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 business owner is one of the pioneering owners of small businesses in the greater Charlotte area to incorporate the controversial digital currency in his payment options. He’s had nearly 30 customers pay with Bitcoin – most heard he accepted it through the Bitcoin Charlotte meetup group – 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’ve 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 their 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 press time, a bitcoin was trading for $567.70. 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.
Growing pains or fatal flaws?
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 nearly 800,000 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,” said Claypoole, a former Bank of America employee. “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.”
‘Funky emails from the Ukraine’
Concerns such as Claypoole’s are one reason why 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-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.”
Charlotte-based PassportParking, which offers a one-stop cloud-based command center for cities, universities and private operators to oversee parking, ticketing enforcement and event management, began offering Bitcoin as one of many payment options a couple of weeks ago.
The company has high-profile clients across the country, including the cities of Chicago, Detroit, Asheville and California’s Parks and Recreation Department. And though the company leaders see potential in Bitcoin, they won’t be on the line if it goes bust, thanks to the nature of their operation.
Passport will be the conduit to move the bitcoins from the parker to the operator, says Charlie Youakim, managing partner: “The funds never sit with us. Once the funds reach the operator it would be up to them as to what to do next.”
Euphoric highs, depressive lows
But there are some who see bitcoin payments as a minimal risk with a potential for big reward. So they’re not worrying about exchanging the cryptocurrency for U.S. dollars.
Peter Kim, who helps run his brother’s south Charlotte dry-cleaning business, John Kim Arboretum Cleaners, started accepting Bitcoin several months ago. After he advertised their new payment option – and a discount to people who pay in the currency – he got a few calls about it from excited customers. But none have actually taken advantage of it yet.
Kim started buying bitcoins himself, when they were worth about $115. He’s excited about its rise in value, but the currency took many a nose dive before climbing to where it is now.
He said the fluctuations cause a roller coaster of emotions, from frustration to excitement to depression to euphoria.
“It’s hard to explain the feelings of seeing money go up and down so severely,” Kim said. “If you invest $1,000 and buy 10 bitcoins and, all of a sudden, your investment becomes $10,000, you’re thinking, ‘Oh yeah, I have $10,000 in my hands. This is great!’ ”
But then it can be embarrassing when it goes down by 40 percent and all the friends you told about it ask how it’s doing, he said.
But overall, Kim said he thinks Bitcoin is a gamble worth taking.
“People talk about how they made 5 percent on their investment last year,” Kim said. “That’s a joke (in comparison). If you make 5 percent on Bitcoin, that’s great that you didn’t lose any, but no one is going to commend you on it.”
As for Mt. Gox: “Let’s say Gmail, the biggest email provider in the world, had problems and is no longer active,” Kim said. “Would that mean email would go away? No, it wouldn’t.”
McMillan Portillo: 704-358-6045; Twitter: @cbmcmillan
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