• Tue
  • Sep 2, 2014
  • Updated: 4:15pm

Bitcoin

Bitcoin, released to the world in 2009 by a person or people called Satoshi Nakamoto, is not backed by a central bank or a government and is seen as an alternative payment system. In February 2013, Bitcoin went into the mainstream as a monetary crisis threatened to bankrupt Cyprus, seen as a safer bet. Early adopters of Bitcoin have been richly rewarded as the price has soared – in one case, a young Norwegian bought a house from an $850,000 windfall on a US$22 investment.

NewsHong Kong
VIRTUAL CURRENCY

Bitcoin exchanges have struggled to survive on mainland

PUBLISHED : Tuesday, 24 June, 2014, 4:01pm
UPDATED : Wednesday, 25 June, 2014, 8:33am
 

The average lifespan of mainland-based virtual currency businesses is just nine months, indicating Beijing's success in limiting financial activity outside the official banking system.

A dozen Chinese bitcoin exchanges have gone bankrupt or shut down in the past 12 months as they have struggled to be profitable or just disappeared.

"The [People's Bank of China] wants to suppress and control bitcoin so it doesn't go crazy or wild," BTC China chief executive Bobby Lee said in Hong Kong yesterday.

Speaking to about 500 participants in Hong Kong's first bitcoin conference, Lee said the exchange failures had damaged the industry and prevented wider adoption of the currency.

"This is actually a sad story as in each case people lose their money because they've left their money in one of these exchanges," he said at the Inside Bitcoins trade show. "Some run away, some default."

On Sunday, it was revealed that police were investigating the Hong Kong Crypto Exchange, a local industry newcomer, over the alleged disappearance of tens of thousands of dollars worth of the virtual currency.

A handful of exchanges including Huobi, BTC China and OKCoin have circumvented restrictions placed by the People's Bank of China on virtual currencies. The Chinese firms have risen to rank among the biggest - with bitcoins valued globally at US$7 billion. Lee, a former Walmart China executive, said on Monday "ordinary people should not buy bitcoin" and warned price volatility would continue for a decade as the currency tried to grow on a stable footing.

A crackdown by the PBOC has resulted in Hong Kong emerging as a possible haven for the virtual currency community.

Zennon Kapron, author of Chomping at the Bitcoin on the history and future of the currency in China, said: "Hong Kong is both a jumping-in point for companies leaving China and foreign companies coming into China.

"It's a natural bridge for foreign countries and the mainland - so it's natural for exchanges to move to Hong Kong."

Leonhard Weese, president of the newly launched Bitcoin Association of Hong Kong advisory group, said his organisation had brought virtual currency businesses together "to be prepared for the day when Hong Kong does bring in regulation" and to help educate people about bitcoin.

The price of a bitcoin peaked at US$1,242 late last year but tumbled to just US$360 in April.

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philip.c.cohen
Ignoring for a moment the use of the Bitcoin system for nefarious purposes, the choice of payment method by a buyer, from those offered by a retail merchant, is driven by the payer who usually bears, directly, none of the cost of such choice. Why then would any online buyer choose to complicate any retail transaction, particularly a “local” transaction, by paying with Bitcoin, which is effectively a “foreign” currency, and a volatile one at that, that you have to buy/sell at a negotiated price and requires a 1% buy/sell fee at either end of every transaction (ie 2% total) for a prompt processing (otherwise you are effectively speculating in foreign currency), and has no transaction dispute moderation process? Dream on Bitcoin fanboys …
53a9c675-33b0-403e-a567-4c5b0a320968
What 1% buy/sell fee are we talking about? Are you talking about 3rd party Bitcoin processing companies like Bitpay? That's only for merchants who don't want to accept bitcoins directly. Merchants are free to accept bitcoins without using Bitpay and there is no mandatory transaction fee.
Using bitcoins online is a choice. But it is certainly not more complicated. Actually, it is much easier and faster. Much less time needed to fill in fields at the Check-Out.
We are far from a world where all merchants accept Bitcoins. But if they did, I would certainly use bitcoins when travelling. Why pay huge foreign exchange fees and carry around cash for my vacation and then have unspent foreign cash to convert back to local cash when I return. If I use credit cards, the companies always tack on an exchange fee (~2.5%).
Even around the local city, if merchants took Bitcoin, I wouldn't need to make weekly trips to the cash machine.
I don't think people are predicting that Bitcoin will replace credit cards and come with insurance and all that stuff that 3rd parties provide (but don't forget that credit card companies are in business to make money so that protection comes at a cost to someone. 2%-3% to the merchants) but that doesn't mean Bitcoin has no place in world of commerce.
53a9c675-33b0-403e-a567-4c5b0a320968
You sound upset. Mr. Lee has not said anything incorrect. Only people who are willing to take big risks should invest in Bitcoin. Like he said, you are making a bet when you buy Bitcoin. He's just being honest.
When you say "Mr. Bobby Lee's Bitcoin", you do know that Bitcoin is peer to peer right? It is nothing like private virtual currencies like Amazon Coin, Linden dollars, or QQ Coin which are controlled by 1 company.
What do you mean power of the exchange? If you leave cash in a bank and it goes bankrupt, you also lose your cash. People who had funds in Lehman Brothers got wiped out. If you don't want to lose your bitcoins if an exchange disappears, then don't keep your bitcoins on an exchange. Keep your bitcoins in your Bitcoin wallet safe at home. Encrypt and backup your bitcoins (keys) onto paper or onto USB drive. Put a strong password on your wallet so even if someone steals your computer, they can't spend your bitcoins without knowing your wallet password. When you buy a new computer, restore your bitcoin keys from the encrypted backup onto your new computer and now you got all of your bitcoins back even though your Bitcoin wallet and computer was stolen. Encrypted backup is quick and easy and only done once since you only need to backup the private key. Now try that with cash.
sipsip1238
So what you are saying is that to keep my virtual currency safe, I need to use something physical (paper or usb)?
I'm not upset about the idea of bitcoin, but so far, the trend has suggested that people who set up exchanges or claim to have things to do with bitcoins have mostly been people who are trying to make a quick buck, and with HXcex, it looked more like a scam than a geniune desire to promote bitcoins.
I've seen it with junior traders before, they start on the desk and punt on the securities/asset classes with the biggest volatility, and end up burning themselve or worst having their limits taken away from them; for bitcoins to become something remotely useful, it's going to take a long long time; and before then, you'll need to weed the vultures out which are already tarnishing bitcoin's reputation - which will most likely take more than a decade.
sipsip1238
If being ordinary means avoiding scams in a very undeveloped and exposed market, then happy to say that ordinary I am! You can take your reverse psychology tactics elsewhere.
Have been in finance as a PM for almost a decade now, so have already experienced much more volatile market than Mr. Bobby Lee's bitcoin has. And I highly doubt that believing in the internet is the same as believing in bitcoins. For one, the technology behind bitcoins while sophisticated, does not offer enough insurance for the owners, it offers a load of power to the exchange (to the extent that they can up and leave!) but definitely not enough for the owners.
 
 
 
 
 

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