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Bitcoin, the crypto-currency that fascinates speculators and tech types, is still struggling to break into mainstream commerce. To prod its popularity, the wallet and exchange service, Coinbase, launched a promotion on Monday in which it will convert merchants’ Bitcoin transactions to dollars or other local currencies at no charge.
The move is significant because, so far, Bitcoin has fallen flat in consumer circles. Early this summer, a Forbes reporter tried to live on the currency for a week in tech-friendly San Francisco — and struggled at times to avoid hunger and homelessness. And, while a handful of bars and cupcake shops have announced they take Bitcoin, their news has often felt like a grab for free media attention rather than a payment processing revolution.
For practical purposes, the Coinbase news will help alleviate the fear of merchants who are reluctant to accept such a volatile currency. Under the Coinbase promotion, they will get a free way to convert transactions – meaning they could cash in the Bitcoins they earn at the end of every day (or even several times a day).
“We want to make it a no-brainer for merchants to start accepting Bitcoin,” said a Coinbase spokesman by email.
The promotion could prove appealing not just because it lowers risk, but because it could one day offer merchants an alternative to high transaction fees charged by the likes of Visa and Mastercard. The San Francisco-based company, which bears the imprimatur of respected VC Fred Wilson, is also trying to spur online micro-payments by going fee-free for small transactions.
There are a couple small catches to the new Coinbase offer. First, the free conversion only applies to the first $1 million of merchant transactions. And second, merchants will still have to pay the 15 cents of ACH fee that banks typically charge to route money into an account.
These limits are unlikely to hold back a small merchant that wants to accept Bitcoin. The bigger challenge for the currency, which offers immense promise as a low-cost tool for overseas remissions, is to create a consumer forum to use it in the first place. For now, nearly the only practical place to spend Bitcoin is at weekly currency-selling sessions like the one in New York’s Satoshi Square.
In unrelated Bitcoin news, members of the Bitcoin Foundation are meeting with seven different government agencies this week to address concerns about the currency’s legitimacy.