Bit by bit, currency cashes in on mainstream

SHABNAM DASTGHEIB
Last updated 09:08 23/03/2014
Michael Bennett
LAWRENCE SMITH/Fairfax NZ

FINANCIAL FLAIR: Soul Thai owner Michael Bennett accepts bitcoins.

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Controversy, scandal and dramatic fluctuations surrounding virtual currency bitcoin have not deterred New Zealand businesses from accepting it.

Overseas businesses including retailer Overstock.com, Virgin Galactic (for future space flights) and news giant Forbes accept bitcoin in lieu of conventional currency and now Auckland takeaway service Soul Thai's name can be added to the list.

Bitcoin acts as peer-to-peer anonymous cash which can handle small transactions online easily with no charges or fees. Bitcoins can be divided down to eight decimal places.

Owner Michael Bennett said it was a response to his customer base being "up with technology".

"It is a very new thing for us. Many of our clients are home-based, they order online and we have acted to a response in the client base who may be interested in paying by bitcoin."

The currency is converted during the ordering policy then transferred to the restaurant.

Bennett said he understood the currency was very speculative but he was in a position to take a small risk.

Requests from customers had sparked the idea and the company began accepting bitcoin last month. Nobody had used the payment method yet. "Being a modern company, we want to show we are right up with the play technology-wise. Hopefully companies like us give it a try."

Telecommunications company 2Talk also began accepting bitcoin last month. General manager Jude Flood said payments had been made using bitcoin from 2Talk's "tech-savvy" customers. "We see the currency as in an early stage but, medium term, expect it to become stable and a common form of payment."

North Canterbury winery Pyramid Valley has responded to international customer demand for bitcoin while Upper Hutt brewery Kereru was an early-adopter, with owner-brewer Chris Mills saying people are happy to spend bitcoin when its value is rising and "not so much" when the value is falling. It adds some minor problems at point of sale and complicates tax as the Government doesn't accept bitcoins for GST payments.

The currency's virtue is that it cuts out fees and conversion rates for international transactions.

To accept bitcoin, a business must have the right programme to receive the digital funds then decide whether to keep in bitcoins or transfer to local currency at current market rates.

Overseas company eBay has been considering allowing payment by bitcoin, and Trade Me is still mulling it over.

Trade Me trust and safety head Jon Duffy said that, until it became more established, Trade Me would not offer payment by Bitcoin. "We have talked about allowing the sale of and allowing payment for items using bitcoins on Trade Me but we've decided to put in place some pretty tough conditions on their sale."

Duffy said the company would keep an eye on the currency and then review its position.

Bitcoin emerged from the work of Satoshi Nakamoto, though his identity and whereabouts remain a mystery to most people. It has fluctuated dramatically during its short lifetime and has been the centre of many scandals.

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In October, the FBI shut down an anonymous internet marketplace for illegal drugs available for purchase with bitcoins. A crowd-funded website raises bitcoins in exchange for hits on top government officials - but this may be a scam.

And last month, 28-year-old American Autumn Radtke, chief executive for the First Meta bitcoin exchange, was found dead in her Singapore apartment by police.

The currency is constantly plagued by collapses, speculation and hackers. A bitcoin exchange company Mt Gox filed for bankruptcy protection in Japan on February 28, saying it may have lost 850,000 bitcoins to hackers.

But Overstock.com has confidence in bitcoin and says it brings in new business and prevents online shopping fraud. The company cashes out the bitcoins as soon as it gets them so fluctuations are not a factor.

New bitcoin ATMs are beginning to bring the currency more into mainstream use. The machines convert bitcoins to local currency and allow users to deposit cash to purchase more bitcoins.

An ATM is reportedly planned for Auckland this year.

HOW DOES IT WORK?

A virtual currency with no central organisation regulating it. It is supposed to be impossible to cook the books without someone noticing as the entire bitcoin network can watch a transaction take place and track it. It is completely anonymous. At the time of writing, bitcoin was sitting at around NZ$700. Advanced computer programmes can "mine" for bitcoin. About 12 million bitcoins are in circulation, with a total maximum circulation of 21 million.

- Sunday Star Times

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