Fintech: Up bit creek

COPYING AND DISTRIBUTING ARE PROHIBITED WITHOUT PERMISSION OF THE PUBLISHER: CHUNT@EUROMONEY.COM

By:
Chris Wright
Published on:

A bitcoin conference on a Thai beach, part of a cryptocurrency cruise, is quite a thing. Libertarian in outlook and cool in attendee, these are bitcoin’s true believers. But as the price of bitcoin tumbled in January, why were they still partying like it’s $19,999?

bitcoin-beach-illo-600

A violinist is on stage trying to play along to ‘Bitcoin Baron’ by YTCracker, which is booming from a 15-foot-high bass-heavy sound system. 

“I’m a bitcoin baron, I’m scaring the status quo/Got that crypto dough in that dat file to blow/And the algorithm gon’ get ’em until prism,” observes YTCracker, believed to be the first person in the history of music to try to get ‘algorithm’ to rhyme with anything. 

It must be playing havoc with the interview a Thai television crew is trying to record with two American financiers, each dressed only in skin-tight Speedos and a lanyard apiece, but the cameraman is more worried about the delegate on a rope swing, who keeps soaring into shot in the background singing ‘Delilah’. 

In a dress code of board shorts and bikinis – a dress code Euromoney, who turned up in a suit, apparently failed to receive – 800 other delegates are wallowing in the Gulf of Thailand or lying on the massage beds on the shore, beakers of free sangria by their sides.

This is what the lunch break at a Thai bitcoin conference looks like.

“I think I’m overdressed,” says a man preparing a Cayman Islands initial coin offering, naked from the waist up and leaning on a sign that reads: “Banana coin: world’s first blockchain option for investing in production of organic bananas.” 

There are topknots on men and Bulgari Flora sunglasses on women. 

World Bank annual meetings do not look like this.

bitcoin-beach-6-600
Bitcoin on the beach: the dress code was relaxed, but the crypto-revolutionaries
displayed the zeal of true believers in Thailand

“Let’s get those bitcoin whales in their seats!” bellows the MC, wearing a ‘Start mining now’ T-shirt. “Crypto-revolute! Crypto-revolute! Crypto-revolute!” 

And slowly the delegates drift back to their seats, an unruly range of plastic chairs beneath umbrellas at the Paradise Beach Club Phuket, facing a stage more commonly used for riotous full-moon parties.

Most of the delegates are halfway through a four-day blockchain cruise from Singapore to Phuket and back, run by the blockchain services gateway CoinsBank. Since bitcoin absolutely tanked after the ship left Singapore two days earlier, its passengers have informally renamed it the ‘Bitcoin Titanic’. But this is an inclusive, rambunctious, libertarian crowd, and one senses absolutely anyone would be welcome here bar JPMorgan chief executive and bitcoin denier-in-chief Jamie Dimon.

The MC bellowing about crypto-revolute turns out to be Eric Benz, managing director of bitcoin exchange and merchant processors Cryptopay, who sets a boisterous and celebratory tone despite the fact that everyone on the beach is, on paper, many thousands of dollars poorer than when they embarked upon the cruise. 

bitcoin-beach-2-600

“Everyone is a crypto friend to me,” he says. “It’s a special time in this industry. If you don’t have bitcoin, buy some. Buy some now.

“At the end of the day, bitcoin is like the tallest tree in the forest: it’s there for ever, it’s not going anywhere,” Benz says, showing a profound misunderstanding of forestry. “For anyone who hasn’t gotten involved yet, it’s not too late.”

He hands over to John McAfee, another rock star of the industry, the anti-virus magnate who these days runs MGT Capital Investments, which among other things is heavily involved in bitcoin mining. McAfee is, by virtue of wearing long trousers and a loose blue shirt draped over a white T-shirt, by far the best-dressed person on the beach, barring Euromoney. 

McAfee – a man who is so libertarian he once sought the US presidential nomination for the Libertarian Party but lost for being too libertarian – is not one to worry about what he says. 

bitcoin-beach-3-600

In a 20-minute address he calls the US dollar a fraud, advocates the decriminalization of marijuana, says that 90% of cryptocurrency white papers are scams, casually notes that the Monero cryptocurrency is being used to sell everything from illegal drugs to monkeys, says he has assisted a collective of American prostitutes develop their own token system, savages Dimon, savages not only the US government but all governments, reveals that he employs hackers in Chicago, predicts the demise of banks and describes the bitcoin era as a “war against the established dynasty of power across the world”.

“I spent two months evading an entire army in central America,” he says in a low baritone, sounding and even looking a bit like Chuck Norris. “Do you think angry words are going to bother me?” 

This is apparently true, part of a quite extraordinary back catalogue of life experiences. He was raided by the Gang Suppression Unit of the Belize police force in 2012 and later that year pursued as a person of interest in the murder of another American expatriate in Belize; the country’s prime minister Dean Barrow called McAfee “extremely paranoid, even bonkers”, around which time McAfee sought political asylum in Guatemala and was instead arrested and eventually deported to the US.

But we digress. The point of McAfee’s speech is defiance: against market falls, against laws, against control, against the establishment: “Someone said governments are going to ban all cryptocurrencies. It’s a great thing to say, but how? Tell me how you can create a law that will not be enforced? Bitcoin is permission-less.”

No place for non-believers

This is not a place for the non-believer. There is little talk of the mainstream idea that bitcoin is built on nothing; nobody is talking about tulips here. Everyone on the beach is either a holder of bitcoin, a backer of cryptocurrencies or in some way already entrenched in the industry. 

“I have not found a use for the US government,” concludes McAfee, before giving way to Ronnie Moas, founder of Standpoint Research. Not to be outdone by McAfee’s rich CV, Moas reveals that in his youth, he put on concert productions for Guns’n’Roses and Metallica.

bitcoin-beach-5-600

By turns boastful and furious, Moas devotes the majority of his speech to explaining how influential and prescient he is – “on July 3, I made headlines around the world” – and railing against income inequality, berating the crowd for what they spent on attending the conference and spelling out just how much could have been done with that money in aid to Haiti. An avid and active backer of humanitarian aid, he says he is “nauseated”. 

Eventually he turns to bitcoin and his rationale that if 2% of increasingly overvalued assets in mainstream investments find their way into cryptocurrencies in the next few years, bitcoin should hit $100,000 in three to five years, and possibly $400,000 in seven to 10, by which time it would be the most valuable currency in the world. 

“I don’t know how much gold there is in the ground, but I know how much bitcoin there is,” he says, in a reversal of an analogy frequently used by non-believers (that they can see and feel gold and understand its use as a store of value but not bitcoin).

“But there’s no guarantee bitcoin will stay at the top of the market. Remember what Amazon did, what Buster Douglas did to Mike Tyson, what Facebook did to MySpace. Champions get knocked out. There are no guarantees here.” 

He explains how he has his bitcoin holdings spread across five exchanges out of concern that one of them will be hacked and could be wiped out – it seems at least a few people here remember the collapse of Mt Gox – and tells people never to trust texted codes to the phone as a method of two-factor authentication. 

Like McAfee, he’s certain 90% of white papers are scams. “It only costs $100,000 to build a scam,” he says. “$25,000 for a web site, $25,000 for a white paper, $25,000 paid under the table to a professor to sign off on it, $25,000 for someone who will be the face of the company and who is comfortable lying to the public. Then they turn the switch on and have a few million in their pocket the next day.” 

His view is that the best legitimate cryptocurrency pitches are impeded by the fact that their investors don’t speak English as a first language.

Euromoney tries to get a question in about cryptocurrency as a method of financial inclusion but is beaten to the microphone by a half-naked Kazakh.

bitcoin-beach-4-600

After lunch, Andrew ‘Flip’ Filipowski, chief executive of SilkRoad Equity, takes the stage. Filipowski has been involved in more business launches in this and other sectors than anyone, but it is best to point out that the other Silk Road, the online marketplace that was notoriously used for money laundering, drugs and even mooted assassinations, is not one of them. Having the name in common has provided a few nervous moments, though. 

“I woke up one day finding out I had potentially been put in jail,” he recalls. 

Intriguingly, he is the second over-65-year-old of the day to take the stage after McAfee, in contrast to the youth of most of the attending crowd. He tells us that he first wrote a computer program in 1967 and asks how many people can remember what everyone was told to invest in in ‘The Graduate’, to which the correct answer (plastics) is shouted out by precisely two people out of 800, one of them Euromoney. But there is not the disconnect of age one might expect; many of the crowd view these guys with enormous reverence. 

Flip’s is a presentation littered with other people’s bons mots, and they fill a screen behind him from time to time: “The best way to predict the future is to invent it. The future is already here; it’s just not very evenly distributed. 99.999% of humanity doesn’t understand or appreciate the ramifications of what is coming. The past is a foreign country: they do things differently there.” 

Age is no barrier to appreciation of the pace of change and he runs through everything from 3D printing to 5G and driverless cars, and how they might interact with the blockchain, with vision and passion.

bitcoin-beach-1-600

Finally Euromoney ticks the box of lifetime ambitions marked ‘Shout out a financial services question while barefoot and open-shirted on a beach’ by asking Flip – who is a backer of Unocoin, an India-based bitcoin exchange – to be the first person at this conference in Asia to say anything at all about Asia. Clearly a believer in the social justice that the early backers of bitcoin were so enthusiastic about, he posits that bitcoin could even bring India and Pakistan closer together. 

Next up is Tone Vays, the blockchain consultant and researcher, who takes the stage to euphoric applause. Wearing shorts and a bright orange bandana, the first thing he does when he gets to the stage is to ask someone, anyone, to bring him some rum from the bar.

But Vays is the only one in the whole day to approach the bitcoin phenomenon with any sense of doubt or cynicism, or to reflect the concerns that mainstream finance has about it all. 

He says the industry is making exactly the same mistakes as happened in the dot.com bubble in 2000, namely that anybody can buy into it without any particular assessment of its worth beyond the fact that they have heard about it and it seems to be going up. 

With bitcoin it is worse, he says. “You no longer need to be a citizen of any country, never need to have a minimum age. There are people aged 13 trading Ethereum and bitcoin because nobody is stopping them.

“This was the biggest problem of the 1990s. Everyone thought they were a trader, that everything’s going to go up – and that means it’s going to come down.”

He bemoans the fact that, as in the late 1990s, founders of failed businesses are able to walk away rich. “You can cash out of your ICO instantly. Ethereum had eight co-founders. The minute they got the money, seven were gone.” 

Ethereum, clearly, was a success, but his point is: “You have to stay and do what you promised.” 

In a nod to the mainstream that doesn’t go down entirely well, he adds: “People hate traditional venture capitalists, but their job is to figure out if your business is any good and they are qualified to figure that out.”

He sees a bubble, expects it to burst and sees that as healthy – a view challenged by a belligerent Canadian from the (beach) floor who manages the mighty feat of asking a question while simultaneously holding a drink, a cigarette and a microphone. 

But Vays is a scholar of bitcoin and fundamentally a fan of its intentions and values. 

“I got into bitcoin as a non-government controlled currency with a finite supply like gold,” he says. “I don’t want the government printing money.” 

He bought into bitcoin when Cyprus decided to shut down its banks and take more than 40% of people’s deposits over €100,000 in March 2013. To him, it expressed everything that was wrong about the existing financial system.

Vays has by now been brought so many rums, he is enlisting help to drink them (Benz steps in), despite his uncharacteristically duff note to this tribe of believers. 

“I really thought people were a lot smarter 20 years after dot.com, but I grossly overestimated that,” he says. 

Last up is the fifth successive American at this Asia conference, Malcolm Wilkinson from Healthureum, whose earnest efforts to explain the way healthcare and the blockchain can work together are somewhat undermined by an announcement that everyone needs to start heading back to the ship. Instead, by and large, they head to the bar and the sea, ignoring the exhortations of valiant young Russian conference organizer Kristina for everyone to get back on the damned boat. But finally they are gone, ready for a full day of presentations on the boat back to Singapore the next day while absolutely pounding the onboard WiFi to see how much money they have lost that day.

Euromoney hitches a lift on the back of a truck back to a local hotel to reflect. 

Three things are clear: that there is a constituency of unshakable belief in cryptocurrencies and blockchain so strong that it is likely to thrive no matter what the rest of the financial world says. That the libertarian ethos that came with bitcoin’s foundation before it became a vehicle of absurd speculation is still intact, at least on the speaker circuit. And that bitcoin aficionados know how to have fun at a conference. 

Next time Euromoney is turning up in budgie smugglers.