Lee, Li and Long, China’s Bitcoin players
By Elaine Dunn
One evening in March 2013, in an unassuming establishment called Cheku Café (车库咖啡厅) in Beijing’s tech district, young university and tech types gathered in anticipation to discuss the night’s event: that an American student named Jake Smith asked
if he could pay for his cup of coffee with Bitcoins. The most frequently asked question of the evening: How many coins do you own?
“Cheku” in Chinese means garage and the name is a nod to the famous Silicon Valley tech giants that started out in garages: Apple, Hewlett Packard and Microsoft. It is fitting that this was the venue chosen to host the night’s speaker: Li Xiaolai, China’s Bitcoin kingpin!
Bitcoin is a hot topic among China’s netizens. Why and what do ordinary Chinese think of it? For many, Bitcoin is more attractive, though riskier, than the Chinese yuan. It is popular because it circumvents their government’s strict capital controls. Ever the gamblers that they are, conversations on Sina Weibo suggest Chinese are impressed by Bitcoin’s skyrocketing price and the millionaires Bitcoin has created overnight. The world’s most famous Bitcoin millionaires are the Winklevoss twins, with approximately 120,000 bitcoins among their assets. (Value of a bitcoin range from a peak at USD1,200 to a low of USD500.)
Bitcoin, the virtual currency, which as of October 2013 had its largest market in China. Shanghai-based BTC China, founded in June 2011, was the world’s largest Bitcoin exchange. “Was” because it was banned by the Chinese government in December 2013from Bitcoin transactions. BTC China accounted for nearly one-third of the total Bitcoin market up until then, trading more than 100,000 bitcoins in a single day. The People’s Bank of China also prohibited merchants and other banks to accept Bitcoins or convert them into yuans in December, declaring “Bitcoin wasn’t a recognized currency and shouldn’t be used in the market.”
Business Insider reports that less than 1000 people own 50 percent of the currency, which users used to have to “mine” with complicated logarithms.
Following are three key players in the China Bitcoin scene:
BTC China CEO Bobby Lee, 38, was born and raised in the Ivory Coast to Chinese parents who could afford to send him to an “elite boarding school” in New Jersey. After graduating with a degree in computer science from Stanford, he worked at Yahoo and then moved to China in 2006 with EMC. After a short stint (July 2011 to early 2012) as Walmart’s CTO in China, he was out of a job when Walmart decided not to continue with an in-house eCommerce approach.
Lee’s brother first introduced him to Bitcoin in 2011. Looking for the next opportunity after Walmart, Lee found that China’s Bitcoin exchange, BTC China, was only a Website ran by two part-timers, Yang Linke and Huang Xiaoyu, and was trading a few hundred coins a day. He looked up the two partners and became its CEO in April 2012. He also invested his own money, sought out funding and by October 2012, had 20 employees and was trading more than 20,000 BTC a day
Despite the December setback, Lee maintains that Bitcoin and BTC China are here to stay. In a Jan. 6, 2014, article by Forbes, Lee said, “This is not the end. It may be the end of a chapter, but it’s not the end of our company.”
On Jan. 30, Lee “interpreted” the December decree by the People’s Bank of China that exchanges need to register meant “it recognizes exchanges as a business category and BTC China is a legitimate business.” As of Jan. 31, BTC China started accepting deposits to its corporate bank account and then transfer those funds into customer accounts. Customers can buy bitcoins through the corporate account as well.
The Beijing-based Li was the Checku Café Bitcoin speaker last March. He is an entrepreneurial sort. He was an accounting major and worked as an English teacher after graduation. He published a number of books on tackling TOEFL (Test of English as a Foreign Language) aimed at young Chinese hoping to study abroad. Meanwhile, the cram school he was teaching at went public and he wanted a safe haven for his newfound wealth. Apparently, he did not have much faith in the school! In the process of researching alternate investment ideas, he came across an online article by Satoshi Nakamoto, Bitcoin’s creator, on Bitcoin. He sold all his cram-school shares and bought bitcoins!
Li, 41, has since started his own chain of private schools in four China cities: Beijing, Nanjing, Shanghai and Shenzhen. He firmly believes Bitcoin is “one of the most significant inventions in the human history. Because it ensures the notion that private property is both sacred and inviolable is guaranteed by the certainty of mathematics rather than the will of governments or organizations.” He has since invested in a container-worth of computing equipment for “mining” bitcoins.
At one point, Li is purported to have Bitcoin holdings in the six digits. However, he said he would not recommend bitcoin mining for the faint-hearted because of the wild fluctuations.
The December Bitcoin announcement was followed closely by Long Yujiang also. The 25-year-old Chengdu resident had been “mining” bitcoins day and night since 2009, running up daily electricity bills of RMB14,000 on his 60 high-performance computers. He has the second-largest holding of Bitcoins in China, right behind Li Xiaolai.
Besides mining Bitcoins, Long has a business selling “mining” machines. A Chengdu website reports that his machines generate 50 new bitcoins on a good day and usually average 30 a day. Since mining is becoming more difficult, he is selling off some of his machines. He is planning a major bitcoin trading platform to rival BTC China this spring.
Before you rush off to start mining, ask where can you spend bitcoins. There are only a few thousand merchants worldwide who accept them. An article on Bitcoin in the Feb. 18 Wall Street Journal quoted Ajay Banga, chief executive of Mastercard Inc. saying, “The world is not short of currencies, so what is this currency solving for?”
For those interested in exploring the future of Bitcoin and virtual currencies, there is an Inside Bitcoins conference in New York City, April 7-8 at the Javits Convention Center.