Lets Talk Bitcoin Episode 70- The $10,000,000 Noodle Stand Original air date: December 27th, 2013

Participants: Adam B. Levine (ABL) - Host Marco Santori (MS) - Digital currency lawyer at Nesenoff & Miltenberg (The Bitcoin Lawyer) Michael Terpin (MT) - Co-founder of BitAngels; CEO of SocialRadius Bobby Lee (BL) - CEO of BTC China Malcolm CasSelle (MC) - BTC China investor; former manager at Groupon/Tencent China

ABL: Hi, and welcome to episode 70 of Lets Talk Bitcoin, a twice-weekly show about the ideas, people, and projects building the digital economy and the future of money. Visit us at letstalkbitcoin.com for our daily guest blog, all our past episodes, and of course, tipping addresses. My name is Adam B. Levine, and its another conference day. Mediabistro put on the first Inside Bitcoins West in Las Vegas, Nevada on December 10th and 11th. Youve heard some of Stephanies interviews from that event, and today Im pleased to share two of my favorite talks from Las Vegas, exclusively with you: [0:46] 1) Marco Santori is sometimes referred to as The Bitcoin Lawyer, and its not because hes new to the game. We kick off todays show with the legalities of Bitcoin, money transmission, and all the things you need to know but probably wont be happy about. [1:00] 2) Then, if the Bull driving the recent price movements in bitcoin has been China, Bobby Lee and Malcolm CasSelle are probably some of the most interesting perspectives one can learn from. They talk China and virtual currencies, and what regulatory clarity can do to the 10 million renminbi noodle stand. [1:15] And of course, as conference material, both of these talks include Q&A at the end. Thanks to Mediabistro for putting on another solid event. If youre interested in being part of future Inside Bitcoin events, you can visit www.mediabistro.com/InsideBitcoins. So I hand it off to Marco. See you next time! [1:34]

MS: Hey there it is bitcoin line, twenty minutes, flat. It took a little bit of time but now its up [transcribers note: this is in reference to the bitcoin price chart]. What Id like to do today is get on my horse. I want to take us through Bitcoin law, at least the bit that I can fit into todays meeting. Im going to go a little quick. -But at the end Im going to leave some time for questions, I promise. This is what were going to talk about today: 1) Money transmission on the federal level. 2) Money transmission on the state level, and 3) How to comply and avoid (sometimes avoid completely) the requirements. Theres more to Bitcoin law and digital currency law than just money transmission, but I only have a little bit of time today so this is what Im going to talk about. [2:21]

You probably heard this quite a bit: FinCEN. Youve heard about NSBs and regulation on the federal level. FinCEN is a bureau of the Department of the Treasury that regulates money services businesses. Their goal is to prevent money laundering, drug trafficking, and a word that youre going to hear quite a bit of today and in the future if youre in this business are you ready for it? Narcoterrorism. (laughter) Narcoterrorism is the think of the children of the 21st century, and youre going to hear a lot of it from me, youre going to hear a lot of it from your lawyers (if you ever hire one), and youre going to hear a lot about it from the government whenever they talk about Bitcoin because they love talking about Narcoterrorism. -So, if youre an MSB (a Money Services Business) youre required to register with FinCEN. You just log onto the website, click a few buttons and youre registered. But from that point on, you have to collect, verify, record, report customer information. Then you have to take that information and check the identities of your customers against watch lists for terrorists, criminals, enemies of the state. To some customers, you have to deny service outright. Interestingly enough, sometimes you have to continue servicing some customers and secretly report their activity to the federal government. And you have to undergo yearly audits. -But, really the upshot of this is that, as a money services business, you are deputized on the War on Terror, the war on narcoterrorism. You are the boots on the ground for the federal government. [3:59] One kind of MSB is another word that youve absolutely heard before and youre going to hear again money transmitter. On March 18th, 2013, FinCEN published some regulatory guidance. It was not law, it didnt have the force of law. Its FinCEN telegraphing to the United States, and anybody who does business here, that this is how we interpret the law. But again, its close enough for most of us. If youre a business, youre in it to make money. Youre not in it to stand up to the government (for most people). You want that to be the other guy. You want the other guy to stand up to government, blaze the trail, and for you as a business, youre looking to actually profit from these laws and how to get around them. [4:45] So what did the guidance do? It introduced definitions and distinctions that werent present in the Bank Secrecy Act (and Im going to talk about those in a second). Some people say it was vague, internally inconsistent, over-broad. And some people just plain said it misunderstood how digital currency works. I agree with that to some extent, but I think youre all going to develop youre own opinions if youre ever encountered with it. [5:09] Lets get to the meat of it. Are you a money transmitter? Well, if you accept value from Person A and give it to Person B, the guidance says (and historically) youve been a money transmitter. One example of that is a hosted wallet that permits you to export private keys. If you accept value from Person A and then give it back to Person A, not to a different person, you just give it right back to the same person at a different time or a different place, youre also a money transmitter. If you exchange digital currency for government currency, youre a money transmitter. If you exchange one digital currency for another and you never touch government currency, youre still a money transmitter. And the last one, the one that really caught a lot of people off guard, is if youre a Bitcoin miner and then you convert your mined coins to fiat currency (to government currency), youre a money transmitter. Youre a money services businesses, even if youre not acting as a business. You could be running a couple of ATI cards that you had left over from your last build in your basement. If you convert your mined coins to fiat currency, youre a money transmitter that has to register with the federal government. [6:21] The state level is a little bit different than the federal level. Weve talked about the federal level. The state level the states regulate money transmitters separately from the federal government. The states dont require you to just register. In fact, you cant just register in the states. You have to get a license, you have to seek a license. And its a privilege, its not a right.

You cant just log onto a website and click a few buttons and become a money transmitter on the state level. You have to apply and theres no guarantee that youll be awarded a license. And just because you get a license in one state doesnt mean its okay to do business in any other state. [7:03] So undergoing a state law analysis, you ask one question: First, must my business be licensed, do I really need to go out and get a license? So long as you service or solicit that states citizens, no matter where you are in the world, you probably need a license. This is a concept called extraterritorial jurisdiction. Historically, if you had a brick-and-mortar location in a state, you had to get a license in that state. But then businesses evolved past brick-and-mortar servicing customers. Now, like Bitcoin businesses, except for youve seen the Lamassu ATM out there, except for businesses with a physical presence, mostly everything exists online anyway. Some states have explicitly said, New York and Texas are a couple, that have explicitly said, Look, if you service our states customers wherever you are in the world, you have to register with us, you have to get a license from us. Other states have not explicitly said it publicly; some have said it privately to some applicants that I have walked through the process. -But, the smart money says, for your planning purposes, youre probably gonna need 48 different licenses. [8:16] But the good news is that the states have not adopted FinCENs very broad categories of money transmitter, all those examples I gave you earlier. For a money transmitter on the state level its typically just a couple of different requirements, and this is the traditional sense of what a money transmitter is if you take value from one person and give it to another, if you take value from a person and give it back at a different place or time. Unfortunately, each state has its own (and, as I said, theyre often byzantine) laws. But what constitutes money? What does it mean to be money? And thats relevant here, right? This is a new kind of money. [8:54] Theres also an open question of what constitutes transmission. Most of the state laws dont even define transmission because back when these state laws were written, we knew what money was and we knew what transmission was. But today, thats not so clear. How do we answer that question? You conduct a survey of the states laws and you apply them to your business; you do the research. Its a state-by-state analysis. You look at the prior guidance, sometimes theres case law. And its relatively cheap. Unfortunately, its largely academic because what comes out of this is, your lawyer develops an opinion and says, Look, this is what I think the state is going to say about your business. This is what I think your risks of being a regulated entity are. And thats largely academic, right? Who cares what your lawyer thinks? What matters, ultimately, is what the state thinks. -So theres a second step you can take. You can request a ruling, called a No-action letter sometimes. You take that research that you did in the first step and put it into a letter. The letter says usually it starts off with, This is what Bitcoin is. Second, This is what my business is doing with Bitcoin. Third, This is what your state law says. Fourth, This is why under your state law, what Im doing with Bitcoin shouldnt be regulated. And the state (and also the federal government, you can do the same thing with the federal government and FinCEN) will send you back a letter, sometimes. And that letter might say, Hey, youre right, we agreed. You dont need a license. Or it might say, No, no, no, you need a license. Either way, youll likely get some certainty. -But, its expensive. You have to pay a lawyer to put together a letter; you have to pay for some follow-up; letters have drafts. It can be pricey. But it permits people to sleep at night. [10:40] The second question. Lets say I need a license. Will I get one? Well again, licensing is a privilege, not a right. And some of the licensing requirement are onerous. Minimum capitalization requirements, six-figure bonding requirements (per state), personal financial

records of the individual owners. These are all things you have to submit to the state to see whether youre worthy of the privilege of transmitting money in their state. This is affectionately known in the industry as the financial colonoscopy. If this sounds unappetizing to you, youre not alone. You can comply by getting registered and licensed, but its a resource-intensive process. [11:33] Or you can try to avoid these requirements, but it will take work, and there are different ways you can do it. People come to me and they say, Ok, look, I want to access the U.S. market at some point, but I dont want to do it now. Im going to wait it out. Im going to do business overseas. How can I do this without getting in trouble? Can I just geofilter IP addresses? Thats a question I get literally every week. The answer is yes, absolutely, you need to geofilter IP addresses. But you should be doing more. And again, you dont have to do all of this, it depends on your risk tolerance. If you do none of this again its just whats going to allow you to sleep at night. If you can geofilter IP addresses, thats great. You want to detect the country of residence for your customer. Then, make them affirmatively state that yes, this country that youve detected (well call it Canada) is [the customers] jurisdiction of residence. Then ask for a phone bill, ask for a utility bill. Thats a good start. But beyond that you should develop policies and procedures that actually help you gauge the probability that your customer is actually a U.S. customer (or is not a U.S. customer, to continue the example of a Canadian resident). Maybe they signed up with a Canadian IP and maybe they sent you an address from some they sent you a utility bill from some property they own in Canada. But did they then go and register a U.S. bank account with your business? Maybe they didnt register their own bank account but they ended up sending wire transfers to a U.S. bank account. Or maybe after registering with a Canadian IP, they started accessing your service from a U.S. IP address. These are all indicators that you are in fact dealing with a U.S. resident. You might want to consider terminating their account. -But beyond just setting up these policies, its important that theyre actually implemented. And I dont mean you go through the motions. I mean that every once in a while you should catch someone, you should really catch someone. Because we all know that this is happening on our businesses, we know its happening. And in five years, if, God-forbid, you find yourself the subject of an enforcement action, what do you want your lawyer to say? Your honor, look, we had these policies and procedures? Or do you want to say, You honor, we had these policies and procedures and they worked. We caught people. We actually did this stuff and proved that it was effective. [14:06] Whats another way? Whats another compliance or avoidance strategy? You could become the agent of a bank or an existing money transmitter. You could enter into an agency agreement or a service agreement that are titled to any number of things. But its easier said than done. Right now, money transmitters are a little hesitant to alienate their existing customer base. Its because they have a good revenue flow already. They have to be, understandably, a little bit worried about getting into bed with a brand-new cryptocurrency that a lot of their customers have heard associated with the black market. Banks are even tougher. Banks havent even, as of now, as of todays date (who knows whats going to happen in a month?) but most banks havent really wrapped their arms around what risk strategies and risk-mitigation strategies they need to take. You can say, Oh Ill just become the agent of a bank or a money transmitter, and then I wont have to register with the federal government, I wont have to seek state licensure. Its easier said than done because even if you find a money transmitter or a bank who is willing to grant their license to you, youre still going to lose a lot. When you enter into a service agreement or an agency agreement, its going to set forth the relative rights and obligations of you and the principal (we call the banks, or the money transmitters, the principal, and youre their agent). Typically the principal is going to have the bargaining leverage in that agreement. Youre going to lose some control over the operations of your business. And no matter what,

youre going to have to implement and comply with the principals compliance requirements, and those might not be the same requirements you thought you had to satisfy or that you think are viable for your business to satisfy. [15:52] Whats another option? Admittedly, this is the strategy that most people take they restructure their business to fit into an exception or to avoid the requirements entirely. There are some exceptions under the federal regulation. You can say yes, maybe, or it sounds like youre doing money transmission under the definitions I gave you earlier, but if youre doing any of these things, youre exempted. One of those things is merely providing network services to a money transmitter. We just talked about a service agreement, signing a service agreement, with your principal. One way to do that, one example, is white-labeling your Bitcoin exchange. If you want the bank to be the first bank to offer Bitcoin services, well, maybe you develop the exchange and you license it out to them. Ill talk a little bit more about that in a second. Theres another exception physically transporting value that substitutes for currency. That means armored cars arent money transmitters even though technically, physically, theyre actually transmitting money, right? They take money from one place, put in a car, take it to another. But theyre exempted from this. Its tough to think about how that could apply to the digital currency world, but I took a stab at it. You guys know what Casascius coins are? You seen those? Little coins that have a private key on them and maybe they are value that substitutes for currency. Thats one example. Operating a settlement business between money services businesses is another exception. If you can restructure your business to operate merely as a settlement business between MSBs, you dont have to register yourself. Or if you perform payment processing services. If you have a contract with a merchant that permits that merchant to service its customers. Either BitPay does that, BitPagos is another company thats doing that. These are exceptions from the money transmission regulations. [17:49] Last example white-labeling your product. White-labeling is probably something youve heard of. You develop your product, you bring it to the cusp of launch, then instead of launching it, you sell it to somebody else or you license it to somebody else. This is a time-honored tradition of passing the buck. Here youre passing the regulatory burden, youre passing it on to somebody else to satisfy. Or youre passing it on to somebody else who doesnt have the regulatory burden. This strategy means something different, functionally, for each different product. But it can apply to both hardware and software. For hardware, you could manufacture the hardware as an OEM and sell it to another company who sticks their branding on it. Youve seen that happen with the Bitcoin ATMs. You can do it with software, license the service as a SaaS (software as a service). This is what some exchanges are doing because they realize that this whole regulatory regime that we just described is not an appetizing thing. They would rather license it to someone else, take a monthly fee, take a revenue share, or something like that, and have somebody else deal with the regulatory requirements. [18:59] So today in the short time that I had we talked about money transmission. Thats not all there is to Bitcoin law; thats not all there is to digital currency law. But for the purposes of this talk were time-limited. There are other considerations also on the payment side check cashing, check selling, and currency exchange are other regimes on the state level with different statutory frameworks that you might have to deal with. Ultimately, that means more reasons why you might have to get a license. -But beyond the payments industry, what else exists? Theres securities. How many of you guys have heard of Trendon Shavers? Wow, okay, not that many. Trendon Shavers allegedly ran Bitcoin Savings and Trust (BTCST) which was allegedly a Ponzi scheme. A lot of people in this room have probably had some involvement one way or another on one end of this scheme. He was a well-known individual in the Bitcoin space. The SEC brought charges against Trendon Shavers. And weve learned a little bit about this case. We

know that, from the SECs perspective, investments denominated in bitcoins are securities and theyre subject to the securities laws. For the purpose of the securities laws, bitcoin is money (the federal judge said this). This is an often-overblown development; this doesnt mean that in the United States bitcoin is money, this means for the purposes of interpreting the Securities Act, bitcoin is money. -So, if youre involved in using bitcoins as a security, or if youre involved in issuing, dealing with securities that are denominated in bitcoins, youre subject to the Securities Act. One interesting thing that the SEC said, not in its papers but in a press release, that they believe unlicensed Bitcoin equities exchanges are illegal. For those of you that have some familiarity with this, for a very long time companies were issuing securities. They werent real securities, there was often times no real company backing them up. But these securities were offered on the Bitcointalk web board and then sold and traded on these unlicensed exchanges. Ultimately these exchanges (most of them) have shut down and a lot of people lost a lot of money. [21:39] What else beyond securities? The CFTC (the Commodities Futures Trade Commission) hasnt officially spoken on bitcoins yet. FinCEN has and thats what we were talking about, they regulate not futures and commodities, but currencies. Its unlikely that buying and selling bitcoins are going to be regulated by CFTC. But trading bitcoin options, hash rate futures, the more exotic things that were starting to see now, may be regulated by the CFTC. [22:10] I think I kept my promise. I spoke for twenty minutes which is about as long as anybody should have to hear a lawyer speak. I got on my horse and I ran through a whole bunch of topics. I realize theres a lot I didnt cover but if theres any questions at all Id be happy to take them and you get a little bit of free legal advice. [22:33] MS: Hi. [22:34] Audience member #1 (AM1): Hello, that was a great presentation. [22:37] MS: Thank you. [22:38] AM1: I have one thing you did not cover. You go to the state, you present your case, and they say nothing. Then what do you do? [22:51] MS: Thats a very good question. [22:53] AM1: And how often does it happen? [22:55] MS: Yeah, thats a very good question. Were seeing that in a couple of states now. Were seeing that from New York, were seeing that from California. Although New York is at least a little bit more communicative about it. They are (anecdotally, Im hearing) just returning applications so they dont have to deny them. The states are trying to figure this out. I met with a state regulator in August, which is ages ago in Bitcoin time. I spoke to her and I said, So say we send a letter to you and I say, this is my business. This is why I think it doesnt apply. This is why I dont think its a licensed entity, a licensed business. How long does that take for you to turn around that request? (This is the request for ruling, the no-action letter.) How long does it take to get a no-action letter? And she said, Look, a traditional money transmitter a couple of weeks. But a Bitcoin business? And this is what she said: [transcribers note: Marco Santori makes some gesture to the audience] (laughter). [23:58] MS: Yeah, youve put your finger right on it. This is a tough time for digital currency businesses.

And the states are trying to figure it out. So what do we do? We wait. We put in our applications, and we wait. [24:16] Audience member #2 (AM2): You mentioned that miners, if they sell their bitcoins for fiat, they might be an MSB. What would a miner actually have to report if they signed up? [24:30] MS: That is a great question. Who do you KYC if youre a miner? Youve been mining coins using a homemade rig, or maybe you bought something from BFL (I think BFL is here) so maybe you bought something from Butterfly Labs. And youre not an institutional miner, its not like you end the day with a bunch of coins you have to block trade on an exchange. What do you report to the federal government? What are you supposed to report? I gotta say its not very well understood because I dont believe FinCEN really wrapped their arms around this particular part of the guidance and Im happy to say that publicly, Ive said it before. Presumably, you have to determine who is your customer. Your customer could be the person on the other side of you at the exchange but if youre using a blind exchange, you dont know who your counterparty is. And again, are they your counterparty or are they your customer? -So its a very good question and its something that as you can probably tell, I dont have a very direct answer to. But these are the kind of problems that were struggling with that some people are coming up with creative solutions to. [25:39] AM2: One more question. This doesnt really apply to me but You mentioned before that one way to avoid having to comply with the FinCEN regulations was to just completely avoid U.S. customers. So lets say you do that but a couple of them get through the cracks. What would the consequences be for that if FinCEN found out? [26:02] MS: Its really a two-part answer. You have to think of the risk of enforcement. And then you have to think of the risk of (well call it) a successful prosecution. And those are two different things. I think the question there you can give a long legal question as to what are your affirmative defenses to something like this. What can you say? Oh, but your honor, I did this. And thats a very long answer that Im happy to give offline. But I think you can answer that with the first question (and that is the risk of enforcement). [The risk is] probably pretty low, youre probably a low-priority, youre one of the good actors. If youre really doing all these things, youre probably one of the good actors. [26:44] AM2: Thank you. [26:45] Audience member #3 (AM3): Hi, I imagine this is going to be hard to answer, but Ill ask it anyway. [26:50] MS: Sure. [26:51] AM3: How much does a colonoscopy cost? [26:53] MS: (laughter) Okay, Stewart says thats my last question, guys. Im sorry. You can find me offline. But to address the colonoscopy issue. It can cost quite a bit. It depends on how many states youre looking to apply to. Right now I have clients that are looking to become licensed in just one or two states. Thats a manageable cost. The cost scales. Your bonding requirement, for example, I think youll see today there are some bonding agents making their way around and telling you, We have underwriters for these bonds, they know your business. Theyre willing to underwrite these bonds. But those are cumulative requirements that are when a bond is $50,000 up to $500,000 (depending on the state) and you have to pay 2% of that. You

pay 2% of that on a yearly recurring cost. Thats just one of the many costs. Its a good question; its got a long answer. For a forty-eight state rollout you could escape with six figures. Not just for bonding, thats sort of your all-in cost. I know youre going to want to put a finger on it. [28:14] MS: I hope I was helpful. I know I ran through it and we had a ton of questions that we couldnt get to. Please feel free to come and speak to me offline. Im happy to help however I can. [28:26]

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MT: First of all, what an amazing conference that Stewart has put on. [Transcribers note: Stewart Quealy of Mediabistro Inc.] Give it up for Stewart! (applause) I was asked to speak at the first Inside Bitcoins which was, believe it or not, three months ago? Three months and a couple of weeks? Bitcoin was at this really high number called $104. Right now were talking about $1000. Whats been the difference between now and then? Largely China. We literally have two of the most important people in the world in the Bitcoin industry right here in this room. Malcolm CasSelle is somebody that Ive known and worked with and been friends with for almost twenty years going back to when he started a company with America Online called NetNoir. And since then hes an early investor in Facebook and has been doing [an] amazing amount of things in China, going back to the early build out of the internet. I like to always tell people that the early build out of Bitcoin, Ive seen this movie before. And of course when I saw Alan Meckler I was like, Oh my God! Internet World. Ive seen this movie before! And when I saw BTC China and how fast its taken off it was just like weve now reached the some of the people on Reddit call it the Bitcoin singularity where its just going up, up, up. Bobby I only just met at the dinner yesterday but certainly his reputation proceeds him. You look at people who are going and leaving amazing careers to then say, Somethings bigger. With

CoinBase you basically had somebody who was on the starting team of AirBnB, from a little startup in an incubator to a $1 billion valuation Nah, thats not big enough. I want to do Bitcoin. Right? With Bobby youve got somebody whos running e-commerce for Walmart in China! How much of a bigger job can you get? Bitcoin. So without further ado Im going to hand it over to the rockstars, Malcolm CasSelle and Bobby Lee. [31:54] BL: Ill start. Thank you everyone. Whos here to listen about Bitcoin in China? (applause) Alright! I have something to confess. Two months ago I thought about starting off this slide like this, talking about the all-time high price of bitcoin in China being almost 2,000 RMB (that would have been like $308), pointing out the fact that its much higher than Mt.Goxs all-time high price. But I guess today this is all irrelevant, huh? Im here to talk about see that vertical line going up to the top? Whos excited about that? So the agenda, roughly. Ill talk about BTC China. Then Ill talk about the user survey we conducted; it tells you a little bit about what our users are doing in terms of buying bitcoin. Ill talk about the adoption of buying bitcoin in China. And also, most excitedly, the recent regulation that the Peoples Bank of China just issued last week. Malcolms going to join us and share with us all the great future plans of Bitcoin in China. [32:55] BL: So a short history. BTC China was a website that was founded by my co-founders in June 2011. So this came up about two and a half years ago. Its been quite a little website, the very first Bitcoin exchange in China. Its always been in first place. I joined on as CEO/Co-founder earlier this year in April. At that time, wed already become the worlds number five largest Bitcoin exchange according to Bitcoin Charts. By July wed obtained (we were going to make it a more formal company) a business license to operate in Shangahi (were based there) and wed climbed to the number three position. By September, after we got the VC funding, we completely eliminated the trading commissions. That was a strategy to win market share and to basically build up the market in China. By November, all a sudden, we got vaulted up to the number one position worldwide. And thats when we decided to actually go ahead and announce our VC investment from Lightspeed. In a short seven to eight months weve expanded from just four people to over twenty-five people. And bitcoin and the RMB volumes have increased ten-fold and one-hundred-fold, respectively. Just to give you an idea of the price increase all summertime pretty much trading at this level [shown on my presentation slide]. The yellow line is the price, bars are the volume. Then when we announced the free trading commission thats where we really picked up Chinas interest. So slowly right after this point the volumes have just gone up dramatically. We hit an all-time high, I think, last Thursday or Friday of 150,000 bitcoins in a twenty-four hour period. And the bitcoin prices have also nicely increased alongside this volume increase. Even on the special day of November 18th, when we announced the VC funding, bitcoin prices in China actually doubled in that twenty-four hour period. We were just freaked out. In terms of the trading volume risen 100x from 5 million RMB to 500 million RMB. Roughly a little over $80 million U.S. dollars equivalent. [35:00] Im gonna run through the slides as quickly as I can that way we leave some time for questions; I know you guys have a lot of questions. Essentially, we did a user survey. This is our methodology. This is over the course of two weeks in November. It was targeting our Chinese audience. Heres the demographics information. Majoritily we still have a big group of male audience, young people under the age of 30 and 40 is over 90%. Education level, this is where its surprising. The national average is actually 27% for college education. However, in our user base we see over 90% of our users have a college degree (bachelors, masters, and PhDabove). So this is quite impressive. It means that our user base are quite educated and really into the math-based cryptocurrency. Why do you buy bitcoin? One of the key reasons is for investment, long-term investment value preservation. Only a small portion is to buy bitcoins for

the purpose of purchasing other goods and services later. This is where China stands right now, vast majority (over 75%) are buying it for long-term value gain and short-term price increase. In terms of investment experience, we find out that the people with the more investment experience, so the bars on the right (five years or more experience) tend to better understand the long-term potential of Bitcoin. Whereas the newcomers are the ones who are maybe speculating a little bit more. I guess its logical as well. The more experienced the user, the more likely theyre buying it for long-term investment. [36:32] So why is Bitcoin so popular in China, what do you guys think? Its not what you guys think. But Ill give you an idea of how big its become. When I first joined BTC China in April, the vast majority of bitcoin trading worldwide was denominated in U.S. dollars. This is the pie you see on the left, over 75%. Six months later, by November, we think over 50% of the worldwide trading in bitcoin now is denominated in the Chinese RMB currency. This is a huge difference. Whether it stays that way, I dont know. But this is a big improvement, or a big change from just a half a year ago. [37:22] Our theories about the fast adoption we have four theories. Number one is China is a nation of savers. Number two is that China is a nation of engineers, and people there are really eager to participate in new phenomenons, sort of the it factor. And lastly, China has always been known as a place of innovators. Ill talk about that in terms of bitcoin mining being ground-zero for that. [37:45] As we know, in the U.S. the savings rate is under 10%. Probably 90% of you spend more than your paycheck every month, right? Taking home equity loans and maxing out your credit cards. In China apparently they dont do that as often. People save for the rainy day, its just a habit in their culture. The savings rate is between 35-50%. Various theories about that probably underdeveloped financial sector; the changes in income outpacing their changes in consumption habits (their incomes are increasing at a much faster pace than theyre spending money); and lastly, we think that RMB currency is undervalued so theyre holding it and investing the money. So as a digital asset/virtual commodity, Bitcoin really represents a significant opportunity to save money and to preserve spending power, preserve purchasing power. The Chinese people really get that; thats very important to the people in China. [38:42] Next topic is A Nation of Engineers. The Chinese people, theres a reputation for them to be really good at math and science. Actually its true because education-wise people emphasize on math and science. Even political and business leaders, its very often youll find them with backgrounds in engineering and its much more likely for a scientific/engineering background. This happens at all levels of government. Ill show you, for example, these are the three most recent Presidents of China, and they all have engineering degrees. From Mr. Jiang Zemin with an electrical engineering degree; Hu Jintao with a hydraulic engineering degree; and the current leader Chairman Xi Jinping with a chemical engineering degree. This happens at the national level, at the provincial level, at city government level. All around youll find people with engineering backgrounds. As compared to the U.S., I guess theyre all lawyers, right? (laughter) So that explains the (inaudible) differences. [39:42] In China, people are eager to participate in something new (this is the it factor). Almost 20% of people say theyre buying bitcoin because of the novelty and to participate in a trend. I guess this is the herd mentality a little bit. But one of the reasons for that is that they like supporting new technologies. Chinese are really open to trying on new things, supporting new technologies. So thats also contributed to the recent popularity of Bitcoin. [40:09]

And the fourth one was talking about the bitcoin mining. We think China is indeed probably ground-zero for bitcoin mining. Its very hard to say how much of the mining happens in China but certainly its a big market. A lot of hobbyists, lot of professionals, lot of people using idle computing power for mining. And the professionals really build mining centers all over China. A lot of ASICs designers are in China, a lot of the whole supply chain for ASICs mining is all in China. We also think that Litecoin mining is coming next as a huge, huge trend. [40:44] Lets get to the fun stuff. This is probably what you guys are most interested in. How many of you here to learn about the regulatory environment in China? Are you guys interested in that? Did you guys hear about the news last Thursday? Yes? Did anyone panic? No? But from the price charts it looks like people all panicked! Actually, the funny story was that I was on a plane, so literally they were waiting for me to get on the plane and fly out and then they make the announcement. (laughter) And when I landed I got all these text messages like panic, panic, call me back! Let me tell you some of the history. Two weeks ago in mid-November, this is Yi Gang (Vice Minister of the Peoples Bank of China, which is the Central Bank of China). He made the following comments. Hes actually the most suitable person to be talking about the regulation of Bitcoin. Hes also the head of the state administration for foreign exchange (thats the department under the Central Bank that controls all foreign currencies, and so on and so forth). So hes the most knowledgeable person, hes educated in the West, in the U.S. Essentially he said three things at the time (this was three weeks ago). He said, the Central Bank is not going to be able to recognize Bitcoin and give it legal currency status in any near term. Thats to be expected, right? Anything above that would have been extraordinary. Secondly, he actually commented two weeks ago that bitcoin trading is legitimate, this is a legitimate virtual good, virtual asset or digital asset, so people should be allowed to buy and sell. Thats actually very good, both for Bitcoin, for China, as well as for my company (BTC China). And lastly he noted that Bitcoin is very unique so hes going to keep abreast of its development. He reads English, so Im sure hes been following all the news about Bitcoin. So thats very exciting to find that someone is able to understand the complexities of Bitcoin and to appreciate the importance or the innovative features of Bitcoin. Hes going to personally stay involved and pay attention to it. [42:54] And then what happened last week is that the government previously it was all his off-the-cuff remarks as his opinion. Last week the government actually made official statements and this was led by the Peoples Bank of China. It was also represented by the Securities Regulatory Commission, the Banking Regulatory Commission, also the Insurance Regulatory Commission, as well as the Ministry of Information and Industry Technologies. They released the first formal guidance. Many international users due to mistranslation of the regulation were unsure of how to interpret it. Some people wrongly believed, and some of the press wrongly believed that bitcoin was banned or that all bitcoin is illegal. Thats actually not the case; its quite the contrary. And by the way, the government regulation that was announced last Thursday is actually completely independent from what Hong Kong, Macau, and Taiwan will do. Hong Kong, Macau, and Taiwan will do things separately. It could be the same, it could be different, but at least its going to be separate from what the Peoples Republic of China [will do]. Okay? [44:04] So here we go, key points. Number one. Bitcoin is not a currency and will not be regulated as a currency. So again, this just formalizes what Yi Gang said two weeks ago that as far as China is concerned, bitcoin is not a currency. I know in this audience, many of us (I dont want to put myself in it) but many of you may think that bitcoin is a currency or is money and all that stuff. But legally speaking China has clarified bitcoin is not a currency. Theres a lot of implications of that. Secondly, on the top right youll see that bitcoin will be treated as a virtual good, virtual commodity. So like a digital asset. Thats been now clarified; bitcoin is now recognized identity

as a digital good, virtual asset, okay? It also says buying and selling of these online commodities its okay, people are free to do that. So this legitimizes the whole bitcoin exchange concept; people can freely buy and sell bitcoin either person to person or through a bitcoin exchange like BTC China. Now obviously its a speculative asset so make sure people are welleducated and they can assume the risks involved with trading bitcoins. On the bottom-right youll see that companies and websites like ours will have to register with a telecommunications authority. I dont know whether that sounds weird but essentially all internet companies have to register with a telecommunications authority. This is in relation to registering to get internet content provider registration. This is very common in China. It relegates our companies doing bitcoin exchanges to under the internet sector. [45:47] So what are the implications? There are some implications. Because it is not a currency, existing financial institutions, banks, and third-party payment systems, what do they deal with? They deal with currencies, right? Banks, and financial institutions, and third-party payment systems. So right now, because bitcoin is not a currency, they therefore themselves are not allowed to engage in bitcoin business. Theyre not allowed to take bitcoin deposits, to make bitcoin insurance policies, or to make bitcoin buy/sell kinda thing. Also insurance companies are not allowed to provide insurance services for bitcoin companies like exchanges and so on. And then separately, bitcoin exchanges (which are now legitimized) have to comply with relevant anti-money laundering and KYC laws. Some of these are still being worked out. The communication from last Thursday was just to set the high-level tone. All the details will be clarified over the next few weeks and months. Were really happy to see these results. As an exchange, Ive always wanted the government to give us more clarity on regulation and so on, so were really excited about this news. Thats why we see the price crash from (I think of RMB terms) it was like 7,000, down to like 4,500, and then recovered to 6,000, and then over the weekend it was zig-zagging. I think in the last few days its recovered up to 80% of what it was before, so its a pretty healthy situation right now. The last implication is that goods and services cannot be priced and cannot be paid for by bitcoin. This is the part where people are a little bit surprised. But if bitcoin is not a currency and China, as a state, only recognizes one single currency (which is the RMB), therefore all merchants, stores, and services can only accept RMB. And since bitcoin is not a currency (its not a recognized currency) its actually a logical conclusion that China for now will not allow goods and services to be sold and paid for by bitcoin. So certainly some of the Bitcoin business models will not work in China because of that implication. [48:03] So whats the immediate impact? As a company were going to proactively implement additional KYC measures. The Peoples Bank of China, they want to better educate the public about Bitcoin. Thats a very positive attitude. This is essentially a first step in the long process of crafting a effective and efficient regulation for the Bitcoin community and Bitcoin market in China. As a company we hope to be an active participant and contributor through this process, so were very, very excited by this recent announcement. Okay so thats it for regulation, Ill pass it over to Malcolm to talk about the future of Bitcoin, and then well open up for Q&A. Thank you. [48:46]

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Malcolm CasSelle (MC): Thanks Bobby, that was a good clarification. One thing I did want to make another point about was that a lot of people were concerned Hey if banks are not allowed to operate in the Bitcoin ecosystem, does that mean that companies like BTC China will have problems making deposits and withdrawing money from banks? Not a problem at all because from the banks perspective theyre just touching currency (renminbi). They dont touch bitcoin, thats Bobbys business. So theres no problem with deposits and withdrawals. Were hoping that the regulation makes it even easier for Bobby to do deposits and withdrawals. We were sitting in the office the other day and I said because there is no regulation particularly applied to Bobbys business hes basically the equivalent of a noodle stand, right? So when he shows up with 10 million renminbi to deposit theyre like Why do you have 10 million renminbi to deposit? Youre a noodle stand as far as theyre concerned, right? So the regulation will hopefully make it easier because obviously if youre a commodities broker or youre an insurance company, making large deposits and large withdrawals would make sense. Thats one of the things were really hoping will open up and make doing that easier. Theres a lot of things were looking for in the future. [51:44] The other thing I wanted to clarify was that I think that this ruling that weve seen in China is very similar to what they did with virtual goods and virtual goods trading. Brock, who you saw earlier, we co-invest together and we invested in BTC-China (we knew youd be number one, Bobby). (laughter) Basically because we saw that in the early days of virtual goods when people started trading their disaster for some pot of virtual gold, the governments basically said, Hey look you as game companies cannot operate in the trading business. By doing that, it allowed for lots of little guys to basically build exchanges and say, Hey I can trade this virtual good/gold for money, or I can change this particular weapon for money, and so forth. Thats where it all really began. Theres a long, great story about how that evolved in China. A lot of people in China actually ended up farming gold and supplying the entire world for that within large games. -But what that did was it made the field completely wide open for little guys to operate, kept the big players out (the game companies themselves) and then the ecosystem unfolded and its now a multibillion dollar industry. Thats good because that means that companies like BTC China and other Bitcoin companies in China have an opportunity to really build a multibillion

dollar industry, and then regulation that applies specifically to them will unfold as appropriate. It means that the banks and the insurance companies and so forth cant just come in and gobble it up. So we all see that as a good thing. [53:20] Were disappointed about payments not being a viable business right now. But I believe, and many conversations Ive had sort of come from the same standpoint, that as currency regulation begins to loosen up and currency is freely tradeable, payments may become an interesting possibility later because at that point then there isnt worry about currency control, which is currently the policy in China. [53:46] So a couple of things. As youve seen, the market has grown and so has BTC China, so thats been a really good thing for the future. But lets talk about some of the threats. Theres a couple to keep in mind. First are bad actors. We really, really do not want those people doing things that would bring regulatory reaction. Thats people doing all kinds of bad things, whether its illegal activity or things that just arent good for society. China has a strong policy against pornography and other things that may be acceptable in other countries but China has strong policies around that. We certainly dont want to see bitcoin being used for things within China that would cause them to want to clamp down on it and make it harder for us to do business. So we call those bad actors. Some of it would be illegal and some of it would basically just be moral standards. Second is cryptocurrency fragmentation. As there is more and more currencies, we think that creates more confusion in the marketplace. Things need to be easier, not harder. Theres just a lot to work on from the industry standpoint to make it easier for consumers. Because were really, really at the early adopter phase. Im sure many of you have seen the adoption curves that show where we are in the adoption phase. China I would say is a little bit ahead of the rest of the world in some respects because the adoption has just gone like crazy. Part of that is because of the speculation, people see it as an investment; and I think when you have so many engineers running around theyre quite happy to spend an evening of leisurely reading understanding how cryptocurrency works, right Bobby? [55:22] BL: Yeah. [55:23]

MC: Ultimately, I think fragmentation is going to be good. Like as we were talking about Mastercoin yesterday, I think theres a lot of great applications. But I think right now until things are easier for consumers, fragmentation will make it more confusing. I think that a lot of the smaller currencies are going to have weird volatility and not as much support and have more risk associated with them. Obviously people lose money (that goes to the third point), that can be bad, the volatility aspect causing bad publicity Grandma thought she was going to be able to retire, put all of her money in bitcoin and lost it all thats not good. Obviously were worried about that happening, we dont want to go there. I think right now its almost impossible for grandma to figure out how to buy bitcoins so were probably safe. But you never know. My mom plays Farmville and buys virtual gold. [56:11] The next thing is the future of Bitcoin in China. We believe, ultimately, it looks very, very positive. More speculation is coming. Theres tons of money flowing into the market and obviously because of the returns you can get relative to, say, real estate or stocks. I think theres also a libertarian component. I think that Chinese investors feel really safe because bitcoin cant really be manipulated the way fiat currency or other kinds of industries can. I think theres a real desire for self-determination and I think that drives part of it as well as the technical aspects of it. The other thing is that because the BTC/renminbi now represents over 50% of the transactions globally, we dont see that trend changing. But what is interesting is

Litecoin. Now many of you may know that, actually, Bobbys brother was the inventor of Litecoin. And so we refer to their dad as BitDad. (laughter) Hes sitting here in the audience. Were like Did your wife know that you were gonna have two kids who literally changed the course of cryptocurrency on the planet? Probably not at the time. [57:15] Heres the other businesses we think are really interesting. Exchanges and trading. So whats happening in exchanges? The general ecosystem generally when tech businesses come to China they mirror this exact same pattern. And that is a lot of companies will jump in, usually the first guy will make all of the money (were excited that thats going to be Bobby and BTC China) but there will be ten thousand followers and then they will completely beat each other up on price and then its basically a war of attrition. Whoever has the most resources and the most efficient business model, serves customers the best, will typically win. And weve seen this over, and over, and over. I used to run Groupon for China in the joint venture with Groupon and Tencent and it was exactly the same thing. The day we announced we were going into China there were three thousand group-buying competitors; the day we launched there were six thousand. Nine months later we were in the top ten and they were just dying off like crazy because everybody drove the margins to zero and only the guys who had enough resources survived. This is, I think, going to be a similar model. Theyve implemented a zero fee. I think theres still a fee for withdrawal, so theres still a little bit of money to be made in the meantime. But a lot of guys are not going to survive and maybe a year or two from now well see massive consolidation, and the winners will be winners. The trading business is still very strong. How many competitors are there now do you think in the trading business? [58:39] BL: About half a dozen. [58:40] MC: Yeah, so like six or so? I think that number will just continue to proliferate, and then well see consolidation. The payment space, as we talked about, is unfortunate. I think for now its kind of a no-go. As I mentioned earlier, I think the future is interesting and well wait to see how currency rules open up and then maybe Bitcoin can join. But today its not viable. [59:04]

Now mining. Mining is insane in China, insane. The first big mining companies weve seen were 65 nanometer technology. Just monster machines, people cranking out these ASICs and just loving it. It was like literally a geeks dream because you could just play with these things and money would come out the other side. I cant tell you how many Bitcoin millionaires Ive met in China these days. Theyre very funny characters because these are guys who were doing it in their basement and they really love the idea that they have this machine that spits out money. I think we all have this dream of having a printing press in our basement, these guys actually do and they love it. And so mining is just insane, I think it is ground-zero. Theyre just insane for it. Something is about to happen. In the next 90 days youre going to see serious ASIC mining technologies run on blank-coin. If you think bitcoin is popular in China, you have no idea how popular Litecoin is. Part of the reason is because one Litecoin is in an earlier phase of its lifecycle relative to Bitcoin. Theres a four-year mark when things change and theres this deceleration in terms of the amount you can make in mining. That phase has not yet occurred (were only like two and a half years in) in Litecoin. So theres still a lot of legs left and the ASIC entry is going to really, really make a lot of people are going to make a ton of money. ASIC mining for Litecoin is about to kick in. Probably the next time theres an Inside Bitcoin conference it will have already opened up and really changed things there. So thats huge. And then of course theres a ton of other cryptocurrencies behind it. I cant tell you which ones are going to be awesome in China next after that, but Litecoin has got a lot of legs left in it. Thats a really huge trend. [1:00:54]

And then ATMs and kiosks. I think because of the desire for people to actually physically take their cash and turning it into bitcoin, I believe this is going to be a massive trend. I think that the levels of exchange that were seeing now digitally online, I think we could see a multiple of that with the kiosks. Were really, really excited about that because guys love to stand in line with stacks of cash and turn it into something else. Its just the culture there. If youve ever been to China and youve seen how people like to carry around cash, the largest note is equivalent to about fifteen dollars. So if you want to carry around any significant amount of money, it definitely puts a bulge in your pocket. People are used to that, theyre used to carrying around big wads of cash to do things. And so we think theres going to be a lot of opportunity to take advantage in that space. [1:01:42] Theres a ton of other businesses. Theres wallets, theres payment mechanisms, purchase mechanisms, a ton of other businesses. But these [the businesses of exchanges, trading, mining, and ATM/kiosks] are, I think, the four biggest that theres trends [for]. I would love to answer questions about China. We can talk to you ad nauseam about the opportunities there and so forth. [1:02:04]

Audience member #1: Hi, is there a conflict here between the Chinese government has been generally positively, so it seems, about Bitcoin, right? And we see that business is flourishing and your business is flourishing. But on the other hand, what about capital controls? Arent the government worried about Chinese people buying bitcoins and sending them abroad or moving abroad with them carrying large amounts of money, smuggling them? [1:02:40] BL: The question is about capital controls in China, right? As of the ruling from last week, bitcoin is not a currency. Capital controls pertain to currency. So bitcoin is just a virtual good. At this point, I think people will be allowed to buy and sell bitcoin and its unrelated to foreign currency. Now things may be clarified more in the coming weeks, so at this point thats the answer. Its similar to gold. People in China can buy gold. They can put it under their mattress or can take it on an airplane and go to Hong Kong. Its similar to that. [1:03:00] MC: I think the issue of using bitcoin as a proxy to do currency exchange and so forth Technically of course people can do that all they want, but I think the policy is youre not supposed to use it for foreign exchange. People will do whatever they want. If they go and buy gold, they put it in their pocket and they go across the border and then they turn that gold into another currency. Technically youre not supposed to do it, but I would say that its in effect not And theres a lot of things in China like that. Theres a lot of things that are technically youre not supposed to do but are very loosely policed. And then once in a while some guy gets policed. (laughter) Usually its because somebody else doesnt like him and its like Hey theres corruption in the government! And its like Well actually yeah we know. But this guy is really bad. But what about? Well, whatever. Just to give an example, there was a big corruption scandal in the pharmaceutical industry. This one Western company got singled out and everybody knew that everybody else was like ten times worse. These guys were like giving people golf trips. And the other guys were basically like Hey cocaine and hookers. They were like, whatever, they just did whatever. The point is that the guys who got nabbed, the guys who got basically called out (a lot of people think it was more political than it was anything else, but) thats just the reality of it. Things are illegal, people do them, and when it gets policed everyone says okay somebody got caught, but thats just the reality of the situation. I think its similar here, a lot of us speed but its only wrong if you get caught, right? [1:04:52]

Audience member #2 (AM2): Weve all seen what happens when an exchange cant handle volume. I wanted to see if you could comment on the infrastructure youve built, and what strategy and perhaps how much bandwidth do you still have at this time? [1:05:12] BL: Were constantly revamping the backend to support more and more throughput. Weve seen volumes go up 100x. Thankfully we scaled our system in the summertime to handle this volume. Weve reached 150,000 coins a day. Its much more significant than 150,000 back in April because of the increased price which means many more transactions per second. For the next year were targeting another 100x increase in transactions and volume. [1:05:41] AM2: Are you practicing a multiple location strategy? [1:05:45] BL: Yeah, we do use a distributed cloud infrastructure for our backend. Yes. [1:05:48] Audience member #3: Basically BTC China has reached the point where if something bad happens to BTC China it would be bad for Bitcoin. Can you summarize a bit the security precautions you take with theft and so on? [1:05:59] BL: Yes, yes, we have good security in place. I think either close to or over 99% of our bitcoins held on behalf of our customers are in cold storage. So theres essentially a very, very small hot wallet, [for] which we also have multiple levels of precaution to make sure it doesnt get hacked and doesnt get stolen. And then in terms of a fiat currency, its all held by third-party payment systems. Its all held outside our reach, if you will. We have our operating funds segregated from customer deposits. [1:06:29] Audience member #4: Hello, Cody here from Austin. Two questions for you. First question: has the bitcoin payment option been removed from Baidu already? And I think there was a Chinese telecom company that was accepting [bitcoins]. Does all that stop immediately? [1:06:44] BL: It was sensational news. Baidu had a small division for a small service, they started accepting bitcoin. It doesnt represent Baidu the corporate. But since the regulation got announced last Thursday, several of these higher profile companies have withdrawn their verbal intent to accept bitcoin. I think it covered Baidu and China Telecom. Its just to comply with the wishes of the government. [1:07:08] AM4: Thank you. Second question was around arbitrage. Ive noticed that the China price can fluctuate up to 30% higher than the price you see here in America. Have you any comments on that? Or what is the opportunity for buying in America, transferring to BTC China, selling? [1:07:26] BL: Theres a lot of arbitrage going on. Theres people all around the world doing arbitrage, people here left and right doing arbitrage, across multiple exchanges. The reality is even if prices are higher on one exchange, the arbitrage process takes longer and is more complex than you think it is. And the reason of the complexity is because of fiat currencies that limits the delays and transfers of funds. It would be common to see prices differ across exchanges in different countries by up to 10, 20, 30%. Its a way of life. People can go in and try to make the money, but its certainly harder than it looks. [1:08:03] MC: Yeah, but the biggest problem is if you, for example, generated a gain on one exchange and you only have a certain amount of cash youre working with in terms of float, you have to be able to move the cash from one place to another. And moving that money in and out of China,

theres no regulatory framework that allows you to do that right now. So its not easy. [1:08:26] BL: Yeah. Next question? [1:08:28] Audience member #5 (AM5): First of all I just want to thank you for providing this service. I bought my first bitcoins from BTC China about a year and a half ago. [1:08:35] BL: Well, congrats. [1:08:37] AM5: Yeah thanks. So keep up the good work. My question was about the rulings on Thursday. It mentioned that goods and services cannot be sold in bitcoin. Im wondering if most investors in China, are they expecting that to change? Or are they expecting the value to come from the international community? Or what are they expecting? [1:08:52] BL: Thats not going to change anytime soon. The government has made it clear that goods and services cannot be priced in bitcoin and cannot be sold and paid for by bitcoin. Thats the current stance. And all companies under the China law will follow that. What happens in the future well wait and see what happens. [1:09:11] AM5: So are the investors then, are they expecting bitcoin to have value just because of the international community? Is that what theyre betting on? [1:09:19] BL: Bitcoin has value for many other reasons, not just the fact that you can remember, person to person payments and also buying and selling on exchanges thats still legitimate. So theres still a lot of reason and also, Bitcoin is a worldwide phenomenon. Just because [in] some countries you can do things with it, some countries you cannot, it doesnt mean the whole Bitcoin is shut down or anything. [1:09:39] MC: Just because you cant buy a car in China with your bitcoin, you could still buy a Tesla and then come pick it up. (laughter) [1:09:45] Audience member #6 (AM6): I wanted to follow on his heels and clarify. There seems to be some discrepancy as to whether the memo that was put out applied to financial instruments being priced in bitcoin, or all goods and services? Can you clarify as to whether all merchants are not allowed to accept bitcoin, or is it only for existing financial instruments? [1:10:05] MC: Its both. Financial institutions cant touch it, and goods and services are not allowed to be sold or priced in bitcoin. Two different points, and they both apply. [1:10:18] BL: Bitcoin is not a currency. Think of bitcoin as eggs in the supermarket. If you buy a dozen eggs, you cant buy stock or gold with your eggs. You buy it at the supermarket and you do what you want with it. [1:10:29] AM6: The reason I ask is, the United States has a provision for bartering, and I was wondering if it might fall under that headline, or if a very clear line has been drawn at goods and services. [1:10:39] BL: Bartering is a known concept in China. However, the memo did not touch specifically on bartering. So well see how that develops. Thank you. [1:10:50] MT: Alright, you guys rocked it. Give them a big round of applause! [1:10:52]

CREDITS: ABL: Thanks for listening to episode 70 of Lets Talk Bitcoin. Content from this episode was provided courtesy of Mediabistro, captured and edited by Adam B. Levine, and featured Michael Turpin, Marco Santori, Bobby Lee, and Malcolm CasSelle. Music was provided by Jared Rubens and Calvin Henderson. Questions or comments? Email adam@letstalkbitcoin.com. And hey, if youre still listening to this do you have any predictions about the next twelve months? What do you think is going to happen for Bitcoin over the next year? Were doing a New Years Eve show. First time well be recording, actually, in December at all and it will be happening, I believe, the day before the end of the year. So if youd like to get anything in for that show, well be reading mail on it. Have a good one! [1:11:44]