BitcoinConfHK

1. Website https://www.btcchina.com/
Contact business@btcchina.com
Bitcoin in China
What is Next?
Bobby Lee @bobbyclee
CEO, BTC China
Board Member, Bitcoin Foundation
June 24, 2014
Hong Kong

2. Agenda
I. Bitcoin’s Development in China
II. Industry Landscape Today
III. As Store of Value
IV. Regulation
V. Bitcoin and Internet Finance
VI. What’s Next in China

3. Bitcoin’s Development in China
HOW DID WE GET HERE?

4. Bitcoin’s Development in China
2011
• BTC China goes
online as the first
Bitcoin Exchange
in China
2012
• Average 24hr trade
volume remains in
the hundreds
• Avalon ASIC Mining
manufacturers
announce crowd
funding initiative
• Activity largely
dominated by mining
2013
• A suite of new
exchanges emerge
• Nov 30th BTC China
Price peaks at RMB
¥7,588
• Dec. 5th, PBOC
releases first formal
statement on BTC
• Dec 7th BTC China
trade volume peaks
at over 150,000 BTC
• Dec 16th PBOC adjust
regulation via Verbal
Guidance
2014
• Feb-Mar: Continued
regulatory
uncertainty impacts
the price
• BTC Price recovers to
> 50% of 2013 peak
• Apr 15th China’s first
Bitcoin ATM
sponsored by BTC
China
• May: More PBOC
regulation affecting
bank deposits
• Exchanges all switch
to using Voucher
method for deposits
195 136 320,000
News Articles
containing “比特币”
(Baidu News Search)
(January – Today)
295,000
Image source: bitcoincharts.com

5. Exchanges Come and Go…
Bitcoin Exchange Started Closed Duration
Vircurex October, 2011 March 18th
, 2014 29 months
Linkcoin Sept 25th
, 2012 May 1st
, 2014 12 months
FXBTC January 1st
, 2013 May 10th
, 2014 17 months
BitXF 比特先锋 March 25th
, 2013 August 17th
, 2013 5 months
GBL May, 2013 October 26th
, 2013 6 months
Renmeng人盟比特币
May, 2013 April 30th
, 2014 20 months
GoxBTC June, 2013 January 18th
, 2014 7 months
808BTC December, 2013 18-Mar-14 4 months
Money.cn 钱途在线 December, 2013 February 19th
, 2014 3 months
Bitexian 比特线 2013 May 5th
, 2014
Bitema 比特吗 February 27th
, 2014 May 30th
, 2014 3 months
Dcoin 2-Apr-14 31-May-14 2 months
9 months Average!

6. Bitcoin Exchanges
What Does It Take?
• Trust and Loyalty
• Security & Reliability
• Best Practices & Policies
• Customer Focus

7. 3-Years Old
Happy Birthday!
China’s First Bitcoin Exchange
World’s Longest Running

8. Bitcoin in China
INDUSTRY LANDSCAPE TODAY

9. Bitcoin in China:
A Delicate Balance
Strong Domestic Demand Regulatory Pressure

10. The Industry Today: China
Payments
Wallets
Exchanges
(Speculation)
Mining

11. Mining
• China accounts for 284 reachable nodes on the
network (4%), the 7th most of any country
• China is home to the second largest mining pool,
Discus fish (13% of hashrate distribution)
A Global Hub
• China’s electricity costs are significantly lower than the
global average
• Bitcoin Magazine estimated mining in China costs
$2/GHash, compared to $7-$8 for some US mining
pools
Cost Advantage
• China is home to many of the world’s major mining
equipment manufacturers
• Examples: Avalon, ROCKMINER, AntMiner, HashRatio,
Gridseed, SilverFish and Zeus
Major
Manufacturers

12. Exchanges
Low Fees Strong Demand
Great Service Global Relevance
Speculation
& Trading

13. Wallets and Secure Storage
Wallet
Popularity
Active mining
Sector
Demand for
Storage
Unaffected by
regulation

14. Payments
Demand Regulation
Chicken and Egg Problem!

15. Continued Threats to Bitcoin
Bad Actors
• Poorly or
unfaithfully
managed Bitcoin
enterprises:
• Damage faith in
the industry
• Prevent wider
adoption
Volatility
• For some short-
term speculators,
volatility is
appealing
• Bitcoin’s
continued
volatility remains
a barrier to
broader
adoption
Regulation
• Global regulatory
framework is
taking shape
• It is important
for responsible
industry leaders
to take an active
role in this
dialogue
Hackers
• DDOS, Social
Engineering,
variety of
methods to steal
• Drive up
operating costs
• Further damage
to confidence in
industry

16. STORE OF VALUE  ASSET CLASS
What Drives Bitcoin Today?

17. Store of Value
Asset Class Price (USD)
Silver (oz) $21
Stocks (S&P 500) $67
US Corporate Bonds $99
Crude oil (barrel) $106
US Real Estate (sq. foot) $122
Bitcoin $600
Gold (oz) $1,320
Manhattan Real Estate (sq. foot) $1,398

18. $1,320
$600
$122 $106 $99 $67 $21
-
200
400
600
800
1,000
1,200
1,400
Gold (oz) Bitcoin US Real Estate
(sq. foot)
Crude oil (barrel) US Corporate
Bonds
Stock (S&P 500) Silver (oz)
Relative Price (USD)
On a per-unit basis,
Bitcoin is rather expensive

19. How to Normalize Prices?
How to you compare something
physical with something virtual?

20. Value “Per Capita”
Asset Class Total Value Value Per Capita
Bitcoin $7 billion $1
USD Money Supply (M2) $1.3 trillion $183
Oil $32 billion $485
Gold $7 trillion $1,000
USA Real Estate Market $35 trillion $5,000
Govt. Bonds $41 trillion $5,900
Corporate Bonds $42 trillion $6,000
Stock Market $54 trillion $7,500

21. Asset Price Per Capita (USD)
$7,500
$6,000 $5,900
$5,000
$1,000
$485 $183 $2 $1
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
On a Per-Capita basis,
It’s pretty cheap!

22. Bitcoin’s Appeal
• Scarce Commodity:
– Only 0.003 BTC for every person on Earth
• The total USD value of all Bitcoin in circulation
equals:
– $1.09 per Person, Globally
– Less than 0.02% of current global stock market
capitalization
– Only 0.1% of all gold in circulation

23. OVERCOMING UNCERTAINTY
The Regulatory Environment

24. China has NOT banned Bitcoin
China has NOT banned Bitcoin!
It is being Suppressed… 

25. Interpreting PBOC Regulation
• Rumored Statements + Western Press = New Regulation?
• Many believe that China has “banned” Bitcoin (…again)
• The December 5th “Notice on Defending Against the Risks of
Bitcoin” remains the definitive statement of the PBOC’s stance
towards Bitcoin:
– Bitcoin is not a currency of “real meaning”
– It is a special class of virtual commodity
– Buying and selling Bitcoin is a form of online commodities
purchasing behavior; Individuals have the right to
participate, provided they are willing to undertake the risk
The Central Bank has NOT banned Bitcoin.
It has enforced a stricter interpretation of its Dec. 5th, 2013 statement.

26. PBOC Regulation 2013-2014
• The Central Bank has more strictly enforced its initial statement
– Disallowed Payment Processors (Dec 2013)
– Disallowed Banks (May 2014)
– Disallow Vouchers?
• Causes of Uncertainty
– Discrepancies in enforcement timelines and jurisdictions
– Incommunicative nature of the People’s Bank of China
– Information vacuum that gets filled by speculation (and speculators!)
• It is important for China’s industry leaders to communicate
clearly and effectively on this matter
– However, our ability to do so is often determined by the extent to which
regulators communicate with us

27. PBOC Attitude
Zhou Xiaochuan, PBOC Governor (April 2014)
• “Banning Bitcoin is Out of the Question”
• 谈不上取缔比特币
We are safe for now. 

28. PARALLEL PATHS?
Bitcoin and Internet Finance

29. Internet Finance in China
Wealth
Management
Products
• The largest money market fund in China is not run by a financial institution
• Alibaba’s Yu’E Bao has more investors than the country’s equity markets
• Tencent’s WeChat, with users roughly equal to the US population, offers a WMP with
annualized return of 7.4% (commercial banking sector’s average return: 6%)
Peer-to-Peer
Lending
• Over 1,000 platforms in China
• P2P loans reached 68 billionn CNY ($11bn) in 2013, 3x times 2012 levels
• VC’s take notice
• Renrendai obtained $130 million in funding (2014)
• 74 closed or went bankrupt in 2013
Virtual
Payment
Systems
• In 2013, commercial banks handled mobile payments worth 9.64 trillion CNY ($1.6 trillion)
• Without even going to the bank, you can:
• Pay the utilities with AliPay (AliBaba)
• Pay for a taxi with WeChat (Tencent)
• Pay for just about anything on Taobao

30. Internet Finance in China
•In the past several years,
large tech companies
moved aggressively
•Services include investment
and payment products
Technology
Innovation
•Released competing
products
•Pushed for regulation
Banks React •Encourages “healthy”
Internet Finance activity
•Blocks Tencent and
Alibaba’s virtual credit card
services
•Future regulation uncertain
Government
Regulation

31. Wealth
Management
Products
•The largest money market fund in China is not run by a financial institution
•Alibaba’s Yu’E Bao has more investors than the country’s equity markets
•Tencent’s WeChat, with users roughly equal to the US population, offers a WMP with annualized return of 7.4% (commercial banking sector’s average return: 6%)
Peer-to-Peer
Lending
•Over 1,000 platforms in China
•P2P loans reached 68 billionn CNY ($11bn) in 2013, 3x times 2012 levels
•VC’s take notice
•Renrendai obtained $130 million in funding (2014)
•74 closed or went bankrupt in 2013
Virtual Payment
Systems
•In 2013, commercial banks handled mobile payments worth 9.64 trillion CNY ($1.6 trillion)
•Without even going to the bank, you can:
•Pay the utilities with AliPay (AliBaba)
•Pay for a cab with WeChat (Tencent)
•Pay for just about anything on Taobao
•In the past several
years, large tech
companies moved
aggressively
•Services include
investment and
payment productsTech
•Released
competing
products
•Pushed for
regulation
Banks React
•Encourages
“healthy” internet
finance activity
•Blocks Tencent
and Alibaba’s
virtual credit card
services
•Future regulation
uncertain
Central Govt.
Internet Finance in China

32. GOING FORWARD, GOING GLOBAL
What’s Next for Bitcoin China

33. Going Forward, Going Global
2014 Grow Along with Global Trends
Wait and See: Regulation in other Countries
Continue to Serve China Domestic Market
Bitcoin in China: A Future For Certain

34. Current Trends in China
• Mining Continues to Lead
• More Professionals, Speculation
• Offline Buying/Selling, OTC
– NEW: BTC China: Mobile Picasso
– “ATM” Sell for Cash
• Bitcoin 2.0 Developments
• Bitcoin Investments Programs
• More Alt-Coins

35. THANK YOU!
Bobby Lee @bobbyclee
CEO, BTC China
Board Member, Bitcoin Foundation