In a move that seems to validate the virtual currency know as the bitcoin, the Internal Revenue Service is accepting bitcoins as payment for taxes owed. Well not exactly. Snapcard a San Francisco start up is converting bitcoins into local currency in turn using the local currency to pay merchants, one of which is the IRS.
As bitcoin moves away from being known only to the tech cognoscenti and becomes a real viable currency that is adopted broadly, more organizations arise that look to leverage all this attention and add something of value to bitcoin holders. SnapCard is a San Mateo-based startup with the stated aim of making it possible to buy anything on the internet using virtual currency. The product works by way of a browser bookmarklet that integrates a bitcoin checkout process with ecommerce sites – want to use bitcoin to pay Zappos for shoes, Amazon for a book or eBay for some retro stuff? SnapCard allows you to do so.
The idea of paying for ecommerce goods via crypto currency however isn’t really super novel – it’s an obvious use case. Online shopping, online alternative currency- it goes together like… peanut butter and jelly. But what if someone told you that they enabled the payment of tax debt via bitcoin? Now that’s pretty unique. The last bastion of hyper-cautious Government agencies meets the very bleeding edge of economics. Especially ironic given the fact that bitcoin is seen by many as primarily a vehicle for transacting in illegal or non-declared income generating activities. The idea of paying tax via bitcoin is sure to have a few people chuckling and more than a few horrified.
According to SnapCard founder Ioannis Giannaros, SnapCard will extend the program to allow bitcoin-fuelled payment universally. In doing so bitcoin will become a replacement for the bill-pay services offered by traditional banks. In terms of how it works, SnapCard uses CoinBase and BitPay to convert bitcoins into US dollars that are then paid to the payment processor and thereafter to the recipient. Of course it’s not perfect – what happens with an incorrect payment amount? Or when there is a warranty issue with a physical or virtual good? Having multiple layers of third parties involved in a payment doesn’t make that stuff any easier. In terms of the IRD payments, SnapCard charges a $10 flat-fee in addition to any IRS payment fees.
SnapCard is a young startup – it has only processed $300,000 worth of transactions from a couple of thousand users over its short life – the jury is out whether end-users will be comfortable using such a small provider to make payments with several levels of abstraction. In terms of the business they’ve done so far, the top websites that they see the most purchases from are, not surprisingly, Amazon and eBay. Small fry thus far, but as an example of an emerging industry and disruption to traditional payments, it’s a telling development. As I wrote this story I received an email from yet another bitcoin service, this time Vaurum which is a platform for financial institutions to trade, store and offer bitcoin to their customers.