the funds.

So it kind of makes sense also customer-wise, but of course it's really annoyance for the customers. And the history of crypto obviously is littered with exchange hacks. Local Bitcoin's is a little bit different, but local Bitcoin's did suffer a hack on its forums that enabled the hackers to post some fishing links. But because you manage these wallets for people, is that also a form of honeypot? Is that something where a hacker could obtain a number of bitcoins at once? Yes.

So if you are, I don't know, I'm not going to go into details about the forum thing. just saying that I think running a Bitcoin business is a little bit different than running any other web service as there is money involved and thus we seem to be under constant attacks from hackers. So it's been, it's been, well, how to say, interesting in a, in a way and also very stressful as being a target, so to say. And yes, we are a custodial service. We held some of the bitcoins of our customers.

And unfortunately, that's how we need to operate to operate this way. and we, but we are, let's say, taking really big measures to make sure that our customers' funds are safe. So I guess what I'm asking is it sounds like, obviously, there's a way where individual people can be compromised, but then it sounds like, from what you're saying, there is also a way where local bitcoins can be compromised, and that then exposes all of the user's funds. is that correct? Yes, you are correct that the easiest way to get hack on local Bitcoins is by making mistake on yourself, like as a user.

And most of the hackers seems to like target the users themselves more than the actual service. And to fight that, we of course educate our users. And I think we have many, many, many, many system in place to, to like catch those kind of operators and trying to protect our customers. But like any other exchange, we are also holding customer funds and thus well, yeah. And so you're doing that not only during the period of escrow, but then also if people, keep their Bitcoins in their local Bitcoin's wallet. Is that what you're saying? Yes. Oh, okay. So I think I didn't fully understand how it was set up. All right. So one other

question I wanted to ask about was for the Bitcoin Cash Fork, at that time, local Bitcoins made this decision to convert that money into Bitcoins for the users. And then they simply added that money to the user's balance and subtracted a little fee for doing that. But then it also said it would in the future support any airdrops or forks. So obviously since that time, there's definitely been other forks and air drops. I don't even know if I could count. But if Local Bitcoin's isn't giving that money to its users, are you guys just leaving it sitting there unused or are you accessing it or what are you doing with that money? We are not using it.

But I mean, yeah, by the way, about this folks, of course. Sorry, being a CEO here, what folks there have been actually since the Bitcoin Cash? Oh, sorry. You know what I was thinking of was the further Bitcoin Cash Fork. So you're right. if it was converted, then that's no longer associated with Bitcoin.

But I was thinking of Bitcoin gold. Bitcoin Cash was, if I understood correctly, it was exchanged Bitcoin for the users. Exactly. Right, right, right. But so what happens to, you know, for instance, like Bitcoin gold or something, which happened afterward? Well, I think we have made it clear that we don't, we don't. this was one time thing that we decided to like credit the users for for the money from the fork and we don't plan on doing it in the future and we haven't done it after that and it's yeah I think there's no more to say about it okay but you're also not accessing the fund so they're just

sort of sitting there yeah we are not accessing the funds It's easy to check if you don't believe me, but yeah. Okay. Yeah, and people can't withdraw them themselves, I guess. So will local bitcoins just always stay with Bitcoin, or would you ever consider adding any of the other crypto assets? Yeah, if I now recall correctly, we are supporting some. What is the payment method we actually supporting?

Of course, not with the escrow, but as a payment method we are supporting something. but the stance is at the moment that the Bitcoin is leading the cryptocurrency back and that's why we are also using it because of course supporting other cryptocurrency is cost for us and our mission is being this new markets which is they are probably not speculating on cryptos as much they are using it for other purposes so at least the current stance is that we stay with Bitcoin And Sebastian, as the new CEO, what plans do you have for local bitcoins?

Yeah. So of course, because our mission is to provide Bitcoins trading for every city of the world, every people on the planet. And like we have actually stated, this has been actually a really interesting interview because we have been discussing that we really need to understand the needs of the people who are using Bitcoins. and it really varies on different markets. And of course, this is kind of studying what are the needs for different customer,

different markets, different people for Bitcoins. And then we try to serve those so that the more people on the world can access and trade bitcoins. All right. And I also wanted to ask about how you guys are based in Helsinki. What is the Bitcoin or overall crypto scene? What is that like in Finland? Well, I could point out one thing that, since general people seems to forget,

is that the second developer on Bitcoin after Satoshi or with Satoshi was a guy using to handle Sirius, which is also known as Marti Malami, who is from Finland in Helsinki. Martin Malmy doesn't seem to be active in scene anymore, but as far as I know he still owns the Bitcoin.org and BitcoinTorch domains. And as far as I know, I know there were, from 2012, 2013, there were active Bitcoin meetups in Helsinki. And they are still active once in a month, I think. I think we have a Bitcoin meetup here.

And there are people there. So we are a small country, but we've been in a Bitcoin for a long time, I think. And if you have been interested in Bitcoin, you can always find someone to share your Bitcoin enthusiasm here in Finland. Great. Well, thank you both so much for coming on Unchained. Hey, thank you. Thank you. Thanks so much for joining us today. To learn more about local bitcoins, check out the show notes inside your podcast player. If you're not yet subscribed to my other podcast unconfirmed, which is shorter and a bit newsier, be sure to check that out. Also, find out what I think are the top crypto stories each week by sending up from my email newsletter at Unchained Podcast.com. Unchained is produced by me, Laura Shin, with help from Factual Recording, Anthony Youn, Daniel Ness, Rich Stroffelino, and Josh Durham. Thanks for listening.