Coinbase provides Bitcoin wallets to over a million people and powers crypto-currency payments at Dell.com, Overstock and Expedia – so why can’t it convince UK banks to give it a business account? Co-founder Brian Armstrong speaks to the Telegraph
On the wall of Coinbase’s San Francisco headquarters is a 100 trillion Zimbabwean dollar note. Despite the ludicrous number of zeroes in that figure – $100,000,000,000,000 – it is worthless except as a collectible curiosity.
The country infamously saw hyperinflation peak at 79.6 billion per cent in November 2008 as the economy collapsed and today has no official currency at all, relying instead on the US dollar, South African rand or even Euro. New bank notes with added zeroes could hardly be printed fast enough to chase the value of the currency downwards; what could buy a house one day would barely stretch to a loaf of bread the next.
It is precisely this kind of financial disaster which Bitcoin proponents like to point to as both incentive and justification for creating a currency totally outside the control of governments.
Coinbase was one of the early-movers in taking Bitcoin from a niche, nerdy plaything for cryptographic hackers to a mainstream payment option. It offers an exchange where users can buy Bitcoins with their dollars, as well as a wallet where they can store them and the merchant tools needed for retailers to accept them.
At the start of 2014 there wasn’t a single retailer with a turnover north of $1bn which accepted Bitcoin, now there are ten. Nine of those use Coinbase. At the start of 2013 the company provided just 20,000 customers with wallets, by the year’s end they were running over a million.
“People would read about Bitcoin and think ‘how do we buy some’. They would Google it and we were the first result,” co-founder Brian Armstrong told the Telegraph. “We want to make Bitcoin easier to use. We tried to just make it super-simple.”
The company claims to have the largest market share of online wallets, 24 per cent – a claim disputed by competitor Blockchain.info, which unlike Coinbase counts each individual wallet as a user, despite many people having more than one.
Coinbase won’t release exact figures but Armstrong confirms that it looks after “hundreds of millions of dollars” worth of Bitcoin.
Originally launched in the US, it recently announced that it had secured banking and regulatory approval to launch in Europe, opening its services up to 18 new markets. But the UK was not among them.
The main hurdles for it to enter a new market are banks and regulation. You can’t set up in a country unless Bitcoin payments are legal, and you can’t handle business unless you can get a bank account. And they are struggling to get a UK bank account.
Even though many people see Bitcoin as undermining the two institutions of big finance and government, which in a sense it does, it is also beholden to them – at least, it is if you want a legitimate, easy-to-use, commercial payment system.
Getting banks on board is “challenging”, admits Armstrong, who points out that there are no British lenders currently offering accounts to Bitcoin startups. In other markets it has taken six months of meetings “just to get them comfortable”.
“These banks are usually quite sceptical. That’s a hard, difficult process that involves a lot of meetings,” he says. Coinbase hopes to launch on these shores “soon”.
“We have to be patient. It could happen in a week or ten years,” he adds.
Europe’s retailers are lagging behind the US with Bitcoin adoption, but Coinbase hopes to grow the number of wallets here over the next six months and using that to convince shops of the benefits of taking crypto-currencies. That’s the same “play book” it followed in the US.
“If our work pays off, it’ll be happening,” says Armstrong.
There is certainly low-hanging fruit to be picked here: Expedia accepts Bitcoin in the US via Coinbase and could be one of the first clients targeted in Europe.
There are also positive signs that Bitcoin is spreading further in use, says Armstrong. It’s still the case that most retailers who accept it instantly convert back to US dollars in order to avoid volatility – which is becoming less and less of an issue as adoption and the number of transactions increases – but some are using it more widely. Overstock, for instance, retains ten per cent of its Bitcoin income to pay those staff who want to receive digital salary.
Coinbase itself has even been paying its UK-based PR agency in Bitcoin.
But how far can Bitcoin spread? Armstrong believes developing nations with access to bank accounts will be among the largest adopters, just as many African nations have already been using SMS-based payments. And the inherent security of Bitcoin will see it grow as an online payment option.
“When you buy something online and type in your credit card details, it’s like giving away your password,” he says. “To spend Bitcoin you don’t have to give them your private key. It’s a much more secure way to pay. I feel like credit cards were just never really built to work on the internet.
“I remember back in 2002 my mum said ‘I would never put my credit card details on the internet’. Now she does shopping online all the time. What is considered normal or secure changes very quickly.
“To me its the most exciting thing in the world to be working on right now. Bitcoin is like a giant wave, we’re just a little surfer riding it. Maybe it makes sense for there to be an internet currency, and have that be the reserve currency of the world.”