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Can Bitcoin unleash local economies?

Bitcoin, a digital currency, eliminates the need for banks and transaction intermediaries. (Photo Credit: Antanacoins via Flickr)

Bitcoin, a digital currency, eliminates the need for banks and transaction intermediaries. (Photo Credit: Antanacoins via Flickr)

When Stephen Cotton entered his local HSBC last week in Worcestershire, UK, a bank teller refused his withdrawal request for £7,000 (about $12,800 Cdn). Worse, he had to justify why he was withdrawing such a sum, which turned out to be a loan payback to his mother. Instead of getting the cash he requested, he had to negotiate with the bank to withdraw just a portion – £3,000 (about $5,500 Cdn).

There was no rhyme or reason for the refusal beyond a new ‘policy’ the bank had implemented requiring customers to justify large withdrawals. He wrote and complained to HSBC about the new rules and why he was not informed of any change.

HSBC responded by saying: “As this was not a change to the Terms and Conditions of your bank account, we had no need to pre-notify customers of the change.”

(HSBC has since rescinded its policy in the wake of a deluge of customer complaints.)

Banks versus Bitcoin

It’s no surprise that the beneficiaries of the current economic system are banks. Just think of the way people’s lives intersect with banks each and every day: the cash machine; banking fees; credit cards and their fees; mortgages.

It doesn’t seem unreasonable to expect that the money you deposit into your bank is your money and that you can access it at any time, for any reason. But as Stephen Cotton now knows, that’s not necessarily the case.

Bitcoin, on the other hand, makes you your own bank.

For starters, Bitcoin eliminates the need for banks and transaction intermediaries. All that’s needed is a computer, a tablet or a smart phone and some software.

Once installed, you can start to accept and send the currency directly to those with whom you do commerce. No need to carry cash. No need to worry about currency conversion. You keep your own numbers, on your own computer (or phone, or both) with no monthly or transaction fees, as long as you are sending over 0.01 Bitcoin per transaction. (At the time of publication this equates to roughly a $9 transaction. For transactions below that amount, a fee is paid to the community of Bitcoin users of approximately $0.09).

Bitcoin loves small business

Balancing the convenience of cash alternatives with the associated fees is a pressure felt by many small businesses all over the Maritimes. Anyone who offers customers the ability to use debit and credit card payments will tell you the third-party fees can be steep.

Bitcoin helps small businesses maximize the money they earn. No need for complicated and expensive point-of-sale providers and handheld machines. A cell phone (or laptop) becomes your point-of-sale machine to accept Bitcoin. And, in a world of rising costs and tightening margins, the 2-3 per cent fee paid to a third-party service provider to allow debit or credit card payments goes back into the coffers. Using Bitcoin means receiving 100 per cent of any payment.

Dealing only in cash will also avoid these pitfalls, but there are notable benefits to Bitcoin. For example, using Bitcoin eliminates the opportunity for physical theft by accepting payment to your device and then instantly sending it to an offsite account. For those working service or handling food, accepting Bitcoin eliminates sanitary concerns. (There’s nothing more off-putting than having the same hand that handled money, handle your food, too!)

Bitcoins are already being accepted in some businesses, like this cafe in the Netherlands. (Photo Credit: Targaryen via Wikimedia Commons)

Bitcoins are already being accepted in some businesses, like this cafe in the Netherlands. (Photo Credit: Targaryen via Wikimedia Commons)

Still in its infancy

Of course, being a pioneer is not without its risks.

Bitcoin is currently very volatile, as the currency is relatively new. The result of this process is that its value has increased somewhat unsustainably. In a similar vein, the return on investment that Bitcoin has realized over the past few years has attracted a lot of speculative investors and traders, which only adds to the volatility.

However, being a pioneer can also have its benefits. With a string of Bitcoin ATMs located in several major Canadian cities, The Huffington Post recently asked: Will Canada become ‘The Silicon Valley of Bitcoins?’

Online security is a critical issue – it’s not insurmountable, it just requires careful planning. Taking the time to protect yourself is a tried and true method to avoid disaster. Because Bitcoin is a digital currency and transaction system, basic computer security is a must. If there is a plan to store any value in Bitcoin, use an encrypted USB drive (or drives), which can be stored in a safe place. Not protecting your Bitcoins would be like leaving your cash savings on the kitchen table. Take the steps necessary to stay protected.

Ultimately, education is the best way to harness the possibilities of Bitcoin. Get to know it and its benefits, and you could unleash the potential of your small business in ways unimaginable.

Resources:

Bitcoin.org
Coindesk
Canadian Virtual Exchange

Since April 2013, Bitcoinhalifax has provided sales, service and support regarding all things Bitcoin in Halifax, including assisting businesses with understanding the benefits of Bitcoin. Email bitcoinhalifax@gmail.com for more information.

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