CEO of pioneering China exchange celebrates bitcoin’s ownership model and sees the ‘future of value’ as digital
(MA XUEJING / CHINA DAILY)
‘Everybody loves bitcoins,” said Bobby Lee, the hyperbole-prone CEO and cofounder of BTCC — the world’s longest-running bitcoin exchange and the first of its kind in China since 2011.
His remark was to a frenzied crowd at the Rise tech conference in Hong Kong in July, where he gave away a stack of physical bitcoins after waxing ecstatic about the “revolutionary” change the digital currency will bring.
All physical possessions — cars, currencies and more — are conferred to you through identity-based details, but this is not true ownership, said Lee in his speech.
“Identity-based ownership is always controlled by a third party,” he said, citing banknotes as an example. Governments can demonetize certain denominations on a whim or adopt monetary policies, he said, such as printing unlimited money into the financial system and debasing currencies in the process (as seen in many nations in the West).
The introduction of bitcoin in 2009, a decentralized cryptocurrency, allowed people for the first time to pass value to one another via information, and have true ownership of money, he said.
“The future of value is digital, where digital value can be transacted person to person by information through SMS, WeChat, Facebook, Snapchat, even PowerPoint slides.”
During his talk, Lee presented a small amount of bitcoin on a slide with its QR code and invited the audience to take it. Sure enough, one audience member quickly scanned the code and took the prize.
The crowd’s rush for Lee’s physical bitcoins post-speech reflected the excitement for cyber money. Markets such as the Chinese mainland, Japan and South Korea have jumped on the bitcoin bandwagon.
The Chinese mainland accounts for more than 90 percent of global bitcoin trading and reportedly is the market where around 70 percent of new bitcoins are mined.
However, the innovation is not making waves everywhere as is evident from Hong Kong’s lack of adoption.
“Hong Kong is all about the status quo,” Lee said, “and the fact that Hong Kong is a finance city and the whole finance industry is anti-bitcoin are partly why (it has not taken off).”
Traditional finance and banking industries view such innovation as a disruptive threat to its businesses, and this expert noted that such fears are warranted.
“Bitcoin is presenting itself as an alternative asset class that challenges paper currency and government-issued money … it’s not going to substitute all of money but it’s a decent substitute for stored value.”
The value of bitcoin is currently going off the charts, having quadrupled in 2017. In August, the digital currency surged above US$4,000, boosted by strong Japanese demand. And on Aug 31, a single bitcoin hit a new record high at around US$4,747.
Interviewed before the most recent surge, Lee said that in 10 years he sees the price of one bitcoin rising to as high as US$16,000.
But clearly he is a devotee and, as much as the alternative currency excites him, there are other observers who see it as a source of peril. Aside from its wild price swings, there are many security-related horror stories around this technology. The collapse of bitcoin exchange Mt Gox in Japan in 2014 lost around 850,000 bitcoins worth around half a billion US dollars, while South Korean exchange Bithumb announced in July that a hack had compromised the data of more than 30,000 customers.
Shanghai-based BTCC takes cybersecurity very seriously, Lee said, with specialists dedicated to protecting the platform. But he added that bitcoin exchanges are akin to banks in that they face such risks.
“It’s part of banking life, there is insurance that would pay for it, or the bank would pay out (the loss incurred by the users) from its profits.” Heists are the costs of doing business in this industry, he added.
It is safe to say that a decade ago, Lee did not expect to lead this risky life, let alone be at the center of China’s financial technology revolution. In fact, his path to bitcoin leader was not the straightest, having experienced many turns in Asia, Africa and the United States.
His grandparents left the Chinese mainland for Hong Kong in the 1940s, with their luggage, silver and gold coins in tow, and his family uprooted again to Africa to start a new life.
“It’s almost a joke that every Chinese immigrant story includes opening a Chinese restaurant somewhere and that’s what my family did,” said Lee, who was born in Cote d’Ivoire. Lee credits his work ethic to his family’s entrepreneurial spirit.
Since youth he excelled at math and sciences and envisioned a career in engineering. And he enrolled at Stanford University to do just that.
Lee was not aware of the Silicon Valley scene that was becoming the bedrock of the US tech revolution, but after arriving in California and learning about the computer science program at the prestigious academic institution, it all prompted him to switch to this course. “A lot of life is coincidental.”
After graduation, Lee dedicated 15 years of his life to working at major corporations including Wal-Mart and Yahoo, but it was his move to Shanghai in 2011 for a break that shifted his career trajectory. One episode in particular was discovering bitcoin through his brother Charlie, the creator of cryptocurrency Litecoin. Soon, Lee was mining bitcoin.
By 2013, his bitcoin obsession led him to do something big with the technology.
“I cold called (the founders of BTCChina, BTCC’s former name) and told them about my vision, what I could do, that we should join forces, that they should let me invest and become its CEO and to go get some investors,” he recalled.
The website was up and running in mid-2011, and Lee plus the startup’s two cofounders established the company in 2013 in Shanghai and secured funding from a Silicon Valley-based firm, Lightspeed China.
It did not take long for the company to explode onto the world stage, fueled by enormous Chinese bitcoin demand. Back then, the cyber money was worth 160 yuan (US$24) or less, he remembers.
Lee envisions a future where people have more choice with money, and most of all, where stored value cannot be stolen anymore. He is critical of lax monetary policies, particularly since the global financial crisis of 2008-09, by institutions that devalue currencies, such as US and Hong Kong dollars.
“These dollars issued by the governments are not backed by anything, there is no guarantee how many bars or grams of gold (you get in exchange for dollars),” he said, even comparing them to money in the Monopoly board game.
“Since 1971, when the US took the US dollar off the gold standard, the money we have today has no basis.”
This is why Lee is convinced if one kept a HK$500 (US$64) banknote for 20 years, its value would drop yearly, whereas the equivalent amount in bitcoin would be worth more over the same period.
In the Chinese mainland, he foresees bitcoin regulation going ahead based on conversations with the authorities.
“We’ve always wanted the People’s Bank of China and the regulators to come and take a closer look at digital currencies because we know this is the real thing,” he said.
Lee compares bitcoin to a long-term innovation like the Internet that can revolutionize society. This is a shift from the technology’s earlier days when China and many governments worldwide viewed it as a fad and made various interventions.
Since January, China’s regulators have worked closely with BTCC to supervise the platform, exchange ideas and feedback on how to regulate cryptocurrency exchanges, which Lee views as positive signs.
“I know it is going to happen in China, it’s a matter of when.”
CEO and cofounder of BTCC
1993-98: Bachelor’s and master’s degrees in computer science at Stanford University, California
2011-12: Vice-president of technology for Wal-Mart’s e-commerce business in China
2009-11: Chief technology officer of BesTV New Media, Shanghai Media Group
2007-09: Director of software engineering at cloud computing company EMC
1998-2006: Senior engineer manager at Yahoo
What is your proudest achievement?
I gave myself a chance in doing this startup, BTCC (in 2013), because all along I had been working for large companies. It was a big leap of faith to not take a full-time job and do this company.
Who are your role models?
(Microsoft cofounder) Bill Gates, (business magnate) Warren Buffett, (the late Apple cofounder) Steve Jobs and (former General Electric CEO) Jack Welch. I don’t idolize them because they are billionaires but because they are successful, which tends to mean they are monetarily successful too.
Is the yuan depreciation fueling bitcoin demand?
I don’t think so. Last year, we saw the depreciation of the yuan and capital (outflow) as seen from China’s foreign currency reserves going down, according to official figures, and we saw the bitcoin price rising.
Bitcoin did not cause the flight of Chinese capital going abroad or cause depreciation of the renminbi. Bitcoin has been around for over eight years ... how come (the yuan depreciation) happened suddenly in 2016 but not in previous years? It’s all correlation, not causation.