Bitcoin has been called crypto-currency, Internet cash and – in the words of Wall Street analyst Nick Colas – “gold for nerds.”
By Kyle McInnes.
Now, the virtual medium of exchange is making a real-world appearance in the ByWard Market with the help of an Ottawa startup, marking the beginning of what could be a burgeoning Bitcoin market in the nation’s capital.
Bitcoin is an unregulated digital peer-to-peer currency that eliminates the need for intermediaries such as banks. Despite experiencing wild fluctuations in value, it’s a form of payment that’s finding favour with an increasing number of online and bricks-and-mortar merchants.
Last week, the city’s first Bitcoin ATM, or “BTM,” was unveiled at the Clocktower Brew Pub. The machine is manufactured by Ottawa-based Bit Access – a startup working out of Invest Ottawa’s offices on Aberdeen Street – and allows users to use traditional currency to buy the digital dollars.
Bit Access, which charges a flat fee for setting up each machine, also recently installed a BTM in Toronto. The firm hopes to tap into the demand seen in other cities, including Vancouver, where the world’s first Bitcoin ATM proved to be a wildly popular machine, trading more than $100,000 in currency in its first week of operation last October.
Other businesses and countries have followed Canada’s lead, with Bitcoin ATM manufacturer Lamassu of the British Virgin Islands saying it’s sold 130 machines to vendors in 25 cities.
Bit Access is working with BiT Capital, a U.K.-based firm that will be housed in the commercial portion of 90 George St. in the ByWard Market and will focus on venture capital funding of Bitcoin infrastructure businesses.
While Bit Access provides the BTM and means of purchasing Bitcoin, BiT Capital will be the trading partner that will trade the Bitcoin for a transaction fee of two per cent.
Bitcoin presents an alternative for consumers who lack access to credit cards or cash, as well as an opportunity for local businesses to reduce their costs of processing payments. While retailers are charged credit card transaction fees in the neighbourhood of three per cent, the equivalent Bitcoin rate is less than 0.1 per cent.
As an investment vehicle, the debate over whether there is money to be made with Bitcoin can be polarizing. The Winklevoss twins, the rowers-turned-Internet entrepreneurs made famous for their legal battle with Facebook founder Mark Zuckerberg, are bullish, explicitly stating their belief that a single Bitcoin could reach as high as $10,000. (One Bitcoin could be purchased for $945 last week.) Similarly, ConvergEx Group’s chief market strategist Nick Colas told Bloomberg last year that Bitcoin “absolutely is” a valid component of a diversified portfolio.
On the other hand, Eric Tymoigne, an economics professor at Lewis and Clark College in Oregon, calls Bitcoin “purely speculative assets.”
It’s not entirely clear what the future holds for Bitcoin, as regulators and businesses around the world have been taking widely differing views on the digital currency. While Canada seems to be a haven for Bitcoin, other countries such as China have banned financial institutions from trading in Bitcoins.
Unless such a measure is taken by regulatory officials in Canada, it seems the digital currency has a place to thrive here in Canada and now, the nation’s capital.
Kyle McInnes is the co-founder of local app developer Pretzil.