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In-Person Bitcoin Exchanges Are Thriving

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By Jon Matonis
American Banker
Friday, June 21, 2013

http://www.americanbanker.com/bankthink/in-person-bitcoin-exchanges-are-thriving-1060061-1.html

Call it a sign of the times, but something is definitely changing as face-to-face purchases of bitcoin are booming worldwide.

In
addition to avoiding a sometimes cumbersome registration process with
traditional exchangers, in-person bitcoin transactions allow you to meet
interesting new people in your area – and discuss bitcoin.

Business
colleagues and friends usually ask me the best way to buy and sell
bitcoin. With the constantly changing regulatory landscape and the
inconsistency of available payment methods,
there is not always a straightforward answer. For the serious traders, I
recommend both a U.S.-based exchange and an international exchange for
diversification. Many choices are available with varying degrees of
identification required. For the casual traders seeking more privacy, I
recommend in-person trading through LocalBitcoins.com.

Established
by Finnish software developer Jeremias Kangas, LocalBitcoins is the
leading person-to-person matching service for people in various locales
to meet and conduct bitcoin business. LocalBitcoins has steadily added
new cities and market depth. “We currently have 142 countries and 1700
cities,” Kangas recently told Bitcoin Magazine,
“but that most definitely isn’t enough. We want to expand to at least
170,000 cities, and have LocalBitcoins.com-branded franchise exchange
shops popping up here and there.”

Including the capability to purchase and sell bitcoin online in addition to the in-person model, the company’s statistics web page
lists 244 countries with 2,004 different cities. The online option
tends to support payment methods that are popular and available in that
local region. Also, once you make an in-person exchange with someone,
you might be more comfortable engaging online with them for subsequent
trades.

LocalBitcoins offers an escrow facility and a rating
system both of which can be extremely valuable for the first-time
trader. The fees range from nothing to 1% for listing and a flat fee of
0.003 bitcoins (about 34 cents as of Friday morning) for wallet
transfers.

According to the company, current trading volume is
approximately 1,000-1,500 bitcoins per day, with 300 new users per day.
Overall user count is now 45,000 and about 15,000 of those are active.

Given the robustness of trade in some large urban areas, it is entirely possible to earn
a living from buying and selling bitcoin using the LocalBitcoins
matching platform. The bitcoin provider sets the price markup and types
of payment that will be accepted. After that is determined, the business
elements include focusing on inventory and adhering to a convenient
meeting timetable.

It will be interesting to watch how this
business model unfolds, because it is also possible to be an in-person
exchanger if bitcoin is given back as change during a regular purchase
of goods or services. A gourmet food merchant in San Francisco currently
offers
two unique bitcoin services: “bitcoin back” from cash purchases and
“cash back from bitcoin purchases,” both integrated with the point of
sale system. While the limits on these services are one bitcoin and $200
respectively, it serves as a great incentive to sample the merchant’s
product and smartly acquire some bitcoin at the same time.

Bitcoin’s
price can exhibit extreme volatility and its value is not supported by
any government’s legal decree. It is admittedly still beta software.
With a crippling “fork
of the block chain – the public transaction ledger maintained by a
decentralized network of computers around the world – it could all be
gone tomorrow. So, do regulatory bodies like the Financial Crimes
Enforcement Network believe that virtual bitcoin sufficiently resembles real
money for its exchange to be regulated under Money Services Business
guidelines or money transmitter rules? Would Fincen also want to
regulate the commodity-based exchange of rare gems and Tide detergent?

Bitcoin
falls most appropriately into the property category of commodity,
although it is an intangible commodity supported by mathematics and a
distributed computing network driven by social consensus. Regulating an
intangible commodity with unprovable existence places the burden of
proof on the regulator since there is sufficient plausible deniability
in the system for someone to deny holding bitcoin or even access to the
private key required to send them from a given address on the network.

It
remains to be seen whether the latest regulatory interest extends
beyond the mere entry or exit point into the U.S. financial system. As
exchange endpoints tighten up and authorities attempt to treat virtual
objects as monetary instruments, the virtual objects might not re-enter
the national fiat environment. Therefore, crypto-key disclosure laws may become the next battlefield for cryptographic financial products.

Treating
bitcoin as a monetary instrument for purposes of regulation fails to
understand the nature of math-based commodities that rely on reusable “proof-of-work
to verify and record transfers of ownership. In the general
classification of commodity, bitcoin’s trade is similar to any other
collectible item, such as antique diamonds, celebrity autographs, moon
rocks, Buddha figurines, and baseball cards.

People
have even sold air guitars online (without the cases, presumably). Just
like air guitars, person-to-person sales of bitcoin “transfer rights”
will continue. Ultimately, until physical paper cash is outlawed,
bitcoin will still be bought and sold in person just like any other
commodity.



Source: http://themonetaryfuture.blogspot.com/2013/06/in-person-bitcoin-exchanges-are-thriving.html



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