illegal
and
could
be
considered a kind of digital
asset that people should be
allowed to buy and sell. The
document also said that
virtual-currency
exchanges
needed to register with the
Ministry of Information; this
suggested that the exchanges
weren’t going to be shut
down.
The bad news, Ling
explained,
was
that
the
government had ruled that
Bitcoin was not a currency,
but was, instead, a digital
commodity.
The Chinese government
had stepped right into the
middle of the ongoing debate
about how to define Bitcoin
and had actually found itself
in agreement with Wences
Casares and many other
advocates for Bitcoin, who
believed that in 2013 the files
on the blockchain were more
similar to commodities, like
gold, than to currencies, like
dollars and euros, because
Bitcoins were not yet widely
or easily used as a medium of
exchange or as units for
accounting. Beyond those
qualities,
the
Chinese
government had also said that
Bitcoin lacked the most
important characteristic of a
currency:
government
backing.
The
Chinese
government’s categorization
of Bitcoin as a digital
commodity didn’t, on its face,
seem terrible to Bobby.
Within China, almost no one
was using Bitcoin to buy and
sell things—it was still just a
speculative investment. The
problem, though, was that
because it was not considered
money, the government had
declared that banks and
payment processors could not
deal with Bitcoin, either
directly or indirectly.
Bobby grilled Ling on
what this meant. Would
Tencent,
the
payment
processor,
have
to
stop
transferring yuan to BTC
China
for
customers
if
Tencent
itself
wasn’t
touching Bitcoins? If so, that
could be deadly.
As was often the case
with Chinese government
statements, the specifics were
left unclear, giving party
officials flexibility to deal
with the situation as it
progressed.
Ling
wasn’t
hopeful about where this
would lead. The statement
made it clear that government
officials were not happy with
the degree of speculation they
had seen.
But
Bobby
was
an
American-educated optimist
and Tencent hadn’t shut BTC
China down yet. What’s
more, there was obvious
room in the statement for
them
to
continue
doing
business.
The market seemed to
agree with Bobby. In the hour
immediately after the Chinese
government statement had
come out, the price of Bitcoin
had entered a free fall,
dropping 25 percent to 5,200
yuan. But soon thereafter the
price began recovering, and it
was already back to around
6,400 by the time Bobby was
through customs.
That afternoon Bobby
gave a talk at his alma mater,
Stanford, and explained that
he
was
“cautiously
optimistic” about the new
rules.
But
that
day’s
statement was not the final
word from the government.
CHAPTER 27
December 7, 2013
The extent to which Bitcoin
could survive and grow
without government approval
was on display in Buenos
Aires, at the first conference
hosted by Bitcoin Argentina.
The group had been founded
by Wences Casares’s old
friend Diego along with a
partner he had met at a
Bitcoin Meetup earlier in the
year. For the conference the
men had booked a big hotel
in downtown Buenos Aires
and managed to sell four
hundred tickets, with about
40 percent going to foreigners
like
Roger
Ver,
Erik
Voorhees, and Charlie Shrem.
The ticket-buying process
itself had put a spotlight on
one of the most promising
Bitcoin startups to emerge
from Argentina and one of
the first companies anywhere
using the network to legally
provide a service that wasn’t
possible with the traditional
financial system.
In Argentina, credit card
transactions with foreigners,
like the sale of conference
tickets
to
Americans,
normally took a long and
expensive route before paying
out
in
Argentina.
The
American customer’s credit
card company would deduct
around $2.50 from the $100
ticket price to send the money
to Diego’s Argentinian bank.
From there, the Argentinian
bank would generally charge
another 3 percent for the
foreign exchange, leaving
$94.50. The big hit, though,
happened
when
the
Argentinian bank turned the
dollars into pesos. If Diego
converted the $94.50 with a
money changer on the street
he could have gotten the
unofficial rate of around 9.7
pesos for each dollar, leaving
him with 915 pesos. But the
bank exchanged the money at
the official exchange rate set
by
the
government—6.3
pesos at the time of the
conference—giving
him,
instead, 595 pesos. On top of
that, Diego’s bank wouldn’t
give him those pesos until
twenty
days
after
the
customer
purchased
the
ticket.
The Argentinian Bitcoin
startup, BitPagos, provided a
clever
way
around
this
expensive morass. BitPagos
took the $100 credit card
payment in the United States
and charged a 5 percent fee.
But instead of transferring the
remaining
$95
to
an
Argentinian bank, BitPagos
used the dollars to buy
Bitcoins in the United States.
BitPagos then transferred the
Bitcoins directly to Diego. He
could either keep the Bitcoins
or exchange them for pesos at
the unofficial exchange rate,
thus ending up with around
920 pesos, instead of 595.
And rather than taking twenty
days, BitPagos gave him his
Bitcoins in two days.
BitPagos had been started
earlier in the year by two
young Argentinians, a man
and a woman, who had been
running
a
consulting
company and struggling to
take payments from foreign
customers. In addition to
collecting ticket payments for
the foundation, the new
company was getting traction
with hotels that took money
from foreign tourists and
didn’t want to pay the cost of
getting those payments into
pesos. By the time of the
conference,
BitPagos
had
already signed up around
thirty hotels. Most of these
hoteliers didn’t care about the