A new and innovative payment system has a number of Vancouver business owners intrigued.
A slew of local businesses, from coffee shops to moving companies, are adopting Bitcoin – a new currency that many believe will revolutionize the way we think about money.
Bitcoin is a digital currency, meaning it has no paper trace and lives entirely online.
It is not regulated by any financial institutions. It is decentralized, and can’t be influenced by governments.
The concept of an open, Internet-only payment system took off in the “post-Occupy-Wall-Street” era.
“Bitcoin was really born out of banking bailouts,” says Michael Bliss with Vancouver Bitcoin Co-op. “It is the future of money, no doubt.”
The Bitcoin Co-op that Bliss co-founded is a local network for people interested in Bitcoins — traders, investors and merchants.
The latter are growing increasingly fond of the new digital currency because it lowers the cost of doing business.
To accept a payment in Bitcoin, a merchant has to pay a one per cent transaction fee. In comparison, to accept a credit card payment, the merchant will have to pay anywhere from 2 to 4 per cent per transaction.
Sweet Tooth Café on East Hastings has been experimenting with Bitcoins for about a year.
Owner Ganji Malerba says even though she knows little about how Bitcoin actually works, she appreciates the idea of low transaction fees, and that is why she got onboard.
“I was pissed off at the time at financial institutions. We can’t get away without paying any fee, and we are all slaves to them,” says Malerba.
For Wayne Taylor, the owner of Blenz franchise on Seymour and Robson, security is another reason to accept Bitcoin.
Bitcoin relies on encryption to make transactions, which are stored publicly and broadcast between users. But like with cash, the identity of a Bitcoin user is not associated with a transaction unless it is explicitly revealed.
Each transaction is validated by the so-called Bitcoin “miners,” who are then rewarded by generating new Bitcoins.
“Most of the criminals are focused on compromising your personal bank accounts. It happens every day,” says Taylor. “Security is an issue in everything. The people who put together the Bitcoin are extreme on security.”
Taylor says besides low transaction fees and a comparatively low possibility of fraud, he likes the concept of a currency that is not bound down by a particular government.
“It allows people a little bit more freedom to do what they need to do,” says Taylor. “I think that people need to start gaining their freedom back, and I think Bitcoin is one way to do that.”
Watch: How does a Bitcoin transaction work?
Mitchell Demeter, co-founder of Bitcoiniacs – The Bitcoin Store, Vancouver’s first physical Bitcoin exchange, likes the revolutionary aspect of the new currency.
“There are a lot of implications of it globally that we like, so we are helping develop the economy locally and see where it goes,” says Demeter.
Demeter’s exchange is a physical place, where people can not only change some cash for Bitcoins and vice versa, but also get any of their questions answered.
“It is a very complex system,” says Demeter. “There is a lot to it. It takes a few times for people to hear it, and people always have a lot of questions.”
Organizer of Vancouver’s Bitcoin meet-up Andrew Wagner says the biggest reason quoted by people who do not trust Bitcoin is that they can’t hold it physically.
“But you don’t really do that with a debit card either,” says Wagner. “It is not really that much of a far-fetched step…A hundred years from now, we are not going to be using paper money. That seems inconceivable to me. I like the direction it is going – culturally and politically.”
But like any currency, Bitcoin comes with its concerns and weaknesses.
For one, it is fairly new, and as such, its price can be volatile.
As of Monday morning, Bitcoins were trading for $105 a piece. In April, it passed the $200-mark for the first time, followed by a series of wild swings.
And while many businesses are experimenting with it, none are putting the fate of their business entirely in the hands of Bitcoin.
Gurmeet Gupta, the owner of India Gate restaurant on Robson, has been accepting Bitcoins since May.
“For me, it is experimenting with a new market,” says Gupta. “We are in a touristy area, so we get US dollars a lot, and this is just another currency. But we are cautious too, because we do not know how long this currency is going to be around for.”
Gupta says the volatility is his biggest concern.
“As a restaurant, we have day-to-day expenses. [Our account] is set up such that it converts back into Canadian dollars and goes into our bank account. We don’t keep Bitcoins.”
Other business owners like Doug Taylor, the owner of Central Bistro on Denman and Comox, says he is in no rush to get rid of the Bitcoins he gets from his customers.
“I am going to keep it as an investment for now, and see what happens to the value.”
Taylor says while he does not have any major reservations about using Bitcoin, he has seen a pretty small volume of Bitcoin transactions so far — coming mostly from tech savvy customers who already know about it.
“It is a fairly small transaction. You can convert it to cash pretty easily…If it got to the point where 50 per cent of our income came from Bitcoin, I might be a little more cautious,” says Taylor.
Economic analyst Robert Levy says to him, the lack of regulation is the key issue.
“From the standpoint of just conducting a transaction, it is ideal. It is very efficient,” says Levy. “So as a consumer, it is fast and it is easy. You know the money is secure, and you don’t have to worry about counterfeiting. But it is the fact that when you have a system like this, it is unregulated and it opens it up for money laundering and stuff like that.”
But Simon Fraser University economics professor David Andolfatto says the lack of regulation is the whole point of Bitcoin.
“I do not think this stuff can be regulated. I don’t think there is anything to fear as far as the authorities are concerned. Let people go and do whatever they want to do with Bitcoins.”
Last month, Thailand became the first country to declare Bitcoin illegal due to “lack of existing applicable laws, capital controls and the fact that Bitcoin straddles multiple financial facets.”
Andolfatto says the ban is going to be nearly impossible to enforce.
“As long as people can do these things anonymously, I just do not understand how it is going to be possible to regulate unless you confiscate everybody’s computers.”
While Andolfatto says it is hard to forecast the future of Bitcoin, he thinks it is here to stay.
“It would be foolish to say it is a passing fad, because with technological development and the demand for anonymity in making transactions, it is potentially here for a very long time.”