My dealer was 15 minutes late. Maybe he wasn't even coming. I tried to comfort myself: Getting stood up by a Bitcoin dealer is, on the getting-stood-up spectrum, significantly less soul-torquing than getting ditched by a date, but worse than getting freezed-out by a drug dealer, which is, I feel, somewhat inevitable due to the vagaries of the narcotic supply chain. Still.
I'd arranged this meeting through LocalBitcoins.com, a Bitcoin marketplace that's not unlike a cryptocurrency Craigslist. People who want to sell Bitcoin post advertisements, and buyers message them to arrange a transfer. The Helsinki-based marketplace started in 2012, but there are people using it to buy and sell all over the world. (Though not in Germany, where it's been blocked for regulatory reasons.)
At almost any time of day in cities like New York, London, L.A., and Tokyo, you can meet someone on the street, in their apartment, or, in my case, a well-lit, busy Starbucks, and slip them some cash in exchange for digital currency.
Bitcoin sellers on the website are hawking anywhere from a dollar to thousands dollars worth of digial coin, and get paid via Venmo to Western Union to Amazon Gift cards to real-life exchanges. The in-person meetups, where you physically hand over cash for the cryptocurrency, are especially popular, because they avoid a paper trail. You don't have to use your real names in these street deals. It's not, of course, a totally anonymous method, but the real-life cash exchange reduces traceability.
Even though people are supposed to treat money traded for Bitcoin as taxable income, as long as people keep their exchanges small enough, it's easy to fly under the radar. It makes it an incredibly appealing option for incremental money laundering, and that's why LocalBitcoins was a cash-spewing tumbler for Silk Road profits. And it's why the Secret Service went undercover on the exchange to bust people for laundering money on it.
If you live in a major city and want to buy Bitcoin today, chances are you can meet a crypto-hustler slinging digital funds in person instead of dealing with waiting periods or the red-tape rigamarole of verifying your identity you get with most online Bitcoin exchanges, due to "know your customer" and anti-laundering requirements. Although Bitcoin is pseudonymous, if you want to buy it from an exchange like Circle or Coinbase, you are usually required to provide your legal name and other proof of identity, which destroys any semblance of identity obfuscation. That's why there are thousands of sellers on LocalBitcoins choosing to keep their real names secret.
The Starbucks at Spring and Crosby in New York's SoHo neighbourhood was so crowded I didn't know if my bitcoin dealer would see me in the corner. I wondered if maybe I should have worn a hat or or whatever it is people wear so they're easy to identify. I wondered if I should bail. I googled "exchanging cash for bitcoin legal???", "undercover cops localbitcoin arrest" and a few other paranoia-induced queries to reassure myself that I wouldn't get accosted by the NYPD if an officer walked by and asked me to explain why I was handing off an envelope of cash to a stranger.
I'd reached out to sellers with good reviews. Like on eBay and Amazon, you can leave public feedback so people can see if they're sketchy or punctual or what. My seller went by the name NYCBitcoinGuy but I didn't know what he'd look like.
But my nerves were coming from what Steven Sadler, aka Nod, the infamous Silk Road heroin dealer (turned FBI informant) had told a journalist about the site, that "any Silk Road vendor not on LocalBitcoins is losing a lot of money." I assumed there was a substantial chance that my coffee rendezvous could be with a dealer who traded in more than just digital currency.
I was only exchanging $US20 cash for a little sliver of one Bitcoin, partly because I don't have a ton of interest in investing in an enormously volatile fledgling currency and partly because I was worried about getting robbed. Though the review system helps weed out scammers, I had already uncovered a variety of horror stories about people getting jumped for cash on LocalBitcoin's forum and other Bitcoin forums:
Face0ff is a scammer
Hello be warned for a guy called FaceOff. He ran away with 50 euro and he is not worth to trust. He gives sites like this a bad name…BE CAREFULL AND DONT TRUST HIM.
just got robbed in Oklahoma City - Edmond, a kid about 20 years old, brownish-blonde hair, 6 ft tall, 150-160lbs $US950.00 -
We met, inside a coffee shop, introduced myself, asked him if he had done trades before. He said he had done several. I wanted to make sure he was familiar with how the site worked and then to see if he had any questions about bitcoins in general. I released the coins, and we started to shake hands as he was handing me the envelope. He jerked the envelope out of my hand and took off running. Every person I have met has been awesome and excited about bitcoins. So I let my guard down. Showed up wearing flip flops. I started to pursue after he had already taken 3 steps, but then realised I would not be able to run in flippers for very long and stopped after about 100 yards.
The potential for a sketchbag encounter seemed high. So did getting blown off. I scanned the crowd. The guy in the fedora looked promising! But no, a moment later he was out the door.
I was about to abandon my Starbucks perch when a baby-faced, tall guy with Beats headphones, a flat-brimmed hat, and a backpack approached me. He looked too young to do his own laundry, let alone launder money, but here he was. He explained that he and his friends were working together under the NYCBitcoinGuys handle to assess the viability of slinging 'coin on the street, but that I'd have to wait for his friend to show up to hear more- this was his very first in-person transaction before and didn't know what to do.
An equally young and tall dude in a business suit appeared a minute later, walked over to us, and high-fived baby-face. But he was just another tertiary member of the BitcoinGuys along for the ride. He'd been at a job interview and come to learn the Bitcoin street-dealing ropes afterwards.
Then he got a nosebleed and failed to contribute meaningfully to the conversation in any way. I made small-talk with Baby-Face and Nosebleed for a few more minutes until their friend who actually knew about Bitcoin arrived.
They were friends from college and, I suspect, still in college, and decidedly not cybercriminals. It looked like their cumulative age was under 50, and far from being intimidating, they presented like eager Ayn Randfuccbois. The friend who actually knew what he was talking about plopped down on the window sill and apologised for being late, grinning widely and explaining that, while he had high hopes for Bitcoin as a payments system, the in-person meetups were mostly for pocket money.
"For me, it's more of a cash-cow than anything else," he told me, explaining that he worked at a Bitcoin exchange. "A lot of these other guys are like, this is my way of making money. People are living off of this."
Some of the sellers on LocalBitcoins are willing to receive huge cash dumps, but the main BitcoinGuy was wary of playing in the big leagues and not properly reporting the money exchanges. NYCBitcoinGuys, as a rule, sticks to exchanges under $US100 so they don't have to deal with reporting the income. "I like my freedom, and not being in prison," he told me, laughing. "But it sucks because sometimes guys just don't know. They see it as a way to make money and don't do the research, and they get in bad positions. Sometimes, though, there are just straight-up bad actors. Guys who knowingly do what they're not supposed to do."
I asked if they knew anyone personally using the service to launder drug money. "Funnily enough, no. To be honest, I know people who use it for drugs- not hard drugs- but let's stay away from that topic," he said.
"You know Charlie Shrem?" he asked, referencing the CEO of a Bitcoin exchange arrested last year for money laundering. "I know him pretty well, but that was more like negligence than anything else," he said, noting that Shrem was already prosecuted and since then, he'd mostly met tech guys, libertarians, and idealistic entrepreneurs through LocalBitcoins and the Bitcoin community, people devoted to making the cryptocurrency more legit, not less.
Then he told me that they were tossing around an idea to lure more customers by creating a "BitcoinBabes" team of women, since they found that the community was mostly male.
"You can do, and you can report on when you do it," Nosebleed piped in.
"I don't want to do that," I said.
We talked for a while longer, mostly about their hopes that Bitcoin will flourish as a way to make cheap money transfers in the developing world. As the polite finance bros and I planned to part ways, I didn't think twice before handing them my cash. The NYPD remained unperturbed. The main guy held out his phone to show me that he was transferring the .0788 Bitcoin I'd purchased into my LocalBitcoins wallet. The transfer was near-instantaneous. And then they were gone.
So they weren't drug-money launderers, to my mingled relief and chagrin. Neither was the older man I met a few weeks later in Toronto to try my first Canadian Bitcoin street deal (we met, again, at a Starbucks, which seems to be a popular destination for cryptocurrency face-to-face tradeoffs). Instead, he was a retired financial sector worker who decided to get involved with LocalBitcoins as "something to do," as he put it.
He was eager that the Bitcoin community not be portrayed in a negative light, and told me a story about how one of his clients transfers Bitcoin to a cousin in Pakistan so he can afford to buy goats. It was a heartwarming tale, though it made me curious about the availability of Bitcoin-accepting goat vendors internationally.
Though my Bitcoin deals went off drama-free, the service that facilitated them is hard to wholeheartedly endorse. As I mentioned earlier, even on the website's forums there is a scary collection of tales about people getting ripped off. My Torontonian retiree told me that he's wary of buying large amounts of Bitcoin for that reason; he's heard of people getting jumped for the cash they're carrying before the exchange goes down.
Plus, LocalBitcoins is not exempt at all from the same volatility and insecurity that plagues the Bitcoin scene in general. At the end of January, LocalBicoins's LiveChat feature got hacked and some people lost money. If you're really into playing around with Bitcoin speculation and you want to escape a paper trail while profiting off small-scale exchanges, it's pretty effective... as long as you're cool with the inherent unknowability of strangers' intentions.
For an average buyer, it seems like it'd be easier to just buy through an exchange like Coinbase or even find a Bitcoin ATM, where you're not required to socialise with anyone. The real benefits derived from in-person meetups seem most acute when you are trying to avoid leaving a paper trail, unless you find enormous satisfaction in physically shaking hands with the person you're meeting. Given the convenience of exchanging currency without the tedium and intermittent thrills of waiting for the man, I suspect these hand-offs will remain a niche throwback.
Illustration: Tara Jacoby