Overstock.com revealed more details of its forthcoming bitcoin adoption on Friday as Patrick Byrne, CEO of the online retail giant, told CoinDesk about the company’s timeline to roll out the digital currency.
The company has not yet chosen a third-party payment processor to manage its bitcoin payments, Byrne said, but added that this will happen in the next two weeks. Nothing will happen immediately after that, he added. Instead, the company will begin taking bitcoin payments in June or July.
“We’ll probably be working with the third parties. There are a few different ones that are interested in our business. It makes sense to work with them rather than developing it from scratch,” Byrne said.
Byrne cited cost as a key driver for the bitcoin move. “You’re getting rid of the interchange fees. We’re paying credit card companies around 2%. For a company whose margin is 1%, picking up 2% on that is quite attractive.”
But his reasons are also ideological. Byrne, a renowned libertarian, re-emphasized his “pro-freedom” stance, taking a poke at the US dollar in the process.
A pro-freedom stance
“In an ideal world we’d go back to gold so you’d have a monetary system based on something that government mandarins can’t expand at the stroke of a pen,” he said. “We’re not going to go back to gold, but bitcoin shares that virtue. It is mathematically if not physically constrained.”
While governments can’t expand bitcoin’s quantity with the stroke of a pen, they can apparently do a lot to squeeze its value. The digital currency has been highly volatile of late, jumping from under $100 in value in August to as high as $1147 on the Bitcoin Price Index (BPI) earlier this month. Following statements from the Chinese government last week, it lost more than half its value from that peak.
Byrne waved away this news. “Political influence like that has a lot of effect on it now. It will have less of an effect as adoption gets broader, and it will be less prone to the whims of government bureaucrats,” he said.
However, as a publicly listed company, Overstock.com is mandated to protect the interests of its shareholders and manage risk.
Byrne didn't have a set goal for the proportion of revenues that he expected to come from bitcoins. As a rough estimate, he suggested that 1% would be reasonable. Based on that figure, bitcoin sales would have accounted for roughly $30,000 per day on average in 2012. Byrne confirmed that the firm would either hedge its position in bitcoin, or simply close it out into US dollars at the end of each day.
Overstock.com will be among the first of the larger retailers in the US to take the plunge and accept bitcoin. This foregrounds it in a traditionally conservative industry, said Jeremy Allaire, CEO of digital payments company Circle Internet Financial.
“In general, medium to large retailers, including online, are relatively conservative about new payment methods,” Allaire said. “For example, it was only just ten years ago that McDonalds starting accepting credit card payments.”
Challenges to consider
One of the biggest challenges facing publicly listed companies like Overstock.com that want to accept bitcoin could be accounting for its value if it doesn't settle in fiat at the end of each day, continued the former co-founder of Allaire Corporation.
The Internal Revenue Service has not issued any significant guidance on the tax treatment for decentralized digital currencies, he pointed out. “This will hold back a lot of companies from accepting bitcoin as a payment. This is particularly the case if a retailer or e-commerce company actually receives and holds the bitcoin, versus just leveraging a payment processor who contracts with the retailer to pay them in local currency.”
In November's US Senate hearings FinCEN director Jennifer Shasky Calvery said that she had been in dialogue with the IRS and anticipated guidance on virtual currencies from the agency.
Patrick Byrne image via Forbes