care much if the government
was collecting information
about them. What did it
matter to the ordinary citizen
if he or she wasn’t doing
anything wrong?
Within
the
growing
Bitcoin community, there was
a similar sense that most
users
weren’t
all
that
concerned about the total
privacy of their transactions.
Perhaps more important, with
the price of Bitcoin now
hovering near $1,000, there
was a growing swell of voices
talking about the virtues of
Bitcoin that had nothing to do
with whether a government
could or could not track
users.
On December 1 the first-
ever research on Bitcoin from
a Wall Street firm was
released; this report called it a
“potentially
game-changing
disruption” to the payments
industry. Gil Luria, a research
analyst at the trading firm
Wedbush, wrote about the
technology with the kind of
excitement normally found at
Bitcoin meetups.
“We see the intrinsic
value of Bitcoin as the
conduit in a new global
crowd-funded
open-source
payment
network,”
Luria
wrote.
By
Luria’s
analysis,
Bitcoin had tapped only 1
percent of its potential market
and the price of each coin
could easily go up to ten or
even a hundred times its
current
level,
to
some
$100,000 a coin.
The same points got more
attention when they were
made four days later in a
research report from Bank of
America Merrill Lynch, the
first of the major banks to
chime in. Bank of America’s
chief
foreign
exchange
strategist,
David
Woo,
expressed more notes of
skepticism
than
Luria,
pointing to the dangers of
Bitcoin’s
volatility
and
association
with
the
underworld.
But
Woo’s
fourteen-page report noted
that in addition to the
possibility of a new payment
network,
Bitcoin
could
“emerge
as
a
serious
competitor”
to
money-
transfer
businesses
like
Western Union.
Woo’s price forecast for
Bitcoin was not as optimistic
as Luria’s, but he argued that
the services Bitcoin offered
could be worth, in total, as
much as $15 billion, or
$1,300 per coin.
The notion that Bitcoin
could provide a new payment
network was not terribly new.
This is what Charlie Shrem
had been talking about back
in 2012, and BitPay was
already using the network to
charge lower transaction fees
than the credit card networks.
But the idea took on a
different weight when it came
from employees at banks that
had the potential to adopt and
popularize the technology.
The clearest indication of
how quickly this was moving
came not from the public
research reports, but instead
from an e-mail that Pete
Briger,
the
chairman
of
Fortress Investment Group,
got from a top executive at
Wells Fargo, the nation’s
largest
bank
by
certain
measures.
Briger
had,
in
the
summer, floated the idea of
Fortress
partnering
with
Wells Fargo on a mainstream
Bitcoin exchange. Then, the
bank had declined to pursue
the opportunity and Briger
had pulled back on his big
ambition to get Fortress into
the virtual currency space.
Now, though, Wells Fargo
was back and wanted to
reopen the conversation. The
men
began
planning
a
meeting at Fortress’s New
York
headquarters.
Wells
Fargo
would
never
do
anything that conflicted with
its government regulators, but
it now seemed possible to do
Bitcoin
work
with
the
blessing of those regulators.
WHILE BITCOIN WAS winning
mainstream approval in the
United States, it was moving
in the opposite direction in
China. On December 5, just
after Bobby Lee had boarded
a plane in Shanghai for his
first business trip to the
United States since Bitcoin
had exploded in China, he got
a call from a reporter at
Bloomberg
News,
who
explained that sources were
telling him that China’s
central bank, the People’s
Bank of China, was about to
release
virtual-currency
regulations.
This was news to Bobby.
The deputy governor of the
People’s Bank had said back
in November, in unscripted
comments, that Bitcoin was
unlikely to get legitimacy, but
that people were nonetheless
free to participate in the
market. That had led many
people to assume that the
central bank would take a
hands-off approach. This had
helped the frantic speculation
on Bitcoin to continue, with
the price above 7,000 yuan on
the day Bobby was flying to
San Francisco.
But
as
a
longtime
observer of markets, Bobby
knew this frenzy was unlikely
to end with anything other
than a dramatic crash and,
when it did crash, it was not
going to help Bitcoin’s long-
term popularity or status with
the
Chinese
government.
Bobby had been warning
people that the price was
unlikely to keep rising, but he
wasn’t averse to some help
from the central bank.
“We’re happy to see the
government start regulating
the
Bitcoin
exchanges,”
Bobby told the reporter
before quickly signing off.
Bobby spent the flight in
an
optimistic
mood,
imagining that the uncertain
state in which he’d been
operating would soon be
cleared up. But when the
plane landed and he turned on
his phone, he had over a
dozen messages waiting for
him. In one of them, his head
of government relations, Ling
Kang, said, “Whatever you
do, call me first.”
On the long walk to
customs, Bobby got Ling on
the phone and told him he
had
heard
about
the
regulations before taking off.
“No, no,” Ling said in the
Mandarin
they
used
in
conversation, with an audible
note of fear in his voice.
“Bobby, this is the real deal.”
The document that had
been released while Bobby
was in the air was indeed
from the People’s Bank, but it
was also signed by four other
major
ministries,
and
it
created deep uncertainty for
the future of Bitcoin in China,
Ling said.
The good news was that
the agencies had declared that
Bitcoin was not in itself