Bitcoins are the world’s most famous cryptocurrency and yet barely anyone on the planet has ever bought one. It’s a strange state of affairs. Everyone with any connection to technology and finance has heard of bitcoins and yet the actual process of buying, storing and using them is still seen as the same backstreet process as it was when the currency first attracted attention three years ago.
After meeting with the founders of small Isle of Man startup CoinCorner it becomes clear that this view is badly out of date and much of the mystery is starting to melt away as specialised firms appear to service buyers. The bigger problem isn’t how to buy, redeem or even securely store bitcoins, but what the cryptocurrency is actually for in the first place and whether established banking networks like the sound of its potentially disruptive ripples.
CoinCorner styles itself as the simplest way for individuals or businesses to buy, sell and ‘cold’ store bitcoins from its website or through a pleasingly slick multi-platform mobile app that also allows the currency to be sent to other people. From the outside it looks as if a lot of work has gone into making the whole process as intuitive as possible in way that would put a lot of conventional banks to shame.
According to CoinCorner’s personable co-founder and CTO Daniel Scott it was the incredible difficulty of getting hold of bitcoins that led to the founding of a startup dedicated to overcoming the problem.
After initially mining bitcoins, “we decided why not make it easier to buy and create our own exchange to on-board people in the bitcoin space in the UK,” explains Scott.
Within weeks of that start in June 2014 a crisis engulfed the sector on the island when a local Isle of Man bank pulled the plug on bitcoin businesses under pressure from mainland institutions fretting about compliance – bitcoin’s reputation had stuck again.
At least two firms folded but CoinCorner held firm. “We battled through,” says Scott. “It stunted the growth in the UK and it still has. When we speak to the banks the replies are that were are too high risk.
“We had to go to Europe and find banking there,” says Scott. “It’s not ideal,” he admits, a reference to the Slovakian banking lifeline CoinCorner now uses. This can cause problems from time to time as mainstream banks baulk at moving money to accounts in the country.
“We are not unique in that respect,” Scott’s colleague and lead developer CoinCorner, Duncan Hughes, points out.
CoinCorner: the cryptocurrency exchange battling to make bitcoins accessible to all
So bitcoins are still on the outside to some extent but an upside is that CoinCorner makes it as easy to load up wallets by accepting credit and debit cards, the first in the UK that offered this ease of use. Rivals still require time-consuming and sometimes costly bank transfers.
Another positive is the isle of Man itself. This means that the firm benefits from a zero rate of corporation tax and a flat income tax rate of 20 percent for employees. To some this sounds a bit like an offshore haven argument – the Isle of Man still has still to shake off this image in the UK - but the official encouragement of cryptocurrencies is surely another pull. Where most countries don’t like bitcoins, Isle of Man does and used legislation such as the Anti-Money Laundering and Terrorist Financing Code 2015 to build trust in its regulatory oversight.
Banking was big on the Isle of Man, then a decade ago it was e-gaming. Could the future be cryptocurrencies?
“We asked customers what they are using bitcoins for and the majority of them it’s investment,” says Scott. So it’s still mostly about speculation, a shaky foundation surely.
The company originally handled other currencies such as Dogecoin, Litecoin and Altcoins but gave up on the latter due to lack of demand.
It’s true that a smattering of businesses on the island advertise that they accept payment in bitcoins, including famously, taxi firm Lady Chauffers and a pub in Douglas called The Thirsty Pigeon. The volume of business is low, however, perhaps three or four transaction per month according to Lady Chauffers’ owner, Nula Perren. She keeps the bitcoins she is pad in a wallet where, hopefully, they will appreciate in value, she told Techworld. CoinCorner had offered to cash them in for her but she is happy to leave them where they are, she insists.
The specualtive aspect remains a problem because to have value a currency of any kind has to do real economic work. It can’t just be something people buy because others are doing the same.
A development that augurs change is the backing for major US blockchain consortium R3 now seen as the standard bearer for the whole sector. This has the backing of 42 institutions, a sign of traction, although what is really going on with R3 remains a bit unclear.
“With bitcoins and blockchains people are still learning it and finding real-world uses for it,” says Scott. “People who don’t understand the technology have still got to get to grips with it. The promise could be enormous.”
Meantime, CoinCorner devotes time to customer service and organic growth and now operates in 45 countries. The business is ticking over.
“We are not marketing heavily. If we were to market we would grow a lot larger than we are now.” CoinCorner is going through discussions with potential investors, says Scott.
Clearly at a crossroads, the next stage is to expand the team and boost the promotion of the business. It’s a situation that mirrors the intriguing, occasionally uncertain nature of the cryptocurrency industry as a whole. Everyone knows there is some sort of gold in there somewhere but getting to it is going to take a bit of work and, most of all, patience.
Once banks change their tune, things will start to move for bitcoins and for other cryptocurrencies. Just investing in the general idea of blockchains won't be enough on its own for some time.
Not that long ago, conventional wisdom said that as far as bitcoins are concerned, it was fool’s gold. Opinions have changed since then. bitcoins are here to stay. When the startup sector serving it gets another kick it might as be on the Isle of Man as anywhere else.