Using OTC apps to deal with loss of Bitcoin exchanges

CoinCola is a Hong Kong-based OTC Bitcoin exchange
ZHENGZHOU, HENAN — Now that I’m back working in China, I’ve had to deal with the brave new world created by the government banning the major Bitcoin exchanges like BTCChina, Huobi and OKCoin. We can still buy Bitcoin; it’s just a little harder than before.

New regulations basically killed the Chinese exchanges, forcing them to close up shop on the mainland by the end of last month. Over-the-counter (OTC) exchanges have stepped in to give mainland traders access to Bitcoin, Ethereum, and even Bitshares.

While I do some trading, mostly I use cryptocurrencies for cross-border exchange, as I am paid in Chinese yuan (CNY) and am loathe to use wire transfers for the measly amounts I send to my US bank account. Aside from the fees, wiring money from a Chinese bank to an overseas one requires a few hours, reams of paperwork, and a patient interpreter to assist in communicating with bank employees.

As I was paid yesterday, I decided to use two apps to buy and then send Bitcoin and Bitshares to my respective accounts.

While I already had an account with LocalBitCoins.com, today I decided to give another service, the Hong Kong-based CoinCola, a try.

CoinCola has an app for both Android and iOS (scan the QR code in the image at left to download), as well as a website. It works much like LocalBitcoins. Both offer an online wallet, an escrow service, and a platform for buyers and sellers to find each other.

For CoinCola’s Chinese uses, the main forms of fiat payment are WeChat Pay, Alipay, and national bank transfers. As such, there is no such thing as anonymity, as the third-party services are linked to one’s bank account. Conceivably, authorities could track down CoinCola traders if there were suspiciously large transactions on a regular basis.

As my sums will be necessarily small, I’m not especially worried, though.

[Regulators cracked down on the crypto exchanges in large part to stem capital flight. Even China PayPal fell victim to stiffer controls: transfers from Chinese bank account to foreign addresses are no longer allowed. Only deposits from foreign PayPal accounts are permitted now.]

I wanted to use Alipay, so I found a seller who offered that payment method. I spent CNY1,000 (about USD150) to get about $145 worth of Bitcoin through him/her, equivalent to about a 3.4% transaction fee.

Easy enough, but the biggest drawback to using CoinCola or LocalBitcoins is the premium the sellers charge. In other words, you are not buying at market rates. The premiums can add up over time, but Bitcoin’s fluctuating price would allow you to recoup any losses if you time selling back into fiat just right.

Bitshares (BTS) is the token underlying the decentralized Bitshares exchange. It kind of flies under the radar, and gets much less media attention than Bitcoin or Ethereum, but it has its supporters in China.

Recently, a team of Bitshares enthusiasts created an Android app, MagicWallet, which does for Bitshares what CoinCola does for Bitcoin and Ethereum. So, I tried it out today, too. (Note: MagicWallet offers an English language UI, but help files are still only in Chinese.)

MagicWallet offers access to the Bitshares ecosystem
MagicWallet operates somewhat differently than CoinCola. It allows access to a decentralized exchange, as well as to OTC buyers and sellers. Rather than send fiat currency to a seller offering a cryptocurrency at a premium, with MagicWallet you can send fiat to an agent, who will “recharge” your MagicWallet fiat wallet. From there, you can buy BTS at market prices. Once you have BTS on hand, you can send it an OpenLedger trading account to exchange for other cryptocurrencies.

One’s first MagicWallet trade is (I discovered) limited to CNY200 (about USD30), and I found an agent offering WeChat Pay as a recharge option. My net deposit, after fees, was CNY197.60, representing a 1.2% fee — about a third of what I paid at CoinCola. MagicWallet has an escrow feature, as does CoinCola, so there is little chance a seller or buyer can cheat you.

I then bought about 338 BTS on the exchange, and sent that to my OpenLedger trading account to buy some Litecoin.

MagicWallet was easy to use, once I realized that (a) my transaction password was wrong and (b) my first recharge was limited to CNY200. As the English interface still returns error messages in Chinese, I had to ask my agent for help in translating them. For some reason, the app autofilled the transaction password incorrectly, and since the password is obscured for security reasons, I couldn’t see it was wrong. Once I manually entered the password, the transaction completed.

For future trades, I may prefer to use MagicWallet, as the upfront costs are a third less than CoinCola. On the other hand, buying Bitcoin or Ethereum directly also has great appeal, as I can deposit them directly into my Coinbase wallets to eventually sell them into my bank account. Either way, I’ve found two ways to avoid the dreaded wire transfer hassle for cross-border exchanges.

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1 thought on “Using OTC apps to deal with loss of Bitcoin exchanges

  1. Pingback: Using Uphold to move funds across borders – Wheat-Dogg's Crypto-Info Pages

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