Bitcoin owes much of its global success to users in China. Nevertheless, local authorities decided to turn cryptocurrency into virtual “candy wrappers”

The first bitcoins, “minted” in 2009 on the computer of their mysterious creator, the mysterious Japanese Satoshi Nakamoto, were worth absolutely nothing. But just four years later, the price of one bitcoin exceeded $1,100, largely due to speculative demand for them in China.

The little-known Shanghai company BTC China recognized the potential of cryptocurrency in time and was able to become the world's largest bitcoin exchange with a daily turnover of more than 100,000 virtual coins, or $100 million (the closest competitor, the Japanese Mt. Gox, has a turnover half as much). The Bitcoin exchange began to appear in the news more and more often, and in the fall of 2013 it attracted $5 million in investments from the Silicon Valley venture capital company Lightspeed Venture Partners.

The clouds gathered when the Chinese authorities noticed the Bitcoin market.

In December 2013, the People's Bank of China recommended that trading companies not accept bitcoins for payment, and prohibited banks and financial institutions from converting digital currency into yuan. So the Chinese authorities brought the bitcoin rate below $500.

Cryptocurrency is especially loved by internet geeks, libertarians and sites that sell pornography and marijuana. What are her strengths? There are no geographical boundaries or government control for bitcoins. Currency can be “generated” on computer hardware and exchanged on a peer-to-peer computer network. Transactions can be traced, but their participants cannot be identified. Investors and entrepreneurs like bitcoins because they can do without intermediaries when making online payments.

Venture capital firm Andreessen Horowitz invested $25 million in December into San Francisco-based bitcoin trading platform Coinbase. This is the largest investment in the Bitcoin business today. “The world is becoming increasingly digital; paying with banknotes, gold or credit cards will soon become obsolete. “Everyone will have bitcoins,” promises BTC China CEO Bobby Lee.

True, the future of BTC China itself no longer looks so promising. When Chinese regulators recommended that financial companies not engage with cryptocurrency exchanges, BTC China immediately lost two payment operator partners.

But this doesn't bother Bobby Lee. “There are 300 payment operators in China. We will negotiate with everyone,” he says. Lee doesn't believe the authorities want to destroy the market. According to him, the screws are being tightened to prevent rampant speculation: “No one has banned exchange exchanges yet. This gives us hope and gives us room to manoeuvre.”

Lightspeed's Jeremy Liu is unfazed by the news from China. According to him, he invested in BTC China with a long-term view. “Anyone who invests in Bitcoin should understand that news from regulators will provoke greater volatility. We invested for a 5- to 10-year horizon, not two to three weeks,” says Liu. — For Bitcoin to be credible, it needs reputable leaders who can negotiate with regulators. And that's Bobby Lee."

Lee, 38, was born in Ivory Coast, where his parents moved from China to run a sandal factory. Lee attended an elite boarding school in the United States, graduated from Stanford University and worked as a programmer at Yahoo for eight years. In 2006, he came to China, where he got a job as a developer at EMC. Five years later, Li became the chief technology officer of Wal-Mart in China and worked on the retailer's local shopping website.

The CEO of BTC China first heard about cryptocurrency in the spring of 2011, when he was visiting his relatives in California. His brother Charles "generated" bitcoins on his home computers. Why not do the same thing in China, Lee thought and bought several graphics cards from his brother. He started generating bitcoins in July when he started working at Wal-Mart.

The entrepreneur’s first acquaintance with cryptocurrency was not impressive.

“That summer was very hot, the computers were heating up the rooms,” he recalls. “My wife kept complaining about the noise and the heat, so I stopped them.” The 25 bitcoins that Lee ended up making in four months seemed like a waste of time: they only cost $300, even though he spent $1,000 on equipment.

In 2012, Wal-Mart decided to abandon the development of its own trading platform, and Lee was left without a job. Then he decided to return to bitcoins and distribute them in China. BTC China had already existed for two years by that time; it was the first Chinese cryptocurrency exchange site. “Back then the company consisted of two founders who were engaged in it in their free time from their main jobs,” recalls Lee. The exchange commission was 0.3%, but only a few hundred transactions were carried out per day. Lee tracked down the founders and convinced them of the dizzying prospects of the site. In April 2012, he became the CEO of BTC China.

In June, Lee and his partners relaunched the site and began looking for venture capital. In September, they raised funds from Lightspeed and waived the fees. At this time, Bitcoin transactions around the world grew by leaps and bounds. The FBI gave Bitcoin a great PR by shutting down the drug selling site Silk Road (it only accepted payments in cryptocurrency). Chinese search engine Baidu has started accepting payments in Bitcoin. We added advertisements and hearings on currency in the US Senate.

But in December, the People's Bank of China announced that bitcoins are not a currency and should not be traded on the market. The bank urged Baidu and other Chinese companies not to accept payments in cryptocurrency. As a result, the price of bitcoins on the BTC China exchange fell to $345.

Li did not panic, because the recommendations of the Chinese Central Bank did not apply to ordinary citizens. In addition, BTC China introduced mandatory identification of its clients, so the authorities should not have suspicions that the company was facilitating money laundering. Plus, the exchange returned commissions on transactions to temporarily cool the market.

But soon the hopes of the Chinese Bitcoin business were truly dashed.

Authorities have banned payment operators from cooperating with Bitcoin exchanges. BTC China and other companies could no longer transfer customer funds from yuan to bitcoin and vice versa - what exchanges exist for. “It looks like there will be pressure on exchanges until they stop working,” says Shanghai-based cryptocurrency entrepreneur Jack Wang.

In addition, business has not forgotten how the authorities dealt with another digital currency. Eleven years ago, the Chinese Internet service Tencent created the virtual currency Q Coin, which was circulated in online games. It became so popular that even exchanges began to emerge to exchange Q Coin for yuan and gold. Chinese authorities declared the practice illegal in 2007, and the currency's value dropped to zero.

In China, you can still pay with cryptocurrency, but there are fewer and fewer opportunities to convert it into real money. Thus, bitcoins become the virtual candy wrappers that many skeptics consider them to be. “If necessary, we will launch other services for working with bitcoins,” promises Lee (the company is launching a secure online bitcoin wallet, Picasso, at the end of December). - This is not the end yet. This may be the end of one chapter of our story, but it is not the end of the entire company."

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