Last year, two online retailers began accepting digital currency Bitcoin as one of their acceptable forms of payment. The historic move is expected to encourage other online retailers and some bricks-and-mortar stores to follow suit.
In April 2013, Foodler announced on its website that customers can now use Bitcoin in all 12,087 restaurants for their food deliveries and online orders. The popular site is an online ordering service that connects hungry consumers with a variety of restaurants for their takeout needs.
It became the first merchant in the food industry to accept Bitcoins. To use the virtual cash, the company outlined an innovative process for electronic payments:
- Customer’s deposit will be converted to USD “Foodler credits”
- Current USD exchange rate per Mt. Gox will be used
- User’s account will be credited immediately upon receipt
- Customer will receive an email notification when this occurs.
The company’s decision will likely induce copycat payment systems from ecommerce shops around the world. Since Bitcoin is a decentralized instrument not sanctioned or regulated by any government or central bank, it’s not currently clear what the tax implications of the new usage are. It’s widely believed that shops already using the currency are able to skip paying taxes due to the lack of record-keeping infrastructure in place for virtual instruments.
Last year, dating site OkCupid announced that it too will accept Bitcoin payments. It’s not currently clear how both online retailers plan to fight possible hacking and/or verify against counterfeit digital cash. Since Bitcoin is composed of data bits sent electronically through computer networks, risk management professionals and security firms may not be able to distinguish between real and fake/counterfeit Bitcoins.
However, both sites are expected to significantly lower costs for its electronic payments. As an anonymous programmer’s invention, Bitcoin is not beholden to large banks and credit card companies who charge expensive merchant fees (and interest payments when consumer debt is involved) for each transaction. It’s regarded as a digital peer-to-peer currency based on cryptography.
It was created in 2009 by a programmer supposedly named Satoshi Nakamoto. Is Nakamoto a state-sponsored programmer? No one knows for sure.
There appears to be immense uncertainty regarding its widespread use in the marketplace. Conservative investors, such as Tom Dyson, have remained skeptical of late arriving speculators and traders looking to Bitcoin as a tradable commodity instead of a global, liquid instrument.
The currency’s viral popularity have encouraged financiers, traders, and speculators to trade in Bitcoin, and the mass infusion of investment capital has led to an extreme volatility in its value. Last week, some investors suffered tremendous losses after Bitcoin’s value dropped by nearly 80 percent in 24 hours.
It reached an all-time high of $266 to a U.S. dollar before crashing to $55 in just a few hours. Less than a year ago, Bitcoin was worth less than $30 per U.S. dollar.
Recently, the U.S. Treasury Department has sent signals that it wants to regulate the virtual cash. The government’s motivation seems to be its ability to fence in taxable revenue as well as prevent illegal activities such as money laundering and the drug trade. Some blogs have even speculated that Bitcoin is a conspiracy by the Central Intelligence Agency (CIA) for electronic spying purposes.
How will Foodler and OkCupid affect consumer purchase behavior as well as retail adoption of the technology? The market - and speculators - are observing.