Entrepreneur Magazine reports:
When it comes to major retailers accepting payment in Bitcoin, Overstock and TigerDirect are only the beginning.
This revelation came in testimony by Fred Ehrsam, co-founder of the Bitcoin exchange and wallet service Coinbase, during the second day of hearings organized by New York state’s top banking regulator to discuss the promise and peril of cryptocurrencies.
Ehrsam described how the Bitcoin economy has been going through a speculative phase, with people around the world driving up the digital currency’s value enormously in terms of U.S. dollars, euros, Japanese yen and other national currencies. But now, he said, the market is beginning to shift away from speculation and toward spending.
“One great beacon here is major retailers like Overstock — and there have been others — hopping onboard,” said Ehrsam, whose startup’s service makes it possible for Overstock to accept bitcoins in exchange for its products. “There are others of similar stature in the pipeline.”
Already, 21,000 merchants are using Coinbase to accept Bitcoin from customers. Overstock, for one, is reaping the benefits of opening itself to the new form of money. Since announcing its acceptance of Bitcoin on Jan. 9, the retailer has received nearly 3,000 orders in Bitcoin, with a total value of more than $600,000.
TigerDirect, a Fountainbleau, Fla.-based online and brick-and-mortar retailer of electronics, experienced similar results when it began accepting bitcoins on Jan. 23. Within three days of the company’s announcement, it reportedly processed more than $500,000 in Bitcoin payments.
Jonathan Johnson, the executive vice chairman of Overstock’s board of directors, testified Wednesday before members of the New York Department of Financial Services that Overstock uses Coinbase to immediately translate any bitcoins it receives into U.S. dollars. Because of this instant exchange, said Johnson, the company is not exposed to the ups and downs of the Bitcoin market, which has seen wild price fluctuations over time. “Our Bitcoin currency risk is nearly nonexistent,” he told regulators.
Coinbase, which is located in San Francisco, is one of the most prominent Bitcoin startups in the United States, allowing individuals to buy and sell Bitcoin with a U.S. bank account and allowing merchants, including Overstock, to accept the digital currency as payment.
Last month, Coinbase announced that it had raised $25 million in a Series B round led by venture capital firm Andreessen Horowitz — the largest fundraise ever by a Bitcoin business. If the startup is indeed becoming the service of choice for top-flight merchants, then it’s already living up to the prediction of Andreessen Horowitz’s Chris Dixon, made at the time of the Series B, that Coinbase will “significantly accelerate Bitcoin’s proliferation.”
Asked what was the incentive for retailers to accept Bitcoin or another digital currency as payment, Johnson’s rationale was simple. “We are merchants, and we are willing to accept any practical form of exchange” that allows the company to sell goods in exchange for value, he said.
Most of the nearly 3,000 Bitcoin spenders were first-time Overstock customers, he added.
For the time being, however, there are limits to the company’s embrace of digital currency. Overstock, which is based in Salt Lake City, accepts Bitcoin only on domestic U.S. orders, and mobile orders with Bitcoin are not yet possible on the merchant’s website.
As for the bugaboo of regulation, a primary concern of entrepreneurs and investors in the nascent Bitcoin market, Ehrsam admitted that further requirements for digital currency startups are both inevitable and necessary. “Once you open up a business that’s moving money around, bad stuff can happen right out of the gate,” he said.
Although new regulation is likely, the hearings held in lower Manhattan on Tuesday and Wednesday have been largely positive on the subject of digital currencies’ potential benefits to the economies of New York state and of the U.S. as a whole. Even a Wednesday morning panel of federal and state prosecutors paid lip service to Bitcoin’s legitimate uses.
Among the founders and investors who testified, some made dramatic claims about the ability of Bitcoin to revolutionize ecommerce, the payment processing and banking industries and even the exchange of stocks, bonds, contracts and property deeds. Others, including Ehrsam, were careful not to raise expectations too high for mass adoption of Bitcoin. “One should expect volatility in the near term,” he said. “We are a long way away from a world in which things just stay in Bitcoin all the time.”
I find that there is a lot of confusion and dismissal in regards to BitCoin. But now that major retailers are getting on board, I think it warrants a second look. But I think they need to distance themselves from the illegal activity (such as Silk Road) which is exactly what The Bitcoin Foundation, an organization dedicated to evangelizing the crypto-currency, is distancing itself from a bitcoin exchange founder accused of laundering money to online drug dealers.
The foundation said that it and Charlie Shrem, who was arrested on Tuesday for scheming to sell over $1 million in bitcoins to drug traffickers, “mutually decided” that it would be best for him to resign from the Bitcoin Foundation’s board.
“The foundation does not condone illegal activities and values transparency, accountability and a high level of responsibility towards its members and overall community,” the charitable foundation said in a blog post. Its self-proclaimed mission is to standardize, protect and promote the untraceable electronic currency.
TigerDirect announced in January 2014 that they are now accepting Bitcoin.
And as far as eBay and PayPal, PayPal President David Marcus tweeted “We’re believers in BTC,” eBay’s US and UK branches say they will let people sell digital currencies in the classified ads sections of the sites.
It seemed like it was only a matter of time before e-commerce giant eBay and its payment platform PayPal addressed the sale and use of Bitcoin on its sites. And, despite concern from government regulators, it appears the company believes in virtual currencies — so much so, that it will soon start allowing their sale on its US and UK sites.
Last week, PayPal President David Marcus tweeted “To clarify: we have no policies against using PayPal to sell Bitcoin mining rigs. We don’t support any currency txn whether fiat or BTC… for a host of regulatory issues. But we treat BTC and any FX txn the same way. We’re believers in BTC though.”
Then, a couple of days later, eBay UK sent an e-mail to one of its merchants that was published on Reddit, which said the company plans to open a “Virtual Currency” category for the sale of Bitcoin and other digital currencies on the UK site.
Please know that per our recent policy update, Virtual Currency (i.e. Bitcoin and Litecoin), whether digitally or physically delivered, cannot be listed in Auction-style or Buy-It-Now listing formats. eBay is opening a Virtual Currency category to allow the sale of virtual currency in Classified Ads format on February 10, 2014. We request that you do not list these items until that date. Please be informed that repeated breach of the policy may further jeopardize your account status. To avoid any inconvenience in future, we’d appreciated it if you go through our help pages or contact us before listing any such items.
While eBay US and UK will start allowing Bitcoin to be sold in its classified ads format, it won’t yet let users sell the currency in the auction or buy-it-now formats. Additionally, all transactions will be required to happen outside of eBay. A eBay UK spokesman told CNET that virtual currency sales will only be allowed on eBay US and eBay UK for now; it’s unclear if the policy will spread to other countries where eBay operates.
“To promote a trustworthy marketplace and ensure compliance with applicable regulations, eBay is updating its Currency Policy,” eBay UK spokesman Steve Heywood told CNET in an e-mail. “The updated policy clarifies that listings for Bitcoin and other similar virtual currencies must be listed in the Virtual Currency Category in the Classified Ad format. This applies to both the US (effective immediately) and the UK (effective 10 February).”
Marcus told CNET in an interview last month, “I really like Bitcoin. I own bitcoins.” But, he also said he’s not yet ready to let people link their Bitcoin wallets with their PayPal accounts. “Whenever the regulatory framework is clearer, and the volatility comes down, then we’ll consider it,” he said.
Bitcoin has proven that it can do well as a traded currency. It’s been around since 2009, but didn’t really get going until 2011 when it was worth $2 per coin. By 2013, the currency had climbed to $20 per coin, and then jumped to $266 last April. Within the past couple of months, it had another price jump and is now hovering around $1,000.
While eBay appears to be opening its doors to virtual currency, China’s largest e-commerce site Alibaba shut the door on Bitcoin earlier this month. The company announced that the sale of Bitcoins on its Web site is now banned. While the majority of site’s sales are made via Taobao’s Alipay system, a handful of merchants were accepting Bitcoin payments or selling the digital currency. [Via CoinDesk]