The flip side of bitcoin

Monday 1st June, 2015

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Is bitcoin more trouble than revenue?

It was a year and a half ago that the adventurous few who had bought bitcoins for less than $1 - the price before April 2011- saw their investments’ value rocketing by more than 1,000 per cent. And it was just three months after this peak, in February 2014, that everybody saw how the bitcoin price started to fall again, gradually but unstoppably.

Despite its historical instability and the bad press linked to its lack of a central regulator, the virtual currency is still gaining acceptance through small and medium enterprises in the UK, aside from the larger online retailers like Amazon that started accepting bitcoin as a legitimate currency to purchase their products long ago.

The bitcoin ATM in The Shoreditch Old Station Coffee was the first in the UK, installed in March 2014 Photo: Teresa López

“There is no way accepting bitcoin can harm your business,” says Joel Raziel, director of Future Coins, the company that operates the first bitcoin ATM in London, placed in The Old Shoreditch Station Coffee since March 2014. 

“One of the key advantages for SMEs is that bitcoin transactions don’t charge them any fees, unlike credit cards that indeed charge a higher percentage to small shops than to large chains,” he explains. Immediacy and safety in transactions and the disappearance of chargebacks are other positive features that Joel outlines.

Today 70 businesses in London accept bitcoin and six bitcoin ATMs are functioning, according to the national database in Where To Spend Bitcoins UK website.

Everybody knows that some people use bitcoin to launder money

The machine that Future Coins manages has approximately £30,000 of monthly circulation. At five per cent commission, this means monthly revenues of £1,500. Happy with this figure, Joel says that before September the company will install five more machines in the city with improved technology.

But the bitcoin adoption is generating criticism and unexpected difficulties for some businesses.

“Since we have the machine here it attracts loads of dodgy and problematic people who come full of notes to change into bitcoins,” says the manager of The Old Shoreditch Station Coffee, Katia.

Katia says that these people do not even buy a coffee when entering in the place to use the machine and that they behave aggressively when the ATM suffers any technical disruption.

Future Coins, Joel Raziel's company, is planning to install five new ATMs among London city center Photo: Teresa López

“They give more trouble than revenue,” she says, clearly annoyed. “We have even thought about removing the machine.”

A few blocks away in Old Street, Gustavo Carbone manages the Nin Con Soup restaurant, where another bitcoin ATM was installed in August 2014.

“Everybody knows that some people use bitcoin to launder money,” he says while he insinuates that the “dodgy” people who also enter in his restaurant to buy loads of bitcoins may be in irregular drug-related businesses.

His staff have also clashed with customers using the machine but it has never been a big issue. In this case, the introduction of virtual currency has had no effect on the business’s cash balance.

“Having the ATM, like giving the possibility of paying with bitcoin, is nothing more than advertising,” explains Gustavo. “It’s not thought to earn significant money but it does look modern.”

While some entrepreneurs in London are already assessing the effects of joining bitcoin, on 15 May the first local business in Northern Ireland introduced this virtual payment method.

Orla McKeating, owner of Boden Park Coffee Company in Belfast, explains her excitement about the innovation: “Our coffee shop has approximately 70 per cent cash and 30 per cent card sales. We are charged to lodge cash with our bank and credit cards have a 3 per cent charge to the card company. With bitcoin, there is no charge to us and a very small charge to the customer.”

Poster in the Old Shoreditch Station Coffee Photo: Teresa López

Six years after this crypto currency was born, and among continuing uproar, its international performance is still clarifying its lights and shadows. On one hand, is the possibility to do tax free peer-to-peer transactions to anybody in the world owning a smartphone. On the other hand, is uncertainty and suspicion of unrecorded money laundering.

Most businesses, regardless of their current acceptance of it, are calling for a unified law to regulate bitcoin use. HM Treasury announced in March its intention “to apply anti-money laundering regulation to digital currency exchanges in the UK, to support innovation and prevent criminal use.”

Among other efforts, the government claims it will work to develop voluntary standards for consumer protection, which will allow providers “to compete to offer new products and existing products delivered in cheaper or more efficient ways.”