Bitcoin + MasterCard: 'Everywhere You Shouldn't Be?'
Created in January of 2009, Bitcoin is an experimental digital currency that
enables instant payments to anyone, anywhere in the world. Given its relatively
anonymous nature, Bitcoins have been linked to e-commerce transactions involving
illegal drugs, porn, and poker, among other things.
What’s today’s big news? BitInstant says it is close to launching the first
internationally accepted Bitcoin-funded debit card with partners of MasterCard.
If true, Bitcoins may become ubiquitous, their value could appreciate, and those
trading in the black market may have a new way to launder money.
According BitInstant, “We are moving forward and the arrangement with MasterCard
will be handled in due time at the proper stage of the process by the partners
who work directly with that company.”
“BitInstant’s partners, who are issuing the card, have been working with
MasterCard for many years, and the specific relationship will be between these
partners and MasterCard (not directly between MasterCard and BitInstant)”.
American Express, Visa, PayPal and Discover are not being named as potential
“All balances for the purposes of the card will be held and collateralized in
USD (or the cardholder’s native currency)”, said the BitInstant Team.
“BitInstant will fund the cards in USD, after receiving a user’s Bitcoins. These
will not be ‘anonymous’ debit cards, but rather a highly convenient means for
verified customers to spend Bitcoin value around the world.”
According to Jim Issokson, Senior Business Leader Public Affairs and Corporate
Communications of MasterCard Worldwide, “MasterCard has no relationship with
BitInstant. There are issuers who allow the conversion of Bitcoins to US dollars
and other currencies, delivered on prepaid cards. However, we’re not aware of
this particular program from BitInstant.”
More About Bitcoin
One Bitcoin currently sells for $250.00 USD. Bitcoin is also the name of the
open source software which enables the use of this currency. The software uses
peer-to-peer technology to operate with no central authority: managing
transactions and issuing money are carried out collectively by the network.
How Could Bitcoin Debit Cards Be A Mechanism For Money Laundering?
Let’s consider the case of Silk Road, which is an anonymous (e-commerce) black
market that uses only Bitcoins as currency. In a 2011 letter to Attorney General
Eric Holder and the Drug Enforcement Administration, Senators Charles Schumer of
New York and Joe Manchin of West Virginia called for an investigation into
Bitcoin and Silk Road. Schumer described the use of Bitcoins at Silk Road as a
form of money laundering.
Intuitively it strikes me that a BitInstant (MasterCard) Paycard would reduce
the “frictional cost” of converting illegal Bitcoin profits from the likes of
Silk Road, into traditional currency. Interestingly some of the largest daily
Bitcoin transactions now average $250,000,000,00 USD.