In our previous commentary, we looked at the future of Bitcoin in China and its potential to become a widely adopted and used virtual currency. One aspect of its development which will be critical if the fledgling currency is to really gain traction is the
maturation of Bitcoin as a transaction platform.
*** NB: As you likely have heard, The Silk Road, one of the largest websites in the world trading illegal goods and services has been shut down. The users of the site typically used Bitcoin to pay, so this revelation has sent the value of Bitcoin spiraling.
Although we see short-term softness in the price of Bitcoin, likely Silk Road closing will be better for Bitcoin in the long run.
Just become more accepting
So far, venues that accept Bitcoin, whether virtual or not, are fairly limited in China. Online, there are about 10 shops on Taobao that accept Bitcoin as payments. These companies are selling anything from mobile phones and computer accessories, to antiques
In addition to being limited in selection, most of the goods tend to be relatively cheap. With the exception of those selling mining devices, the majority of vendors sell items priced at RMB 20 to 200, which is likely because that as the value of Bitcoin
fluctuates widely, so it is still somewhat risky to price in Bitcoin and purchase expensive goods with Bitcoin. Taobao also has an escrow functionality that ensures that buyers actually receive the goods they have purchased, but as Bitcoin does not go directly
through Alipay or on the Taobao platform, escrow is really not possible.
To solve this problem, domestic entrepreneurs and Bitcoin enthusiasts are trying to launch platforms to both satisfy this escrow requirement and speed up the confirmation of payment, which currently can take several hours. Yesbtc (比特汇) is one of these that
was launched in September 2013. Yesbtc provides escrow services very similar to what is available on Alipay. The buyer first loads Bitcoin on the Yesbtc platform. Yestbtc will then inform the seller who will then send the goods and after confirmation, the
platform will release the Bitcoins to the seller. As Yesbtc acts as a virtual wallet, everything is on-platform and the transaction is faster and safer.
Life beyond Taobao
Outside of Taobao, there are a number of other online businesses that have been setup to address different aspects of Bitcoin exchange and transactions. BtcTele.com was setup recently and allows users to exchange Bitcoin for mobile phone credit. The platform
takes a 1% fee and it can take up to an hour for the credit to reach the buyer’s mobile phone, but it seems to be gaining popularity.
In addition to websites selling products and services, there have been a number of sites setup to convert actual currency into Bitcoins. These can be sites like BTC China, that allow you to register an account and trade online, or merchants on Taobao that
will sell Bitcoins as ‘products’; in other words, the good that you’re paying for online is the actual Bitcoins themselves which would then be sent to your account.
One of the first actual bricks and mortar merchants accepting Bitcoin in China is Cheku Café in Beijing; many of the café’s customers are technology savvy, which likely helps the adoption of the currency.
Preaching to the choir
Through discussions with many of the merchants and websites dealing in Bitcoins, we found that most of the merchants are Bitcoin enthusiast themselves and are very bullish on the potential growth opportunity, but many are still concerned about trust. Some
interviewees indicated that if you transact in Bitcoin, it’s better that you are a bit of a Bitcoin enthusiast so that you are aware of the risks, otherwise it’s better to transact in RMB.
What Bitcoin needs
Most observers believe that although Bitcoin without an actual widely accepted payment / transaction platform will still fulfill payment niches in the market, to really be successful, the virtual currency needs to enter and be transacted in the mainstream.
As we can see from the examples above, Bitcoin acceptance is moving in the right direction, but it does have a ways to go.