Overstock, Other Retailers Accept Bitcoin
In the latest show of support for Bitcoin, Overstock.com (NASDAQ: OSTK) said in late December that it would start accepting bitcoins for payment in June. And some small brick-and-mortar retailers across the U.S. are already accepting the digital currency. Overstock.com, the largest retailer to throw its weight behind Bitcoin, is reviewing several third-party firms that facilitate Bitcoin transactions, The New York Times reported. In a commodity system fraught with fraud and ever-changing value, we are surprised to see major retailers jumping on board with bitcoins. Bitcoins can be purchased and exchanged for standard currency, such as dollars, Euros and yen, at bitcoin exchanges. In mid-November, the value of Bitcoins jumped to $900.98 for a single bitcoin and then the value fell just as quickly as it rose. Plus, the virtual currency is fertile ground for fraud, and has already caused billions of dollars in losses. In one of the biggest heists, Chinese bitcoin exchange GBL shut down in late October, taking $4.1 million worth of client funds with it. U.S. regulators were concerned enough to hold Congressional hearings in November to try to get a handle on how to regulate the global Bitcoin market. We have to admit, though, the bitcoin industry is no small potatoes. There are almost 12 million bitcoins in circulation, giving the currency a market value of nearly $8.5 billion. And some retailers recognize that a small portion of Americans want to pay using the digital currency. In April, EVR “gastro-lounge” in midtown Manhattan became the first brick-and-mortar retailer to accept bitcoins. Alex Likhtenstein, operating owner of EVR, said the fact that the lounge is able to process bitcoins with a minimal fee of just 1 percent (compared with the up to 3.5 percent that some credit cards charge), is one of the currency’s benefits, the New York Post reported. EVR processes about a dozen Bitcoin payments weekly. In addition, Greene Ave. Market in New York City, which incentivizes customers to use Bitcoin with a 10-percent-off discount offer for those who pay with the digital currency, sees five to ten bitcoin transactions daily. For its part, Overstock.com wants to be able to offer a digital currency that a small, but growing, fraction of the population is using. Plus, the value of a bitcoin is not set by the U.S. or any global government, which makes it appealing to Overstock’s CEO Patrick Byrne.“You want money to be based on something that no government mandarin can wish into existence with the stroke of a pen,” Byrne told The New York Times. Even though Bitcoin’s value fluctuates wildly, Overstock plans to use derivatives to hedge the risk from any bitcoins it holds, according to Byrne. Alternately, the retailer may simply convert its bitcoins to dollars on a nightly basis. Meanwhile, U.S. regulators are still grappling with how best to regulate the global bitcoin market, in order to prevent fraud. The way bitcoins are transacted — using coded wallets and special keys that don’t need real names – allows for significant privacy, which in turn can help criminals. It would be easier to fight crime with “appropriate anti-money laundering and know-your-customer controls, said U.S. Acting Assistant Attorney General Mythili Raman at the November hearing on bitcoins, CNN Money reported.