By Oon Yeoh
Bitcoin is in the news again, although for reasons its advocates dread to hear. Its value has been dropping considerably. Late last year, it was doing great, rising in value to around US$1,100 (RM3,600) in November. Then, in early February, its value plunged, hovering to around US$600 (RM2,000). That’s a steep drop.
The reason for the huge decline is that Bitcoin, the world’s leading digital currency, has been under attack and there was at least one incident of hacking which resulted in the loss of millions of dollars.
The attacks by hackers have caused several Bitcoin exchanges to temporarily halt withdrawals. When one of the most popular exchanges, called Mt Gox (based in Japan) temporarily halted customer withdrawals, it sent tremors across the emerging Bitcoin scene.
Then there was the attack targeting Silk Road 2, an underground black market site that launched last October after the FBI shut down the original Silk Road. The hackers took advantage of a bug in currency’s protocol that allowed them to make off with the equivalent of US$2.7 million (RM9 million) worth of Bitcoins.
Yet, despite all these bad news resulting in a drop in its value, Bitcoins have all the signs of a growing currency judging by the number of merchants embracing it in the West.
Bitcoins not well accepted in Malaysia
It’s not well accepted here in Malaysia yet, though. In fact, according to CK Wong, the founder of Ecommercemilo.com, a website that tracks e-commerce activity in Malaysia, there is only one local company that accepts Bitcoins, a hip and trendy co-working office space company called Nook in Bangsar.
The situation is a bit different in Singapore. That city-state is welcoming Bitcoins with open arms. According to Wong, there are already 18 merchants in Singapore accepting Bitcoins and this number is bound to grow. The island republic’s tax agency, the Inland Revenue Authority of Singapore, even provides guidance on income tax and GST for Bitcoin usage in the country.
Bank Negara on 2 January this year issued a statement that said: “Bitcoin is not recognised as legal tender in Malaysia. The Central Bank does not regulate the operations of Bitcoin. The public is therefore advised to be cautious of the risks associated with the usage of such digital currency.”
“What this means is that, while it is not legal tender, Bank Negara does not say it is illegal either,” says Wong. So, if you are a merchant, you can accept Bitcoins, but at your own risk.
Is it worth the risk? The advantages of using Bitcoins are well documented but the key reason for a merchant to consider accepting Bitcoins is the publicity that is generated by it. Its advocates claim acceptance of Bitcoin automatically confers a hip image to the merchant that embraces it.
There’s probably something to that. People who use Bitcoins are, by definition, digitally-savvy people (otherwise, they wouldn’t have anything to do with the notion of digital currency, which is a bit hard to grasp, for the layman). These people make the cutting edge segment of society.
The company would naturally get some press coverage for its acceptance of Bitcoin as it is quite rare, at least in this part of the world. But even in the US and other places where there are more companies accepting Bitcoins, it’s sufficiently novel that when a new company decides to jump on the Bitcoin bandwagon, it is news.
So, if you run a business and you want to start accepting Bitcoins – Bank Negara’s word of caution notwithstanding – what do you need to do?
Wong of Ecommercemilo.com suggests using a payment gateway called BitPay.com which operates similarly to PayPal. “Instead of accepting cash or credit card like PayPal, BitPay converts your ringgit price tags to the Bitcoin equivalent and processes them as payment for your products or services. Upon successful transaction, the Bitcoin payment will be stored in your BitPay’s wallet.”
When you want to cash out, you just transfer your Bitcoins to your preferred digital wallet for a minimal fee of 0.01 Bitcoin (in contrast, PayPal’s lowest rate is 2.4% + RM 2.00 per transaction).
Alternatively, if you have a bank account in USA, Canada or Europe, you can instruct BitPay to deposit directly into your bank account at no fee. At the moment, BitPay does not direct transfer to any Malaysian bank account.
“It is worthwhile considering accepting Bitcoins as part of the payment options for your company,” opines Wong. “Because it is so rare in our neck of the woods, you would be regarded as a pioneer in Malaysia’s Bitcoin scene.”
Oon Yeoh is a new media consultant.