Most people are talking about SoLoMo and it’s relevance to marketing. Even I, in this blog, have fallen into this trap. What some are missing is the final mile of SoLoMo, that of fulfillment. Handing over something of value to get something I want/need. Typically something of value is money, or currency. Bitcoin is the new (relatively) kid on the block storming the castle. And just like every disruptive technology trying to make its way in the world it is facing resistance by the establishment in the form of regulation and control. And if you think privacy regulations in SoLoMo are stifling, they are nothing compared to financial regulations.
Let me start by saying that I am not a Bitcoin user so what I know is from reading publicly available sources. Bitcoin at its most simple is a digital currency or, as described in this article by its creator(?), a “purely peer-to-peer version of electronic cash. While Bitcoin lacks the backing of gold, it reminds me of the currency talked about in the book Cryptonomicon, by Neal Stephenson. Not controlled by any central authority and totally anonymous it seems like the perfect currency for an always connected world operating across borders.
Money as a concept dates back to the seventh or sixth century B.C. and it is defined as a identifiable object of value that is generally accepted as payment or repayment within a market or which is legal tender within a country. Bitcoin, or any alternative currency, is definitely not legal tender in any country, but it is being exchanged within the online market. Over the many centuries of money, many things have been exchanged for value. One of my favorite is where we get the word shekel, sacks of cereal grain.
Storming the Castle
Any threat to an established structure will be met by resistance from the established structure. PayPal itself before and after its initial public offering (IPO) faced challenges by states and the U.S. Justice Department. Many states require that business that facilitate the movement of money acquire “money transfer licenses” and that PayPal had not. PayPal sold out to eBay and today has over 100 million active accounts. But they bent to the requirements of the financial regulators, and a departure from the vision of it’s founders to enable account holders to send money to anyone in the world with an e-mail address. It’s humorous to note that some of the person-to-person money movement functionality you see in your mobile banking apps supports that exact vision, albeit within the walls of the castle.
Fast-forward to Bitcoin. Bitcoin is money, and it is a currency. Unlike PayPal’s early regulator detractors which only cited online gaming as a problem, Bitcoin’s regulatory detractors are looking at the money laundering and criminal enterprise funding as the bogeyman of today (FBI Report on BitCoin).
The Financial Crimes Enforcement Network (FinCEN) issued guidance in late March for using virtual currencies. I have some issues with the guidance, but it is a shot across the bow for virtual currencies at large, not just for Bitcoin. My problem is one of definition. If I engage in barter and use strips of bark to denote the value of our transaction are the strips of bark currency? Since I can attach “real currency” value to the items being exchanged (lawn mowing for masonry work, for instance, my strips of bark are real currency. I don’t think that Bitcoin’s exchange value was meant to provide it an “equivalent value in real currency.” I think it was just useful to provide some comparison feature. And considering the volatility of Bitcoin value, that is probably the right conclusion.
However, my opinion doesn’t matter. Bitcoin under this assault will have to change. More specifically, the administrators of Bitcoin exchanges in the United States (though see below for Europe) will have to change. They will have to register as money service businesses or shut their doors, as some of the exchanges have already done. I am not a fan of big government, and personally think that Bitcoin should be given a little more breathing room.
Other Virtual Currencies
As more and more sites offer some sort of currency on their site to enable you to do various things (Amazon Coins, for instance), I think they may face some of the challenges that Bitcoin is facing with regulators. The established players have one thing that Bitcoin does not, though – lawyers and compliance experts. This was the problem that PayPal faced and one of the purported reasons why it sold out to eBay – to get access to eBay’s legal team. However, the European Central Bank is already looking at (targeting?) virtual currencies such as Facebook Credits.
Arwa Mahdawi of The Guardian in her March 2013 article said it best, in my opinion – “Virtual currencies aren’t just a new-fangled sort of Monopoly money. Rather, they may just be the thing that ends the monopoly on money.” Very idealistic statement, but are we at the beginning of that sea change on currency/money where our central banks are no longer in control. Would you trust an unknown central authority to regulate currency that you use? Quite frankly, given some of the issues the central banks have been having, I might trust them more than government-backed ones.
Whither SoLoMo and Fulfillment
Let’s get back to the blog topic for some type of conclusion or issue spotting for you SoLoMo readers out there. Given the current regulatory backlash on virtual currencies, I think you are probably best served by using some of the more traditional money movement methods for your users. Digital wallets incorporating existing credit cards are a great way to tie into your fulfillment streams. Having some way for me to not only identify I need a furnace filter, but to broker a deal with the store (or be the store and give me a discount) and then to get payment for it without me doing anything would be quite the consumer nirvana wouldn’t it.
There are a few digital wallet and other money movement schemes out there, too. Mobile is driving them forward very quickly. So while today was more of a futurecast on the currency, we will look at what you can do today with money and currency, but never lose your line of sight to the horizon, it is closer than you think.