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The Big Interview

Coinsource’s Arnold Spencer: Widespread Bitcoin adoption is coming

As people discover that transactions can be cheaper, faster and safer than using cash and credit cards, the adoption curve will continue to rise, Arnold Spencer, General Counsel of Coinsource, tells Coin Rivet

Coin Rivet: How has 2018 been for Coinsource?

AS: Coinsource doubled our business during a year in which Bitcoin went from $18,000 to below $4,000. During the same year, we received the New York Virtual Currency License, making us the only BTM operator to receive the license and the only recipient without venture or institutional capital.

We also successfully implemented our own proprietary software operating system. There is no doubt that the drop in the price and volume of Bitcoin transactions prevented us from doing more, but we built this company with a five to ten-year perspective, and three years after we began operations, we are right on track.

Coin Rivet: The number of global Bitcoin ATMs is growing each day. But will it only be a niche thing? What needs to be done to break through to the mainstream?

AS: Bitcoin ATMs provide convenient access to digital currency. Our customers can buy Bitcoin with cash, or sell Bitcoin for cash. Not only can they buy as little a $5 of Bitcoin, they will also receive their Bitcoin immediately, with no need to wait days or weeks to complete transactions. Users don’t need a bank account, and they don’t need to submit stacks of paperwork to the international cryptocurrency exchange.

For the BTM industry to grow into a mainstream product, the industry must move past the stage of only a niche group of people using Bitcoin. When Bitcoin becomes widely adopted by the general public, when individuals want and need that convenient access, then the BTM industry will go mainstream.

This will occur at all levels of our community: ten-year-olds will want $5 of Bitcoin for their online games; teenagers will want $20 of Bitcoin to spend online; college kids will pay their restaurant tabs in Bitcoin; adults will use it for international purchases directly from the artisan, or the farmer, or the weaver, or the miner. Bitcoin make sense for so many types of transactions for so many types of people.

We see a lot of signs that widespread adoption is coming — the daily growth of Bitcoin ATMs, the growth of individual digital currency wallets, the growth of businesses (and governments) that accept Bitcoin as payment.

It will take time, and we will have many logistical challenges and public relation challenges. But as people discover that transactions can be cheaper, faster, and safer than using cash and credit cards, that adoption curve will continue to rise.

“If you bought Bitcoin between October 2017 and October 2018 and held, you lost a lot of money. Investors who bought Bitcoin in the preceding nine years, including as late as June or July 2017, have vastly outperformed every other asset class”

Coin Rivet: You say that your expansion is demonstrative of the continued interest in Bitcoin regardless of current market fluctuations, but there are many high profile crypto critics who argue that the coin is a busted flush, a solution to a problem that doesn’t exist etc. How do you respond to them?

AS: The criticism that Bitcoin is a solution without a problem is a small-minded perspective. Traditional currencies have real shortcomings. Central banks manipulate their countries’ currencies. If you are not aligned with that country’s national interests, that is a problem.

More than 20% of US households are unbanked or underbanked. That is a problem. Wire transmission fees for small amounts can be more than 30% of the total amount of money wired. That is a problem. We can no longer engage in one cent or five cent transactions in the United States, which quashes entire business models. That is a problem. North Korea has been counterfeiting US currency for decades. That is a problem.

An individual almost anywhere in the world can communicate with another individual anywhere in the world, but a tiny percentage can engage in financial transactions – directly or even indirectly. Some may not view that as a problem, but it is certainly a missed opportunity, especially for the most vulnerable people on our planet.

Digital currencies have real problems as well, and it is hard to deny that enormous amounts of hype have come with the excitement around the new technologies and the possibilities of addressing some of the failures of traditional currencies. The interesting question is, can we improve our current situation? Can we do this better? A lot of smart people have real and interesting proposals for digital currencies to improve the shortcomings of traditional currencies.

History has some interesting guidance. Sovereign-issued coins took more than a thousand years to gain widespread acceptance. Paper currency, cheques and credit cards all took decades to be adopted by US consumers. By historical standards, it is still premature to judge the likelihood of Bitcoin’s demise.

Coin Rivet: The UK Treasury Committee recently labelled Bitcoin and other cryptocurrencies a “Wild West industry” and called for regulations in order to protect investors. What’s your take on regulation in this space?

AS: There are two things to know about FinTech regulation: regulation is needed, and it is coming. The FinTech community is very excited about this burgeoning new industry that can disrupt many existing practices and businesses, but Bitcoin will never disrupt anything if it is not widely used.

As people increasingly use Bitcoin, they have to comply with existing laws and regulations. Some of these regulations existed before Bitcoin, like the US securities laws, but others will need to be created from scratch, like the New York Virtual Currency License. Like every regulation that has ever been adopted, some will view the government requirements as burdensome and overreaching.

The companies that will succeed are the companies that successfully navigate and comply with the regulations. The companies that ignore regulations will be prosecuted, and the companies that avoid markets because of regulations simply lose that market share.

“The criticism that Bitcoin is a solution without a problem is a small-minded perspective. Traditional currencies have real shortcomings. Central banks manipulate their countries’ currencies. If you are not aligned with that country’s national interests, that is a problem”

Coin Rivet: The call for regulation aside, how do you view the current state of the cryptocurrencies space? Has the bubble burst? 

AS: I draw a difference between speculation and adoption. The speculation bubble certainly burst, and everyone is guessing where the floor will be established. But adoption has been constant and continues to build. Two years ago, almost every mainstream media report on Bitcoin started with a reference to criminals. Today, the dominant themes are speculation and volatility, but criminal activity is not the primary association.

The adoption curve continues to slowly build momentum. Today, governments around the world are accepting digital currency for payments. The most prestigious investment banks are exploring crypto strategies. Fortune 500 companies accept Bitcoin, and more importantly, the fastest growing companies accept Bitcoin. Bitcoin is being spoken of kindly in Davos, in Switzerland, on Wall Street, and on Pennsylvania Avenue. People gauging the current state of the crypto space should be focusing on the adoption curve, not the price speculation curve.

One digression on the speculation bubble bursting…If you bought Bitcoin between October 2017 and October 2018 and held, you lost a lot of money. Investors who bought Bitcoin in the preceding nine years, including as late as June or July 2017, have vastly outperformed every other asset class.

Coin Rivet: Where would you like Coinsource to be 12 months from now?

AS: Coinsource expects to continue to expand it into new geographic markets and new business lines. By year end 2019, we will likely be in most, if not all, 50 states, D.C., and Puerto Rico. We also will enter international markets in 2019.

Some of most exciting opportunities are new lines of business. We will be buying and selling many new digital currencies in addition to Bitcoin. We will partner with other digital currency companies to offer other financial services, and we have some other projects on the whiteboard that we are looking at. We are very optimistic about 2019.

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