Bitcoin’s Imminent Arrival
A couple weeks ago I pointed to the disruptive potential of Bitcoin, a currency and value exchange that used peer-to-peer and cryptographic technologies to disrupt the currency and payment marketplaces. At the time I was left wondering how you might be able to tell when something like Bitcoin had “arrived.” Obviously when everyone started using it to buy their morning coffee, you might have a clue, but a few different stories breaking over the past weeks have given some subtler signs.
First, a company called BitInstant announced that they were in talks to create a Bitcoin-funded debit card that would be powered by MasterCard (and therefore accepted everywhere in the world that accepts MasterCard). The cards will have a unique Bitcoin address printed on the back of it which can be used to refill the card. While this announcement alone is an interesting step forward for the accessibility and usability of Bitcoins, what is most interesting is actually the reaction. The product got so much press that MasterCard itself was forced to respond, putting out a press release stating that they were not working with BitInstant and that there was no such card in development. (BitInstant responded that they were still working one on one with a bank in the US and not yet at the stage of dealing directly with MasterCard). Getting one of the largest payment providers in the world to sit up and notice your upstart, even if only to dismiss rumors with a press release, is a good start.
The second sign that Bitcoin may have arrived is that people are using the US courts to sue each other over them (see the complaint here if you’re curious). The most recent case was filed August 6, 2012 in Superior Court in California by a group of plaintiffs against Bitcoinica. Bitcoinica was a website that allowed people to deposit either US Dollars or Bitcoins and acted as an exchange where people could buy or sell Bitcoins. Bitcoinica was hacked earlier in 2012 and it appears as if a large number of Bitcoins were stolen by the hackers. The plaintiffs were customers of Bitcoinica who claim they didn’t get their deposited money back and they are suing under a number of causes of action. The most interesting part for me is that the plaintiffs are making claims that are based on California banking law, including Open Book Account claims and Account Stated claims. If the judge and jury in the case accept those arguments it could be an interesting result for Bitcoin’s legal status as a store of value.
Finally, it must be that a new currency on the block has arrived when some are engaged in what appears from the outside to be a Ponzi scheme denominated in it. That’s what seems to be happening in Bitcoin right now, as the “Bitcoin Savings and Trust” has not paid out its promised weekly interest in two weeks. It is widely suspected that the whole enterprise, which had promised to pay an incredible 7% per week in interest, was a simple pyramid scheme. When BS&T went bust, the proprietor claimed to have 500,000 Bitcoins on hand, worth more than $5.5 million today. Time will only tell if we’ll have another Bitcoin lawsuit on our hands, but if we do, it might just be another sign that Bitcoin has really arrived.