With bitcoin in the media
spotlight, everyone seems to have an opinion on the price. Few recognize the
profound implications of decentralized money for the monetary system, society
and government – not to mention the emerging business opportunities.
The timing could not be better for the inaugural conference of the
newly-formed Bitcoin Foundation. Next month, several hundred people from around the world will
converge on the San Jose Convention Center (in Silicon Valley, naturally).
Billed as "The Future of Payments," the conference is attracting technologists, venture capitalists, bankers,
traders, payments specialists, and financial regulators.
Launched in January 2009, bitcoin achieved all-time
highs in transaction volume and new entrants into the currency last week –
milestones overshadowed by the price volatility. The nonprofit foundation was
established in September 2012 to standardize and promote the core bitcoin protocol. (I have a seat on the foundation’s
board.) Two of its early accomplishments were to recruit lead bitcoin developer Gavin Andresen (whose informal role in
the Bitcoin community mirrors Linus Torvalds’
position in the Linux world) as chief scientist and to launch a quarterly
grant program for funding various initiatives that advance the bitcoin protocol. Next, the foundation intends to
encourage best practices for bitcoin businesses and
exchanges, to facilitate the formation of local foundation chapters in foreign
countries, and to educate global regulators about what can and cannot be
regulated feasibly with a distributed peer-to-peer system such as bitcoin.
Although the conference features excellent technical
tracks, the agenda will be particularly interesting to those in the banking
and payments fields.
For example, many people understandably ask why merchants would want to
accept payments in Bitcoin given the volatility of
the exchange rate with the dollar. After all, even if you believe the digital
currency will appreciate over time, you probably can’t use it to pay the
electric bill or the rent.
Part of the answer is the service provided by firms like BitPay, whose cofounder and CEO, Anthony Gallippi,
will explain how he’s been driving business adoption of Bitcoin.
BitPay functions as a merchant payment processor,
somewhat akin to the acquiring banks in the Visa/MasterCard space. The
startup provides foreign exchange conversion services for merchants desiring
immediate settlement in local national currencies. Thus Tony’s customers reap
the benefits of Bitcoin – no chargebacks, since bitcoin transactions are irreversible, and lower fees
than they’d pay for credit card transactions – while BitPay
takes the currency risk. Tony recently landed one of the best-known merchants
to accept Bitcoin: WordPress,
the blogging platform.
Another startup is Paymium, whose Bitcoin-central exchange has shown
it is possible to seamlessly integrate bitcoin and
the traditional regulated banking infrastructure. The French company’s
co-founder and chief operating officer, Pierre Noizat,
will talk about bridging that gap. If his name rings a bell for some
financial services professionals, it may be because Pierre comes from the
traditional payments world, having served as managing director of the French Mobile Contactless
Association.
Would-be disruptors eyeing this space but worried about legal uncertainties
will have a chance to hear from Patrick Murck, the
general counsel of the Bitcoin Foundation. His
expertise extends across the legal and regulatory issues governing the use of
Bitcoin, virtual economies, gamification,
alternative payment systems, and social loyalty and reward programs.
Immediately after the Financial Crimes Enforcement Network issued the March
18 regulatory guidance on centralized and decentralized virtual currencies,
Patrick published an analysis.
Bitcoin’s user-defined anonymity protects personal
privacy, and this combined with the decentralized structure arguably thwarts
censorship – for example by allowing people who want to donate to WikiLeaks to circumvent the political blockade that forced the major payment processors to cut off that
organization. Rainey Reitman, the activism director of the Electronic Frontier Foundation, a nonprofit civil liberties law firm and advocacy center, will hold
forth on these liberating aspects of Bitcoin. She
is particularly interested in the intersection between personal privacy and
technology, and has spent significant time investigating the role of
financial intermediaries as censors. Reitman is also the chief operating
officer and co-founder of the Freedom of
the Press Foundation, a nonprofit organization that
crowd-sources funding to supporting independent, nonprofit journalistic
institutions – and recently started accepting bitcoin.
Most of the attention paid to Bitcoin in the
mainstream media has focused on its merits and drawbacks as a store of value.
The smarter commentators have paid greater attention to its potential as a means of exchange.
But what about the third key role of money, as a unit of account? Bitcoins, after all, are divisible to the eighth decimal
place, and this is another disruptive component. Erik Voorhees, a bitcoin
early adopter involved in several leading bitcoin-related
companies, such as BitInstant, SatoshiDice
and Coinapult, will encourage thinking on this as
he discusses the economics of Bitcoin and its role
as money.
Ever since the bitcoin cryptocurrency
launched and achieved initial success, institutional investors and hedge fund
managers have secretly sought a regulated investment vehicle for bitcoin placements. Malta-based Exante
Ltd. has a solution with its new Bitcoin Fund. There remains a case for Bitcoin as a
store of value, even after the recent whipsawing. Tuur Demeester, author of the financial newsletter MacroTrends,
added bitcoin as part of his recommended currency
basket in January 2012, and he’ll talk about bitcoin's
emerging role as a separate asset class alongside precious metals, equities,
and bonds.
Last month, my column featured a conversation with software developer and
online payments industry veteran Peter Šurda about how nonpolitical cryptocurrencies like bitcoin
could alter the future of fractional reserve banking. If you were as fascinated as I was by the discussion, he’ll be on
the “Economics of Bitcoin” panel with Voorhees and Demester.
By Jon Matonis
PaymentsSource
Monday, April 22, 2013
http://www.paymentssource.com/news/bitcoin-pros-to-talk-merchant-acquisition-banking-opportunities-3013882-1.html