At Free Geek Vancouver’s thrift store, Tim Adkins oversees the sale of refurbished desktop and laptop computers, displays, and peripherals at discounted prices. Customers can make their purchases with cash, debit, and credit cards. They can also pay with Bitcoin.
Adkins told the Georgia Straight that the nonprofit electronics-recycling organization began accepting the increasingly popular cryptocurrency in June 2013. The sales coordinator noted that Free Geek’s commitment to free and open-source software made it a “natural move”.
“Whether Bitcoin itself becomes the ultimate cryptocurrency remains to be seen,” Adkins said by phone from Free Geek’s facility in East Vancouver. “There may be an improvement. Maybe we’ll see some other cryptocurrency, but personally I believe that cryptocurrency is probably the future of money.”
Fans of Bitcoin say the decentralized digital currency is designed to promote freedom and, among other things, has the power to help nonprofit organizations. Bitcoin uses peer-to-peer, open-source technology; employs public-key cryptography for security; doesn’t require banks to operate; and isn’t issued by a government, unlike the Canadian dollar and other fiat currencies. Countries around the world are struggling to define and regulate this revolutionary form of electronic money.
An unidentified person or group calling itself Satoshi Nakamoto created Bitcoin in 2009. Bitcoins are “mined” by computers competing to be first to solve complex mathematical equations and reap the reward. This global network of miners processes all transactions and records them in the block chain, or public ledger.
By default, the addresses used to send and receive bitcoins aren’t associated with users’ identities, making the system pseudonymous—but not anonymous. Transactions are almost instantaneous and require no or very low fees.
The total number of bitcoins in circulation will max out at 21 million near the year 2140. As of February 14, the price of one bitcoin (BTC) was near US$650, down from the record high of around US$1,200 set in November 2013. Collectively, the more than 12 million bitcoins currently in existence are worth about US$8 billion.
According to the CoinMap website, 42 places in Vancouver accept bitcoins. In October, the world’s first Bitcoin ATM opened at a downtown location of Waves Coffee House. On January 30, the city’s second such ATM launched at Quadriga CX’s office in Gastown.
During an interview at the Straight offices, Simon Fraser University communication student Esther Tung demonstrated how easy it is to send bitcoins from one digital wallet to another. Using the Blockchain app—which Apple controversially pulled from its App Store on February 5, citing an “unresolved issue”—the Surrey resident scanned a QR code with her Android phone and transferred 0.00097 BTC ($1 at the time) to this journalist’s wallet.
“Why I’m interested in Bitcoin—the angle that really speaks to me the most, that resonates with me—is its potential impact for social change,” Tung said. “And this happens on a variety of levels.”
Tung is the vice-president of communications for the Simon Fraser Bitcoin Club, which co-organized a currency conference at the Segal Graduate School of Business on February 16. In November, the club hosted a live fundraiser that netted $1,400 in Bitcoin donations for the charity Schools Building Schools.
According to Tung, Bitcoin makes it easier for nonprofits to receive both small and large donations from all over the world. Since the technology is still new, organizations adopting the currency sometimes receive publicity they wouldn’t have otherwise, she noted.
Tung suggested Bitcoin could address some of the challenges faced by street canvassers soliciting donations from passersby, who are often reluctant to divulge their credit-card and personal information. If canvassers wore T-shirts bearing a QR code representing their organization’s Bitcoin address, people could scan it and donate without disclosing such data.
PeaceGeeks, a Vancouver-based nonprofit that uses technology to help human-rights organizations in conflict-affected countries, started accepting Bitcoin donations in 2012. It now also accepts contributions in MemoryCoin and NobleCoin, two of the myriad “altcoins” based on the Bitcoin protocol.
Having gotten into the digital currency in 2010, PeaceGeeks chief security officer Scott Nelson is a Bitcoin old-timer. He’s also a cofounder of dāna.io, an Internet startup that in May plans to launch a crowdfunding platform that uses both fiat money and cryptocurrencies. On June 10, Nelson is slated to give a talk about digital currencies for the social sector at a Net Tuesday event.
Nelson told the Straight that adopting Bitcoin required an “education process” at PeaceGeeks, since information put out by governments and media tends to associate it with money-laundering. He recommended that nonprofits consider how they can take advantage of Bitcoin in their operations.
For example, an organization might want to equip activists in a developing country with cellphones so they can do citizen journalism. If PayPal were used to send money for this, the fees would be “ridiculous”, according to Nelson.
“Lo and behold, with Bitcoin there is a way,” Nelson said by phone from Sri Lanka, where he was on a cycling tour. “There are places where you can pay for SIMs and airtime using Bitcoin. So there is a way that we as an organization here can have a measure of control over our spending, and we’re talking about fairly small payments.”
Without much effort, Bitcoin can help nonprofits’ efforts to be transparent about donations. A widget on the PeaceGeeks site shows the organization has received 34 contributions totalling 12.4 BTC.
Charities can use a payment processor such as BitPay to immediately convert Bitcoin donations into Canadian dollars, Nelson noted. Then they can issue tax receipts, and they won’t be exposed to the currency’s volatility.
According to a January report by the U.S. Law Library of Congress, the international debate over how to regulate Bitcoin is in its “infancy”. The report found that only a few countries, including China and Brazil, have regulations that specifically apply to Bitcoin.
In its 2014 budget, tabled by Minister of Finance Jim Flaherty on February 11, the Conservative government referred to Bitcoin as one of the “emerging risks” threatening Canada’s ability to crack down on money-laundering and terrorist financing. The government plans to bring in “anti-money laundering and anti-terrorist financing regulations for virtual currencies, such as Bitcoin”.
The Canada Revenue Agency considers the use of bitcoins to pay for goods and services a barter transaction. If a digital currency is bought and sold like a commodity, gains and losses may qualify as taxable income or capital, according to a November 2013 fact sheet.
The Canadian Bankers Association, which represents the “big five” and other banks, hasn’t taken an official position on Bitcoin. The association’s media-relations specialist, Kate Payne, emailed the Straight a statement warning that cryptocurrencies “replace and operate outside of a traditional national currency system and all of its protections”.
In November, the Bank of Canada issued a working paper that reviewed recent developments in private digital currencies. However, authors Joshua Gans and Hanna Halaburda focused on platform-sponsored virtual currencies such as Amazon Coins and World of Warcraft Gold.
“What is of broader future concern is the emergence of digital currencies that compete with state-issued currency,” the paper states.
On January 24, WikiLeaks revealed on Twitter that the majority of its donations are made with Bitcoin and Litecoin, a popular altcoin. After the whistle-blowing organization released classified U.S. diplomatic cables in 2010, the Bank of America, MasterCard, PayPal, Visa, and Western Union blocked donations, presumably leading it to accept the cryptocurrencies.
For Nelson, circumvention of the financial blockade of WikiLeaks proved that Bitcoin is a “censorship-proof currency”.
“Here’s a currency that nobody can stop,” Nelson said. “For certain organizations, particularly those working in human rights or other dangerous areas, that’s a very important thing.”