The Apple Pay effect on m-commerce should result in more attention for mobile-heavy Bitcoin transactions, but virtual currencies are still being held back by unclear regulations, according to payment executives.
Bitcoin should benefit from the broad fallout from Apple Pay's vast mainstream publicity, said Emily Goodman Binick, American Express' vice president and general counsel during a panel discussion at Bitcoin Law: Regulation and Transaction, which was held at New York Law School Oct. 21.
I don't think [Apple Pay] is going to be that transformative from a fees perspective...since they're just another player in the value chain rather than eliminating folks in the value chain, said Emily Goodman Binick, vice president and general counsel at Amex. But...it will help consumers get used to paying with their phones.
Others on the panel agreed that Apple Pay will create awareness and education around using Near Field Communication contacless technology to pay with a smartphone at the point of sale.
Bitcoin transactions at brick and mortar retailers are usually facilitated through mobile payments, with the consumer either scanning a QR code associated with the merchants Bitcoin account or typing in the alpha-numeric merchant Bitcoin address.
While Binick is interested in how Bitcoin and cryptocurrency in general could solve problems with the international payments and remittance industries, Amex, like most regulated payment companies, can't work with Bitcoin startups until there's some regulatory clarity.
Federal and state government agencies and regulators are having trouble defining Bitcoin.
The Financial Crimes Enforcement Network (Fincen) issued guidance on virtual currency in March 2013 stating that businesses transmitting Bitcoin should register as money services businesses as if Bitcoin was being seen as a currency. Then in March 2014, the Internal Revenue Service (IRS) released guidance stating that it would be viewing Bitcoin as property, meaning that users would be required to claim capital gains and losses on their taxes.
Government agencies are constrained by existing regulation, said Marco Santori, an attorney with Pillsbury Winthrop Shaw Pittman LLP and chairman of the regulatory affairs committee at the Bitcoin Foundation. And just as government regulators struggle with this, so do banks, he said.
It's almost impossible to operationalize a reporting structure in a large regulated company, Amex's Binick said. Different areas of Amex's business look at Bitcoin in different ways. And whereas every dollar that's moved into Amex accounts is regulated, Amex can't be sure that every bitcoin is.
Most large bank responses Santori gets go something like this, he said, We're looking at it but you have to understand we have compliance obligations in Asia that interact with our compliance obligations in South America... Banks have to make sure not to go asunder of the law in one region even though they're following the law in another, he said.
But banks and other traditional payment companies are studying the potential benefits of Bitcoin should the regulatory environment clear up.
There's a lot more advocacy on the financial institution side to learn more about Bitcoin, said Brian Stoeckert, chief strategy officer at CoinComply, a digital currency consultancy. Banks are thinking about Bitcoin...as can they be market leaders in attracting these types of companies.
And attention from legacy institutions isn't only focused on Bitcoin. Ripple, a digital currency payment platform headed by serial entrepreneur Chris Larsen, seems to be making substantial headway. Ripple uses cryptocurrency on the back end to transmit any currency (whether a real national currency or a invented currency between friends) quickly and inexpensively.
Most Bitcoin companies have been hesitant to work with regulators and the traditional payment system, but Ripple has been more proactive working within the regulatory guidelines and developing partnerships with banks. In September, Cross River Bank in Teaneck, N.J., and CBW Bank in Weir, Kan., became the first lenders in the U.S. to transact currencies across borders through Ripple's money settlement platform.
And because Ripple is not focused on consumers, Binick said that has helped the company form relationships with financial institutions, who don't have to worry about consumer protection threats.