In-person bitcoin exchanges spread across the globe
“I’ll do Coinbase price.”.
“It’s $10 under Gox.”
“Last time I was here everyone was trading in Gox price.”
“That was a long time ago.”
So went the banter on the trading floor -- or rather, the trading winding pathway in San Francisco’s Yerba Buena Gardens, where five men stood in a loose circle and prepared to trade bitcoins for dollars.
What qualifies as “a long time ago” in the fast-moving world of cryptocurrency could only have been a few weeks earlier, at most. On this late-summer evening, the weekly cryptocurrency trading session known as Buttonwood had been convening for about two months.
It was named for the agreement that led to the birth of the New York Stock Exchange. But the resemblance ends there. The pace at Buttonwood was just a tad slower than on the NYSE trading floor, and there was no opening bell rung by a celebrity -- only the jingling collar of the occasional dog being walked by.
As the summer twilight fell on the grassy park and couples on dates strolled toward the movie theater in the nearby Metreon shopping center, one of the traders asked: “Buying or selling?”
Some traders responded that they didn’t care which. As the evening went on and more traders arrived, a little bit of both happened.
But for most of the traders, the main point was just to be there, participating in bitcoin.
San Francisco bitcoin consultant John Light started the Buttonwood exchange on 4th July, after seeing Josh Rossi start a similar event in May in New York City’s Union Square Park. Rossi first wrote about the idea of in-person exchanges, calling it Project Buttonwood, but ended up calling the actual meet-up Satoshi Square.
Now there are at least 11 exchanges meeting all over the world, in Berlin, Los Angeles, Tel Aviv, Sydney and more cities. Like traditional stock exchanges, the events work on the open outcry system -- traders verbally agree on exchange prices and execute the transactions using their smartphones or laptop computers, and cash.
Last week, Rossi held an exchange in Panama City, where he recently moved to work for a new bitcoin venture. He said he has helped a number of the other exchanges get going as well.
In NYC, Satoshi Square has drawn as many as 60 people, and on several occasions more than $10,000 in bitcoins have been bought or sold, Rossi said.
Sometimes the New York traders use a smartphone app that Rossi developed to keep track of buying and selling prices. In San Francisco, on the other hand, no more than $250 to $300 generally changes hands, and the volume hasn’t been high enough to bother with the app yet, Light said.
In Berlin, the exchange is called Bitcoin Exchange Berlin, has a sponsor (LocalBitcoins.com) and a logo, and even cute bowler hats for traders to wear and chalkboards where they can write their buying and selling bids. The BXB, as it’s called for short, also incorporates a marketplace where people can sell goods for bitcoins.
Before the exchanges popped up, if you wanted to trade bitcoins in person you pretty much had to use LocalBitcoins, a Helskinki-based website that helps individuals connect for one-on-one trades, much like a Craigslist for bitcoins.
Alan Lin, of Oakland, said he preferred meeting at San Francisco’s Buttonwood to LocalBitcoins match-ups.
“Half of the guys would come and half would postpone,” Lin said. If the price of bitcoins changed between the agreement and the meeting time, the trader might just decide not to show up, he said.
Light said one of the reasons he started Buttonwood was that he, too, had trouble trading on LocalBitcoins.
“I would try to get a time out of [the potential trader] or some contact info, and would either just not get responses or just delay after delay,” Light said.
Once you have half a dozen or more bitcoin enthusiasts gathered in one place, the friction is removed and trading can ensue seamlessly. So seamlessly, in fact, that all the trading was wrapped up within half an hour or so, leaving plenty of time for socializing and for teaching newbies about the currency. That’s part of the point, Light said.
“Some people specifically show up to learn and it’s a kind of environment where they can see how bitcoin works in person,” Light said.
Since the same traders tend to show up repeatedly and there are plenty of witnesses around, it’s also a safer way to trade. With a one-on-one meetup, traders say, they might show their dollars, but only hand them over once the bitcoin transfer goes through. In Yerba Buena Gardens, people hand over $20 bills first, then transfer the bitcoins.
After the trading, conversation turned to media coverage of people buying bitcoins in order to purchase drugs on the Silk Road website, which has since been shut down by US authorities.
The traders gathered at Yerba Buena looked like a pretty clean-cut group, and many said they dislike publicity portraying bitcoins as the currency of crime.
Buying bitcoins in person is indeed more anonymous than going through an online trading service like Coinbase or Tradehill, an anonymity that would be useful if you’re planning to use it for something illegal. But Light said no one has shown up at Buttonwood broadcasting that they’re looking for drug money.
“I think people understand that they would probably get turned away, or that would cause a bit of awkwardness. Anybody who’s done that has probably kept it to themselves,” Light said.
The traders at Buttonwood said that the appeal of trading in person is more about privacy than trying to get away with something.
“I prefer to give companies as little of my personal information as possible,” Light said.
Then there’s the sense that trading person to person is in keeping with the idea of bitcoin as a decentralized, peer-to-peer currency.
“To me it makes sense to have a distributed model, that is not dependent on companies in far-away lands, their regulatory environment, and their technological skill,” Rossi said. “Bitcoin has proven to be an incredibly resilient network, I think the methods by which we convert it to and from traditional fiat should be as resilient.”
With Tradehill’s bitcoin trading on hold due to regulatory issues, and US customers having trouble getting their money out of Mt. Gox, it makes sense for bitcoin users to build up these in-person events as a way to keep bitcoins trading if the newly launched corporate intermediaries are not longer around.
Speaking of regulators, are these casual exchanges legal? FinCEN, the US financial crimes enforcement network, did not respond to comment requests, and a recording on the office’s press line said the office is temporarily unavailable, probably due to the US government shutdown.
The virtual currency guidance that FinCEN issued in March says that people engaged in the exchange of virtual currency as a business are considered money services businesses, and as such are subject to registration, reporting and record-keeping regulations. However, people who simply acquire a virtual currency for their own use are not subject to these regulations.
In the end, passing a beautiful evening in the park, trading dollars for bitcoins doesn’t seem like such a fringe activity. In fact, to at least one participant, this group leans toward the mainstream.
“I still have some Ripples and PrimeCoins if anyone’s interested,” said Cole Albon, a San Francisco data warehouse engineer. He explained that PrimeCoin is a newer cryptocurrency that discovers prime numbers as its proof of work. But even Albon is unsure if PrimeCoin will pan out, and he was not too surprised that no one was buying.
“They’re way too exotic for this crew,” he said.