JISHOU, HUNAN — #Bitcoin is still alive and well in China, a year after the central banking authorities clamped down hard on banks doing Bitcoin-related business. We can still exchange renminbi for Bitcoin; it’s just not as easy as it was before December last year.
Before the big crackdown, it was easy to transfer money from one’s bank account to any of several Bitcoin exchanges in China using the UnionPay interbank debit card system or the AliPay or TenPay third-party processor systems. So easy, that it appears Chinese Bitcoin speculation was pushing the exchange rate well over US$1,000.
After the central bank restricted bank transfers and required banks close the exchanges’ bank accounts, the value of Bitcoins tumbled very quickly and has yet to return to the $1,000 level. Today, it was trading around $325.
All but a few of the Bitcoin exchanges in China closed their doors. BTC China is one of the few that survives. It works around the banking restrictions by using vouchers as an intermediate step, and two representatives who accept the bank transfers. I took advantage of this system this week to transfer part of my paycheck to my US bank account.
Previously, I had been using another cryptocurrency, Ripple (XRP), to exchange for bitcoins. While Bitcoin trading was sharply curtailed, the banking authorities seemed to be giving Ripple a pass, so I could buy Ripple vouchers on TaoBao, China’s big online shopping site, with my UnionPay debit card without much trouble. Then I’d exchange the XRP for BTC and finally use Coinbase to deposit dollars into my bank account.
That avenue is now closed as well. After I got my pay, I went to TaoBao.com to buy Ripple and found all those options were entirely gone. I assume the long arm of the central banking authorities finally clamped down on renminbi-to-Ripple transactions, too. So, I decided to give the BTC-China voucher system a whack.
Here’s how it works. There are currently two resellers handling the money, each with an account on QQ, China’s ubiquitous instant messaging service. You send them an IM, they send back the bank account details. China’s banks allow interbank account transfers, so it’s a cinch to use your online banking to transfer money from your account to their account safely and quickly. Once they receive the funds, they send you two voucher codes which you enter at the BTC China website to obtain your Bitcoin.
The image image shows the CNY funding page. The resellers’ QQ links are near the bottom center and the voucher exchange button is at far right.
[UPDATE Jan. 23, 2015: BTC China is once again offering “express” purchase of vouchers, without going through the resellers. The fee assessed is 5% of the voucher’s value and the payment processing is handled by TenPay, which pulls the money from your China bank account. I used this method two weeks ago to transfer money to my US bank account.]
I was a bit wary of entrusting my hard earned cash to someone I don’t know, I admit. While BTC China has a very good reputation worldwide, you have to have some faith that this voucher exchange system will work.
It did. Within a few minutes of receiving my money, the reseller sent me the two voucher codes, which I used at BTC China’s website to buy Bitcoin. Total cost was nearly zero. My bank imposes a 1 renminbi (CNY 1) fee for interbank transfers. That’s about 16 cents at current exchange rates. BTC China imposes no fees to exchange CNY for BTC, and the usual BTC 0.0001 (3 cents) fee for Bitcoin-to-Bitcoin transactions.
Previously, I would transmit Bitcoin to Coinbase for eventual deposit to my US bank account. This time, I used a new US exchange, Buttercoin, which allows users to place both limit and market orders. Buttercoin launched earlier this year with some big name Wall Street backing. At the time I was online last night, Bitcoin rates were bouncing between $320 and $325. I bought mine at $324, so I placed a limit order at $325. That order was filled overnight, leaving me with about $2 more than I had started with.
[UPDATE: Buttercoin closed up shop in April 2015. This Coindesk article has the details.]
In other words, I exchanged Chinese Yuan for US dollars online at no net cost to me. In fact, I made a couple of bucks in the process, because of market fluctuations. I haven’t always been that lucky; usually, Bitcoin values seemed to be dropping almost every other time I did these transfers. This time, exchange rates were holding steady.
For comparison, as noted before, sending money through PayPal results in a 4% transaction fee for currency exchange. The exchange from China PayPal to US PayPal is nearly instantaneous, and deposit to US bank takes about four days. My Bitcoining took several hours — the interbank transfer was not instantaneous and the limit order at Buttercoin happened overnight. The deposit to my bank will happen between one and three days. So, the time required is nearly the same, but the cost of using Bitcoin (at least this time) was much less.
Time is money, as they say.
Also published on Medium.