Crypto's best bet for retail payments: Gun shops
Cryptocurrency has struggled to be accepted for everyday payments, but it is finding opportunities in certain niches — such as gun sales.
The Atlanta-based blockchain infrastructure developer BitRail LLC is working with Los Angeles-based ICOx Innovations Inc. to make digital currency easy to spend while keeping regulators appeased. To that end, BitRail announced a deal with GunBroker.com, one of the world’s largest online marketplaces for hunting, outdoor sports and firearms, to allow the merchant’s customers to buy and sell using FreedomCoin, a cryptocurrency underpinned by BitRail’s blockchain infrastructure.
For companies like GunBroker.com, which announced its support for FreedomCoin at the Shot Show conference in Atlanta last month, having another payments option is critical, as other digital payment platforms reject working with legal firearms purveyors. Mainstream payment networks such as Visa and Mastercard support legal gun sales, but have been criticized after reports that mass shooters used credit cards to build their arsenals.
Gun shops welcome cryptocurrencies for two key reasons: Mainstream credit card providers charge them high fees because they view firearm sellers as high-risk; and gun aficionados want to know they can still buy firearms whenever there is momentum to ban or restrict such sales.
BitRail's technology "meets the needs of an established organization … looking for options less expensive than money order or credit cards,” said Cameron Chell, vice chairman and co-founder of BitRail. The cost to process these payments is about half the cost of processing credit cards, and incorporates know-your-customer and anti-money-laundering processes within its digital application, Chell said.
GunBroker.com’s customers can buy FreedomCoin and store the cryptocurrency in a blockchain enabled wallet until they choose to make a purchase. Buyers and sellers on the firearms site will be able to accept and spend FreedomCoin. BitRail powers the digital wallets that store the FreedomCoin currency.
The platform offers buyer protections similar to those associated with credit cards, and adds security through blockchain verification, two-factor authentication, and price volatility management, according to BitRail.
“We’ve heard the pain points of our merchant community. GunBroker.com is tapping blockchain technology to replace the need for other costly and time-consuming payment options,” said Patricia W. Huff, director of marketing at GunBroker.com. Indeed, eBay discontinued the sale of firearms two decades ago, according to Huff, “And cash and money orders are expensive. This is a better way.”
GunBroker.com has 4.4 million U.S. users buying and selling firearms online. With the margin on selling firearms “very low,” Huff said the 3 percent to 4 percent in credit card transaction costs is relatively high for their business.
“The innovators at BitRail understood us,” said Huff, adding that as an e-commerce site, GunBroker.com must be compliant at a federal, state and local levels. In particular, Huff says she and her colleagues were “big fans” of the digital platform’s verification and AML processes.
Prospective digital payees can set up a wallet using a valid email address, cellphone number, and the last four digits of a Social Security number—the same information GunBroker.com already requires. BitRail itself officially launched on Jan. 15.
Another gun seller, Central Texas Gun Works in Austin, began accepting bitcoin, litecoin and ether in 2013, and installed a cryptocurrency ATM in its lobby in 2014. It also accepts those three cryptocurrencies online.
“You would think that the majority of your credit card processors would actually love gun stores because you get an FBI background check before you complete the transaction,” owner Michael Cargill told PaymentsSource last year. “I could sell knives, I could sell other things and there’s no background check when it comes to that stuff, but with a gun store, you’re going to have a complete FBI background check."