Bitcoin, the latest and arguably most successful ‘virtual currency’ to date, is causing a stir in many circles.
The digital currency stands completely alone from any government, central bank or other type of business to underwrite its value, and Bitcoin exchanges take place directly between the buyer and seller – meaning no banks are involved to facilitate Bitcoin payments.
In this post, I’ll look at the future of these crypto currencies.
Although the crypto currency has only been available for the last five years, it has an avid group of supporters, but a relatively small group of users.
However, Bitcoin has been touted to revolutionise the ecommerce space, mainly because of the money that retailers can save by not having to pay banking fees for Bitcoin exchanges.
In a controversial move, the UK government even announced that it will end VAT on Bitcoin transactions.
However, confidence in Bitcoin has also been tested. The lack of regulation around it, and the fact that transactions using Bitcoin are essentially anonymous, has made governments and retailers alike nervous about the use of the currency – especially for black market activities.
Last year, the US FBI seized 144,000 Bitcoins worth, at the time, US$28.5m due to the illicit activities the ‘coins’ were being used for. Additionally, numerous thefts of Bitcoins have been reported in the news.
From a retail perspective, attempts have been made to restore confidence in the currency. In March the world’s “first physical” Bitcoin retail store opened in Hong Kong, giving consumers an easier way to purchase and use the currency.
But is there really a consumer appetite for the currency and should retailers be opening their doors to Bitcoin?
According to recent research we conducted, the future success of Bitcoin on UK shores is uncertain.
Our results found that 43% of UK consumers don’t trust the virtual currency and would not use it to make payments and the same number also admitted that they don’t fully understand how the currency works.
Digging deeper, almost a quarter of Britons also feel that the currency is so unstable that they would worry about paying more for items than they would compared with other payment methods.
In contrast, almost one in ten (8%) feel that it is a valid currency and should therefore be offered as a payment option and, interestingly, 5% of UK consumers stated they would use Bitcoin because they prefer not to carry cash and/or use cards for payment.
The same number also stated they would use the currency if it meant they were offered discounts on products. Finally, the anonymity that Bitcoin offers appealed to 6% of those polled, who like the fact they can make purchases without having to reveal their identity.
The jury is still out on Bitcoin, but as our results show, there will certainly be stumbling blocks to overcome before widespread adoption of the currency takes place.
High profile coverage around the theft of Bitcoins and the bankruptcy of Mt. Gox, Bitcoins largest exchange site, have done little to improve its public perception and has led some to question whether this is the beginning of Bitcoin’s end.
Trust appears to be the biggest barrier to people using the currency and despite the potential benefits Bitcoin offers retailers, unless these reputational issues improve, investment in Bitcoin should, for now at least, be put on the backburner.