“It’s a new disruptive technology, so, yeah, we’re looking at Bitcoin closely,” said John Donahoe, CEO of eBay (NASDAQ:EBAY), in an interview with The Wall Street Journal at the end of April. “Virtual currency is something that’s here to stay.”
Bitcoin is a cryptocurrency that has a few unique properties that make it interesting to traders, investors, and marketplaces. One is a modicum of anonymity. Actors in the Bitcoin ecosystem are identified by what amounts to an alias, and precautions can be taken to make it nearly impossible to determine the real-world identify behind that alias. This has some obvious pros and cons, and has popularized Bitcoin in online black markets like Silk Road.
Another benefit is that users do not need a bank account to use it. This opens the currency up to participants around the world who may have access to the Internet but may not have access to a formal — or trustworthy — financial sector. What’s more, as many as eight percent of American households don’t have a checking or savings account. For these people, Bitcoin offers a way to digitally move money around the world without having to rely on a financial institution.
But most of all, the currency is decentralized. Like gold, there is no one central bank that controls it. Price is determined by the market, and supply is created at regular, known rate. Taken together, these factors have made Bitcoin increasingly popular as a currency, and have put it on the radar of eBay and the U.S. government alike.
Over the past four years, Bitcoin has emerged from obscurity to pique the interest of popular websites like Reddit and WordPress, which accept the currency. A small, nebulous array of retailers and businesses accept Bitcoin as payment as well, but volatility and general dubiousness about the currency has kept it out of main stream use so far.
A conversation surrounding the currency was revitalized recently when the price underwent what could respectfully be called a major correction. Movement over the past few weeks has been particularly volatile as the currency basked in the media spotlight and attracted a torrent of fresh attention from traders and speculators looking to make a quick buck.
eBay is interested in the currency because it lowers the barrier to entry for certain would-be users. Whatever their reasons, people are clearly exhibiting a healthy demand for the currency, which is currently trading at about $120. The total market is estimated to be over $1 billion.
Donahoe suspects that Bitcoin — or some other decentralized virtual currency — could become widely accepted at mainstream retailers and marketplaces in the coming years. By nature the currency should become more stable as time goes on and the number of people using it increases. Adoption by a marketplace like eBay or a payment platform like PayPal would give it a huge boost in credibility.
The U.S. Treasury is interested in the currency because of how bad actors could potentially abuse the system to launder money and facilitate black-market transactions. The Treasury has made it clear that the federal banking laws that address money laundering within the U.S. apply to virtual currencies.