Proponents of bitcoin, a currency that few understand and even fewer use, are hoping to push it into the mainstream in Maine.
Daren Hebold, president of Lux Realty in Portland, has set up a company called Luxolo Financial and is licensed by the state as a “money transmitter,” which allows him to conduct currency transactions, such as converting dollars to bitcoins. He set up an ATM inside the Techport offices on Temple Street and opened an office downtown to handle a variety of cryptocurrency transactions.
But what, exactly, are cryptocurrencies? They are an all-digital form of money, like bitcoin, in most cases not backed by governments or maintained by central banks like the U.S. dollar is. Rather, users within the bitcoin network can transfer payments to other users through the internet. Users are only identified by a code and their payments are recorded in an online public ledger. No need for a bank or credit card company to intervene.
Because there will only ever be 21 million bitcoins in circulation, its value rises and falls depending on how many users are trading and the perceived value of those trades. Wild fluctuations are common. Last fall, bitcoin lost 20 percent of its value in one day, dropping from more than $11,000 to $9,000.
BITCOIN WINDFALL FOR RESTAURANT
Despite the public’s difficulty in grasping this new way to pay, the Great Lost Bear pub in Portland has been accepting bitcoins for meals and drinks for four years. That prescient business decision provided a $7,000 windfall to the restaurant, which held onto the bitcoin payments it received and then sold as the value of the currency rose last year.
Owner Dave Evans said his understanding of the currency is about the same as most people – minimal – but the restaurant has made a profit by taking bitcoins in payment and then selling them later.
“It’s a mystery to me, but we have made money on it,” Evans said.
Over the years, the restaurant acquired bitcoins from patrons paying for their meals and beer and eventually owned seven. Even though the meal tabs totaled only a few hundred dollars in U.S. currency, the rising value of bitcoins last year led the restaurant to sell, making a profit of about $7,000, said Evans and Dave Foster, the restaurant’s media marketing manager and a leading proponent of bitcoins at the Great Lost Bear.
Foster sheepishly said the restaurant could have made even more had it held onto the bitcoins longer – the value shot up sharply at the end of 2017, but has since retreated – but the profit still was enough that it paid for a fence around a patio area next to the restaurant.
“We call it the Bitcoin Barrier,” he said.
Foster said his impression is that use of bitcoins tends to follow the market – when the value is high, holders tend to spend them, and when values drop, holders naturally hold back, hoping for them to recoup their value.
He said the restaurant has a couple of regulars who frequently pay their bills in bitcoin, but there are usually only a couple of transactions a month – long enough for the waitstaff and bartenders to forget how to process them. He said the restaurant provides a bar code for customers to scan into their phones and use it to send bitcoins – actually fractions of bitcoins – to the Great Lost Bear’s online wallet. Most bitcoin apps provide easy tools to translate dollars into current values of bitcoins, so it’s simple to convert the cost of a couple of beers into fractions of bitcoins and make the payment, Evans said.
He said the ability to use bitcoins to pay a bar tab is a good tool for marketing to a certain segment of the community.
“People who have this stuff are so excited to use it the way it’s supposed to be used,” he said. “But it’s a matter of time before people start using it on a daily basis. It feels good to be part of it. It’s the future. It’s Blade Runner.”
Restaurants and other retailers should use bitcoin and other cryptocurrency because the all-electronic system means fees are much lower than what credit card companies charge, said Hebold, who set up Luxolo Financial.
That, and the dollar’s ongoing devaluation because of inflation, are Hebold’s main beefs with plain old dollars, he said. Bitcoins should provide a more stable valuation, he said, once the speculation phase dies down.
The ease of making all payments electronically, without the involvement of a bank or credit card company, is another draw, Hebold said. To pay a bill seamlessly and quickly, he said, he can use an app on his phone.
“It’s so easy to use, I don’t have to get out my checkbook or swipe a card,” he said.
But that’s assuming he’s dealing with someone who accepts bitcoins and other online currencies. The number is currently small, and mainly involves individual-to-individual transactions now, but there are a growing number of businesses that deal in cryptocurrencies, he said. Websites that list retailers that accept cryptocurrency show only a handful in Maine, including a cross-fit training center in Westbrook and an online clothing company in Lewiston.
TRANSACTIONS WITHOUT A LICENSE
Hebold is certain that use of cryptocurrencies will grow fast.
“I liken this to email in 1992,” he said. “Maybe one (person) in a hundred has heard of it and one in a hundred uses it.” Hebold said he has helped “many dozens” of Mainers buy bitcoin through his ATM in Portland, but he declined to disclose any names.
Mark Susi, a lawyer with the state Bureau of Consumer Credit Protection, said Hebold is the only person he knows of with a money transmitter license, which requires posting a bond and meeting minimum net-worth standards.
No license is required for direct sales and purchases, he said. For example, he said, there are other ATMs in Maine offering cash for bitcoin or vice versa. But since the owner of the machine also owns the bitcoin, no license is required because there is no third party involved, only the buyer and seller.
If a third party helps get sellers and buyers together, as Hebold does, a license is required, Susi said.
Edward D. Murphy can be contacted at 791-6465 or at:
emurphy@pressherald.com
Send questions/comments to the editors.
