Interview: BitPay Shatters BitCoin Processing Record
Bitcoin, an online currency that’s received a good amount of attention over the last couple of years, is quickly becoming a force to be reckoned with. With tens of millions of dollars with of Bitcoins floating around in cyberspace, the currency is being picked up on online merchants around the globe as an alternative to traditional currency. BitPay Inc., a Bitcoin payment processor, recently broke a record by conducting more than $250,000 worth of Bitcoins transactions in one day — a considerable amount of money for such a niche market. CCPnet was naturally curious about this new processor and the new currency, so we reached out to BitPay to get more information and highlight their recent milestone. Anthony Gallippi, co-founder and CEO of BitPay, was kind enough to field a few questions.
CCPnet: First, can you explain the allure of Bitcoin and why it’s seen a surge in popularity over the last couple of years?
Gallippi: Bitcoin is a neat invention when you look into it. Bitcoin takes everything we know about money, the Internet, security, and cryptography, and creates a new money system that is designed for the Internet. You can now send money like you send an email, anytime, anywhere, for little or no cost. It is the equivalent in innovation of email compared to the postal service.
CCPnet: BitPay recently conducted $250,000 worth of transactions in a single day. What was the most common type of transaction? Retail? Services?
Gallippi: The strength of Bitcoin is solving the fraud problem for Internet merchants. Credit cards were never designed for the Internet, and when we try to use them that way, there are huge risks in this “card not present” scenario. The amount of credit card fraud is staggering, over $50 billion per year just in the United States. And 95% of this occurs in the card not present transactions. So the merchants who have the most compelling reasons to be early adopters of Bitcoin are Internet retailers and Internet service companies, because Bitcoin solves the fraud risk for them.
CCPnet: What is the current worth of a BitCoin in U.S. dollars? And where can one find daily currency conversion rates online?
Gallippi: Bitcoin floats against every currency in the world. The current price is around $6.50. A website called http://bitcoincharts.com can give a real time list of all of the Bitcoin exchanges and rates from around the world, even from China.
CCPnet: As Bitcoins have become more popular, has there been a legal consensus on them?
Gallippi: Not yet, Bitcoin has yet to be defined by the government or by any court. In Europe, they have a definition for virtual currency, but the way they wrote the definition, Bitcoin does not fit. When you really analyze how it works, Bitcoin acts more as a commodity like gold, silver, or crude oil. The fact that anyone can create Bitcoins on their computer makes it more similar to anyone being able to dig for gold on their property, or grow oranges, or produce a commodity of value.
CCPnet: What are BitPay’s transaction rates? Are they comparable to other payment processors?
Gallippi: We give our merchants the option to keep the Bitcoins directly, or we can automatically convert some or all of the Bitcoins into their local currency, and put a direct deposit into their bank account. This process is hands free for the merchant. For merchants accepting their payout in bitcoins, our rates for order processing are 0.99%. For processing and conversion to U.S. Dollars, the rate is 2.69%, and for conversion to Canadian Dollars, Mexican Pesos, British Pounds, and Euros, the rate is 3.99%. Compared to other payment processors, we are cheaper at all price points. Especially for cross-border payments, where all the other payment processors charge roughly double their normal rate.
CCPnet: Is BitPay PCI compliant or does compliance even matter for a non-governmentally recognized currency?
Gallippi: PCI compliance is designed to secure customers credit card numbers and sensitive information. The yearly audit that companies go through for PCI is expensive, and a hassle. Since there are no account numbers or private information disclosed during a bitcoin purchase, PCI compliance is not necessary. This is a big relief for payment processors like us, and any merchant that handles payment information.
CCPnet: Many news outlets decry that Bitcoins are used for money laundering and purchasing illegal drugs. Does BitPay keep records on the types of transactions it is conducting or is privacy an utmost concern? Would BitPay be compliant in investigations conducted by the FBI or DEA without a subpoena?
Gallippi: That’s a headline that will boost readership in the newspapers, but in fact it is a rather silly statement. Every day, millions, if not tens of millions, of US dollars are used for drugs and illegal activities. Criminals also use cell phones and email in their criminal activities. So singling out Bitcoin doesn’t make much sense. BitPay does keep records for all of our merchants. But the way Bitcoin works, when we receive a payment into a specific address, the Bitcoins literally fall out of the sky. We would comply in any investigation, but if the information does not exist, we can only do so much.
CCPnet: Anything you’d like to add?
Gallippi: Of all the payment processors out there for processing Internet payments, BitPay is unique in the marketplace. Using our service, a merchant can collect a payment from any country on the planet, instantly, with zero risk of fraud. The value we bring to businesses, especially of they handle cross-border payments, is extremely compelling.