“If the industry is only interested in buying, selling and trading bitcoin, confidence will disappear.”
The remark finds OKCoin CEO Star Xu cutting to the core of what seems to be on his mind these days. The head of the world’s leading BTC/CNY exchange, Xu looks contemplative, picking absentmindedly at the grass in front of Miami’s Fillmore Theater, winding the stems through his fingers and plucking pieces from their roots as he sits for a new interview with CoinDesk.
In contrast to the Western perception that OKCoin has led the charge toward introducing more advanced, and some would argue more risky, financial trading tools to the ecosystem, Xu’s first speaking appearance in the US was one that sought to project a more friendly and inclusive message – one that ties the fate of his company to the network at large.
Taking place on day one of The North American Bitcoin Conference (TNABC), Xu’s talk was largely focused on finding “real use cases” for bitcoin. On stage, he argued that bitcoin’s value is already determined by expectations of its future use, a point he later underscored.
“The bitcoin market is different from the stock market. The price of the stock is based on the company’s profits or revenue. Bitcoin is different. Why does bitcoin have price? Because people believe it will be used in the future. The industry has to find a new use case, otherwise confidence in bitcoin will be compromised.”
Throughout the interview, Xu stressed that OKCoin needs to encourage more consumers and merchants to use bitcoin, though he argued that, unlike companies in the US market, the China-based exchange will need to take an active part in creating the wider bitcoin economy.
“There’s a lot of startups in the US,” Xu said. “In China, there are only several big bitcoin companies, so we have to build a bitcoin ecosystem.”
The comments come as part of a wide-ranging talk that found Xu opening up about OKCoin’s position in the market, bitcoin’s value proposition in e-commerce and the challenges the company faces as it seeks to build its international user base.
Syncing with the West
To better frame the current challenges at OKCoin, Xu often talked more generally about how OKCoin has a unique opportunity at the “starting line” of the bitcoin industry, something that sets it apart from past Chinese tech ventures.
Xu talked about OKCoin’s need to “sync itself” with its US competitors in a bid to change how Internet commerce has developed historically.
“Over the last 20 years, the whole Internet industry has just been copied in China,” he explained. “Bitcoin is the same, some big companies in China are just waiting for what happens in the US.”
Xu explained that Chinese Internet companies have long followed the business models of established US companies, citing the Chinese version of eBay, Taobao, and its homegrown Google, Baidu, where Xu worked as a search engineer.
Using this as an example, Xu framed China’s merchants as less willing to consider bitcoin as an e-commerce tool.
“In China, most merchants think they want to wait until bitcoin becomes a more established industry, then they can accept it. They want to follow the US. I think if Amazon accepts bitcoin, Alibaba has to,” Xu said.
Doing it all
Xu indicated that OKCoin is also in a unique position, as it needs to be involved in many facets of bitcoin business in a bid to increase its prospects – not a small task considering the company already operates a RMB exchange, USD exchange, margin trading service, futures trading service, payment platform, multisig wallet, payment gateway and application platform.
In this light, finding specific target markets where bitcoin might prove advantageous, Xu indicated, would be top priority. OKCoin is particularly interested in cross-border money sending services, he suggested.
“A lot of Chinese people try to buy something from Amazon or Newegg. Payment is difficult for them, so we are proposing bitcoin as a solution,” Xu continued. “There are many families sending their children to study overseas in the US, offering a potential opportunity for bitcoin to be used within this specific market.”
Here again, Xu framed his company’s efforts as similar to his home country’s Internet giants.
“Alibaba offers B2B, B2C and a payment business,” he said. “They have to do this because when they do e-commerce, there’s no payment in China, so you have to do payment. There’s no UPS, so Alibaba has to do this.”
Still, Xu seems unsure of exactly what role OKCoin will take in this process, adding: “We don’t want to run all the businesses, but we have to build the ecosystem.”
Trust was another recurring theme in the conversation, with Xu emphasizing that this is a major focus for OKCoin, both at home and abroad. The necessity of such measures was on display at TNABC, with Xu facing sometimes pointed questions from the audience about the exchange’s role in leveraged trading.
Still, Xu sees ways for his company to bridge the East-West divide that has become palpable in the conversation surrounding bitcoin.
“I think we have to become more open to international customers and earn their trust,” Xu stated. “We can provide our cold wallet address, we can do proof of reserves and show our exchange infrastructure to our customers. I believe our technology is very good. I believe that by being transparent, we can earn users’ trust.”
Overall, Xu said the company needs a better approach to earn that trust, though he noted US companies would likely face similar barriers to entry in China.
Emphasis on security
Security was yet another major theme of the conference, which took place in the shadow of the $5m hack at Europe-based bitcoin exchange Bitstamp. During this time, OKCoin notably capitalized, pulling ahead of Bitstamp to the number two position in terms of daily USD trading volumes.
Despite the incident at Bitstamp, however, Xu was not concerned that OKCoin would fall victim to similar issues.
“Security is the most important thing to us,” Xu said. “We use our own technology, we have a team of three individuals that solely focus on security.”
Xu went on to describe OKCoin’s risk control system, which he said scans the exchange every two minutes. “If we find a difference all withdrawals are stopped, and we send a message,” Xu said.
“Our financial team has to review this data everyday. If there’s some difference, they cannot go home. Everybody needs to follow those rules. On the weekend, we have three financial accountants who work in shifts to cover all hours,” he remarked. “This is done on a daily basis, seven days a week, year round.”
Over time, Xu suggested this determination will win over more skeptical consumers abroad.
“I think international for OKCoin is on the way.”
Image via Joshua Dykgraaf for TNABC