Tony Vo had never heard of Bitcoin before one of the regular customers at his then-1-month-old Waterbean Coffee shop asked him whether he accepted it as payment.
Four months later, the Cornelius, N.C., business owner is one of the pioneering owners of small businesses to incorporate the controversial digital currency in his payment options. He’s had nearly 30 customers pay with Bitcoin – most of whom heard through a Bitcoin Meetup group that he accepts it – and now other businesses are following suit.
“Recently, I had a window-cleaning guy call me and ask about it, and a franchisee (who) sells sandwiches,” Vo said.
“It’s catching on a lot.”
And, like many people who have embraced the potential of Bitcoin – as a marketing tool if nothing less – Vo isn’t fazed by the ongoing debate over the currency’s legitimacy or staying power in the wake of a nearly $500- million Bitcoin exchange fiasco that generated headlines such as “Bitcoin’s Future in Jeopardy” and “Huge Heist or Sloppy Glitch?”
First, though, here’s how Bitcoin works: It’s a digital currency that was created in 2009 and began gaining widespread attention in 2013. Anyone can download a program on his computer and use certain online exchanges to convert dollars to bitcoins. The bitcoins can then be transferred directly – and anonymously – between two users anywhere in the world, without credit card fees. You can also buy things in tiny fractions of a bitcoin, which is how someone can use the digital money to buy a cup of coffee.
For now, it’s unregulated, which is why the relative worth of a bitcoin could fluctuate by hundreds of dollars in a single day. At its highest, a single bitcoin was worth about $1,200. As of Wednesday, a bitcoin was trading above $600. But that’s a long way from the currency’s humble beginnings; at one point, people were buying a bitcoin for 13 cents. Many of those early investors are now multimillionaires.
Businesses that offer Bitcoin as one of many payment options can keep the money in Bitcoin for no fee. It’s an attractive option to entrepreneurs who are willing to gamble on whether the currency will continue to rise in value.
Then there are owners and individuals, such as Vo, who use software that automatically transfers Bitcoin to U.S. dollars, for a small fee of about 1 percent – smaller than the typical credit and debit card fees.
Vo said the popular payment service Square takes on a 2.75 percent charge to every transaction.
But Bitcoin’s reputation took a major hit last week when Tokyo-based Mt. Gox, one of the first and largest Bitcoin exchanges, filed for bankruptcy after losing hundreds of thousands of bitcoins.
And whether the Mt. Gox controversy was driven by a flawed system or an incompetent staff, it’s a prime example of the risk associated with a currency outside the bounds of regulation, said Ted Claypoole, an attorney who leads the privacy and data management team at Womble Carlyle Sandridge & Rice.
“It is like carrying around $10,000 in large bills,” Claypoole said. “Your spending may not be tracked, but you could lose the cash at any time. … And just like cash, (with Bitcoin) you can’t really prove that it ever belonged to you.”
Others see Mt. Gox as one of those painful but necessary growing pains, along the way to shore up the currency.
“When you introduce a new technology, stuff like this is going to happen,” Vo said. “So as long as people’s businesses still accept it, and more people are trusting it, it should be fine.”
Charlotte entrepreneur and venture capitalist Amish Shah believes Bitcoin is poised for a comeback.
“As with any new industry,” Shah said, “bad firms like Mt. Gox (will) be weeded out and replaced by trustworthy ones that would make Bitcoin more credible and secure.”
Concerns such as Claypoole’s are one reason many small businesses are easing into the Bitcoin market. They’re accepting Bitcoin payments, but – like Vo – are using electronic tools to immediately convert them to U.S. dollars. Vo registered with BitPay, the Georgia-based Bitcoin merchant processing provider.
Ken Adams, a Fort Mill, S.C.-based certified public accountant, listed his business on Coinmap.org, an international map of businesses accepting Bitcoin, and said he’s “intrigued by” the currency. But he said he will only accept it from trusted customers. And then he’d want the payment converted to U.S. dollars as soon as possible.
Adams said his new payment option hasn’t earned him any new clients locally, but after his business showed up on Coinmap.org, he got some “funky emails from the Ukraine.”
“I haven’t responded,” Adams said. “If someone from the Ukraine is going to pay me in Bitcoin, I’d be a little leery of it, especially if they’re asking for $20,000 worth of work.”
Wondering whether Bitcoin could be a good payment method for your business?
Consider doing this:
- Set up a Google alert: Read everything you can about the currency, and study the positives and negatives reported by other small businesses who are accepting the currency as payment.
- Buy a bitcoin: “If business owners really want to educate themselves, they should go into Coinbase and buy one bitcoin,” said George Smart, owner of Strategic Development Inc. in Durham, N.C. “That’s enough for them to have plenty to play around with and experience how it works.”
- Prepare for a roller coaster: Even Bitcoin enthusiast Peter Kim, who helps run John Kim Arboretum Cleaners, likens the Bitcoin investment to a gamble, one with high risks and high rewards. He said he stopped bragging about it to his friends, because whenever they asked him how Bitcoin was doing, he’d lost money.