A new bitcoin ATM in Toronto offers evidence of the cryptocurrency’s growing appeal.Peter Power/The Globe and Mail
To get the inside story on what may be the future of money, you have to visit a high-tech office suite four blocks north of the White House.
This is where the Bitcoin Foundation lives in relative anonymity. Despite the cryptocurrency's rapid rise to prominence, its most vocal advocate is as yet little known to the general public.
Among U.S. legislators, however, the foundation is building a growing reputation. Over the past year the non-profit group has become bitcoin's de facto ambassador as it works to educate policy makers about a new form of money that is not supported by any government and not backed by any tangible commodity.
The foundation says its mission is to help people exchange resources and ideas more freely. Founded in September, 2012, it relies on donations from members, which include Lightspeed Venture Partners, a California-based venture capital fund, and Circle Internet Financial, a Boston start-up that aims to build payment systems that will allow more merchants to accept bitcoins.
Like bitcoin itself, the foundation is decentralized. Jinyoung Englund, the director of public affairs, is the only employee based in Washington. The executive director resides in Spain, legal counsel works from Seattle, and chief scientist Gavin Andresen is in Australia.
All of them, naturally enough, are paid in bitcoins.
The foundation faced its first major test last August, when Congress began probing the digital currency as a result of concerns about its potential use in money laundering and tax evasion.
Ms. Englund, who previously worked on Mitt Romney's presidential campaign, swung into action. She met with members of Congress, the Department of Justice and central bankers, seeking to assuage their concerns about the growing popularity of bitcoin.
Her briefings appear to have helped. In November, Senate hearings into potential regulation of the currency offered a surprisingly friendly appraisal of bitcoin's potential and the Department of Justice announced that virtual currencies "offer legitimate financial services," helping to send the price of bitcoin to new highs.
Not all countries are as tolerant. China's central bank stopped financial institutions from conducting bitcoin transactions on Dec. 5, and later barred BTC China, at the time the world's largest bitcoin exchange, from accepting customer deposits in yuan. Bitcoin's price halved as speculators bet that China would ban the currency altogether.
According to Ms. Englund, those fears are groundless. "China is tapping on the brakes, and what they did is responsible," she says. "We say the same thing: Don't put your life savings in bitcoin."
The foundation has recently met with China's central bank to "educate them," although Ms. Englund insists: "We've never approached them. They're reaching out to us."
Not everyone in the bitcoin community is thrilled by the group's growing status as the voice of a currency that is built to be outside the control of any central body. "There's a lot of libertarians in the bitcoin realm," said Anthony Di Iorio, executive director of the Bitcoin Alliance of Canada. "When they see [the Bitcoin Foundation] talking with government, they are not happy."
The number of businesses around the world that accept bitcoin payments remains meagre, but has ballooned to 2,467 from 552 at the start of November. One roadblock to the currency's wider adoption is its wild swings in value. Since last January, the price of a bitcoin has shot from $14 (U.S.) to $939, but with major turbulence along way. The price peaked at around $1,200 in early December, then plummeted near $600 the following week on fears of a Chinese crackdown.
Ms. Englund grows uneasy when discussing the investment aspect of bitcoin. "Bitcoin is trading like an early stage tech stock," she said. "Right now, it's volatile … eventually, it will even out."
She says the foundation views bitcoins as a complement to more traditional currencies, not as a replacement for them.
"The true definition of bitcoin is an open source protocol for transferring value over the Internet," she says. "That's never been done before."
Scientists consider the technology behind bitcoin to be revolutionary: It automatically validates transactions, eliminating the need for a third party to oversee transactions.
The foundation hopes bitcoin will provide a cheaper, easier way to send money across the world, thereby disrupting existing payment systems such as those offered by Western Union and traditional banks.
"Yeah, investors and entrepreneurs are going to make a ton of money," Ms. Englund says. "But the real goal of bitcoin is financial inclusion for the poor. Not just Africa. We're talking about Americans who can't get banking because they are too poor."
Bitcoin made easy
The world's second bitcoin ATM will open in Toronto on Monday, joining one that launched in Vancouver in October.
The new machine is located at 64 Spadina Ave., inside a four-storey building intended to become an incubator for bitcoin entrepreneurs.
"Bitcoin is the easiest, fastest way to send money anywhere in the world, and the ATM is the easiest way to buy bitcoins," said Anthony Di Iorio, executive director of the Bitcoin Alliance of Canada and operator of the ATM. "Eventually, there's going to be bitcoin ATMs all over the place."
The working space, named Bitcoin Decentral, will offer permanent and temporary desks for bitcoin businesses.
Purchasing bitcoins online can be a complicated endeavour. The ATM aims to streamline the process. When someone places an order through the ATM, the machine automatically buys bitcoins through an online exchange.
Mr. Di Iorio says he has another five ATMs on order. While he doesn't have a prediction for demand in Toronto, the Vancouver ATM brought in $1-million in its first month.