Tim Gosling in Prague -
Drugs, terrorists, hackers and scammers: the forces that blight virtual currency bitcoin are myriad, but one Czech company hopes to take at least a couple out of the equation.
Investors spent early 2014 dumping Emerging European currencies with almost evangelical zeal. Investment company Marlyle exhibits similar levels of enthusiasm in its bid to spread the word on bitcoin. Marlyle announced in late January that it has purchased three bitcoin ATMs from US manufacturer Robocoin Technologies at a cost of around CZK1.5m (€54,450) and hopes that one - destined to take up residence in the Smichov area of Prague in April - will be the first of its kind in Europe.
The machine, which will allow users to access (almost) instant exchange for buying and selling the virtual currency, will be accompanied by human staff. The idea is to "enable digital currency trading to those people who are thinking about it today, but have been discouraged by concerns related to the safety of their investments," said Marlyle CEO and investor Martin Stransky in a press release.
The project was inspired by Stransky's experience in investing in bitcoins, and the potential he sees in solving security concerns, says Denisa Marcekova, who is involved in business development as one of a number of Stransky's "friends" donating their time to the project.
Introduced in 2008 as a global currency outside the control of central banks and separated from the issues affecting financial markets, bitcoin brings its own issues. The volatility of the market - which sees massive and rapid swings in their value - and the ambiguity of regulatory issues are elements that Marlyle's media representative, Tomas Vrbik, admits the company has little control over. However, he insists the company can deal with the security issues, though is still unwilling to discuss the details.
The virtual currency has come in for no little bad press. It is reported to be a domain dominated by drug deals and online gambling. More sinister are assertions that it is also regularly used for money laundering and financing terror groups.
While a very limited number of legitimate businesses around the world accept the currency in payment for goods and services, its use as a financial investment is seen as the major above-board use of bitcoin. The volatility of the market offers ample potential for that strategy. Around a year ago, one bitcoin was valued at around $15; in November, the value had passed the $1,000 mark for the first time. On February 11, the virtual currency was quoted at $645 per coin on Bitstamp's exchange.
Playing that risk is one thing, but online assets can equate to Russian roulette, and bitcoin's image in the Czech Republic has taken a battering recently. In November, hackers emptied 4,000 "wallets" at bitcash.cz. The same month, a Czech-based online bazaar announced BTC5,400 lodged in its system by vendors and buyers had been stolen. The consensus, however, is that the site itself was simply one large scam.
"Our aim is to protect investments from hackers, scams or even just losing your computer [which contains the encrypted certificates]," Marcekova says. Marlyle can't do anything about the volatility, she laughs, but points out that bitcoin investment remains outside the usual market risks. "There's unlikely to be a Lehmans or insider trading."
The plan then is to attract investors by not only dealing with the security issues, but by offering to hold their hand as they try it out. The spirit of bitcoin - which as supporters point out is independent of political or regulatory influence - is clearly also seen as a selling point to young professionals seeking a means of playing an alternative market. Marcekova clearly believes this image - born in the entrepreneurial fires of open source computing - is an additional attraction.
However, the mood is somewhat ad hoc. "We have no research really on number of potential investors into bitcoin," says Vrbik, "but we sense from our personal experiences that there are thousands that would be interested in putting small amounts into such a high risk investment but are put off by the security issues. We want to bring virtual currencies down to earth so they can 'touch it'."
Down to earth
Should that instinct pan out, however, it will present the group with another issue. Right now, regulators have yet to get to grips with virtual currencies, but that will quickly change should bitcoin put on a growth spurt. "Something will happen in the Czech Republic, and we're open to that - although not calling for it - in order to introduce more transparency," points out Vrbik. "Right now, they don't know who should be in charge of it. They don't even know what it is: a currency? A commodity?"
Regulators are clearly uncomfortable with that confusion. As a bastion of e-government, Estonia's view carries some weight, so criticism from the country's central bank on January 31 that virtual currencies could prove to be little more than a "Ponzi scheme" could prove particularly damaging
Despite the company's enthusiasm for the "lack of boundaries" offered by the virtual world, it's a situation that Marlyle is also watching with regard to placing the other two Robocoin machines it has ordered. The mundane detail of bringing bitcoin into the physical world also appears to create borders, with Marcekova suggesting that Slovaks and Germans will next be offered an introduction to the virtual currency.
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