BitLicense- Some Comments from CEO Alan Safahi of ZipZap, Inc.

As a community, we all knew that regulation would come down onto virtual currencies at some point. In fact, it is incredible that a BitLicense hasn’t been proposed before now.

The New York Department of Financial Services (hereinafter NYDFS) is the first institution to attempt to make a BitLicense framework that could both protect the general public and provide clarity for virtual currency entrepreneurs so that they can continue building their businesses without fear of being in violations of any laws.  

I have, in the past, alluded to how regulations would affect the Virtual Currency Community and why regulations are necessary (NY Bitcoin Conference, 2013.) Many people rejected this idea that regulations are necessary- yet here we are today, faced with a BitLicense proposal that could either stifle the market OR aid it in growing to its full potential.

 This first draft of the BitLicense is important. The weight and levity of this document cannot be stressed enough. Once this document, with its regulatory clauses and sub-clauses, is passed it will set precedent for all BitLicenses to come.

 As it stands, it is very much a well-rounded and well-thought through document. As many of you can see, it is also very biased (in favor of stringent regulation.) NYDFS has given the Virtual Currency Community an opportunity to have its voice heard, albeit in a totally unreasonable timeframe of 45 days. Many small entrepreneurs (majority of bitcoin startups) do not have resources at their disposal to properly analyze and respond to this proposed legislation in such a short period of time.

 Market and community leaders have voiced strong opinions on the majority of the document including the need to extend the time for comments by several months. To effect real change in the document itself, however, there cannot be a mass of incoherent complaints, suggestions and opinions. If the Virtual Currency Community could band around a few of the proposed changes surely we could affect some change in the framework.

Some of my observations on the BitLicense framework (what needs to be changed/paid more attention to):

-       Clarifying the definition of digital currencies (what’s included, what’s not).  This is not a simple task, but it must be done. 

-       Limiting licensing requirements to apply only to custodial relationships such as exchanges (those involved in buying and selling currencies) not other categories like multi sig wallets, software providers or anyone who receives or transmits crypto currencies

-       Applying licensing requirements only to exchanges based in NY or those doing buy/sell orders with people in NY

-       Creating several tiers of licensing for start ups (less than $1M in annual volume, no license needed), small enterprises ($1M-$10M/yr, one page application), medium enterprises ($10M -$100M/yr, long form application with small bond and fee requirements ), large enterprises ($100M-$1B/yr, audited financials, higher fees and bonds) and global enterprises ($1B+/yr, highest fees and bonds, annual audits).  Tiered licensing has proven to be a successful tool in allowing smaller businesses to abide by regulations while not crippling them. 

-       Changing “Permissible Investments” to allow investments in digital currencies for all using their own funds and to vary for custodial funds depending on licensing tiers proposed above (e.g. no regulation for startups and small enterprises, moderate “guidelines” and controls for larger enterprises for risk management and asset allocation purposes). 

-       Limiting KYC requirements to purchases made in excess of $1000 (similar to prepaid cards bought at grocery stores)

-       Changing Reserve requirements to mirror that of banks and credit unions.  The capital reserve requirements for a business in Virtual Currencies should not be any different than capital reserve requirements for existing banking and financial institutions. To force larger reserve requirements on virtual currency businesses would give an unfair advantage to the already-established banking and financial services businesses. By holding virtual currency businesses to the same standards as existing financial institutions it will increase the accountability of the new virtual currency institutions while not unnecessarily crippling them. *Capital Reserve Requirements: Reserve requirements are the amount of funds that a depository institution must hold in reserve against specified deposit liabilities.

-       Eliminating the redundant need for state level monitoring (if FinCEN rules were good enough for Financial Institutions, they are good enough for Bitcoin exchanges).

Many of these points have been repeated across the internet, and I hope that adding my voice to the masses will help influence this momentous development in the Virtual Currency realm. BitLicense is here, let’s get to work!

Have we got some news for you! ZipZap is now open in 34 countries around the world!

From Simon, SVP of BizDev at ZipZap: “ZipZap has a commitment to simplify and democratize payments worldwide,” said Mr. Simon Nahnybida, Senior Vice President of Business Development at ZipZap. “We are now enabling more consumers with the power to easily, safely and securely buy digital currencies at affordable prices using multiple payment options.”

Here’s a short piece by Newsbtc - Today’s Bitcoin News on the expansion through Europe:

Transaction network ZipZap has announced plans to expand into a whopping 34 countries in Europe thanks to strategic partnerships.
NEWSBTC.COM

Buy With Cash Anywhere You Go: ZipZap Expands Global Cash Transaction Network To 20,000 UK Retail Locations Through Payzone Partnership

SAN FRANCISCO, June 24, 2014 /PRNewswire/ — ZipZap, Inc. (www.zipzapinc.com), the leading global transaction network, today announced its expansion to the UK through a partnership with Payzone (http://www.payzone.co.uk), one of UK’s leading consumer payments and cash distribution networks.

With this partnership, ZipZap now offers an easy way for UK residents to buy digital currencies at more than 20,000 retail payment center locations; UK users can also buy digital currencies like bitcoin, Lite coin and Dogecoin through one of ZipZap’s exchange partners such as ANX, Bittylicious and Buybitcoin.sg.

"Many UK consumers prefer dealing with cash without having to disclose their banking information," said ZipZap’s Simon Nahnybida, SVP of Business Development. "Our partnership with Payzone allows customers to easily buy digital currencies online and pay at convenient locations within a walking distance from their home or work."

Payzone is one of the leading consumer payments and cash distribution networks in the UK, allowing consumers to manage prepaid phone plans, transportation ticketing and now their digital wallets.

"We are very excited to partner with ZipZap and participate in the digital currency economy," said Mark Mellor, Director of Sales and Marketing at Payzone. "We strive to provide the best products and services with the utmost convenience and ZipZap’s practices fall in line with our belief of providing quick and cost-effective payment services to consumers whilst offering an extra service for our merchants to add to their Payzone basket of services."

While electronic payments (via credit cards, debit cards, PayPal, etc.) overall will see double digit growth in the next few years, we expect to see an exponential growth with digital currency and cryptocurrency in the next two to three years,” said Gil Luria, analyst and managing director at Wedbush Securities. “We believe the UK, in particular, may be an early adopter of Bitcoin technology because of its substantial money remittance markets, which can be served by the lower price point of Bitcoin-based remittance services. “

In additional support of the UK expansion, ZipZap recently partnered with IDology one of the leading provider of innovative technology solutions for businesses, to support ID verification to help deter fraud and meet compliance standards.

About ZipZap:

ZipZap, Inc. is a global payment network, enabling consumers to buy, sell or use digital currencies with cash or other payment options. Founded in 2010, ZipZap is headquartered in San Francisco, California, with operations around the globe. For more information about ZipZap, visitwww.zipzapinc.com

About Payzone:

Payzone is one of the leading consumer payments and cash distribution networks in Europe. Headquartered in Dublin, it has operations in 21 countries across Europe, processing over 630 million transactions per year on behalf of its clients. These transactions have a yearly value of over €13 billion Euro and are handled electronically through the Payzone network of over 240,000 points of service (terminals, vending units and EPOS tills) at more than 170,000 retail locations across Europe. Payzone offers a wide range of services including pre-paid mobile phone top-ups, energy pre-payments, bill payments, pre-paid Visa vouchers, local and housing authority payments, pre-paid Visa and MasterCard payment cards, payment vouchers for on-line shopping, gift card and loyalty programs, transport ticketing, lottery games, parking and electronic road tolling, debit and credit card acceptance, contactless payment solutions and world-wide money transfer services. Payzone also operates approximately 6,000 ATM cash dispensers in the UK and Germany. For more information, visit www.payzoneplc.com.

CONTACT:
Karen Sorenson

Press@zipzapinc.com

562.735.0124

Bitcoin Spring

Spring is finally in the air!  Flowers are booming, birds are chirping and there is a distinct feeling of hope and anticipation all around.  This is especially true in BitcoinLand, where after a winter of eruptions at Mt. Gox, indictments and resignations at the Bitcoin Foundation, and a false outing of “Satoshi”, Bitcoiners are embracing the opportunities ushered in by massive VC investments (Circle, SecondMarket, Xapo), Bitlicensing in New York and sub $1,000 Bitcoin ATMs. 

CoinSummit, which hosted Bitcoin luminaries from around the world in San Francisco last week, could not have come at a better time.  Over two days we huddled, learned, strategized, collaborated and charted the course for the future of our young industry.

Bitcoin has proven more resilient than most imagined, but to date, despite widespread and sensationalized press coverage persists.  Bitcoin is still viewed as a niche currency hoarded by libertarian techies and savvy investors.  The question on most people’s minds this spring is how do we change that image?  How do we take Bitcoin mainstream?  

Andreas Antonopoulos wrote a great article last May on why Bitcoin is much more than mere digital cash.  However, since average consumers relate to Bitcoin first as a currency, mass adoption may only result when we address the non-tech consumer’s perspective first and foremost.  Here are a few areas we need to invest in to drive adoption. 

1.     Awareness: It took the Internet about 20+ years to reach 90%+ consumer awareness.  Gift cards reached that level in 15 years.  And Bitcoin will likely reach that level of consumer awareness in under ten years.  This awareness must include not only the benefits but also the risks of using bitcoin.  The media can be counted on to help with the latter “headline” risks, but we need the Bitcoin Foundation, entrepreneurs and investors to lead education on the benefits of Bitcoin.

2.     Accessibility: Any digital currency needs to have easy on-and off-ramps to fiat currencies (alt-coins sidestep this issue by relying on Bitcoin).  Massive investment in technology and infrastructure is needed to make the process easier for consumers.  Unfortunately, many early Bitcoiners who stand to benefit the most from the rise in valuation that massive adoption would bring have chosen to hoard bitcoins instead of investing in supporting its infrastructure.   

3.     Privacy: There is a great debate among Bitcoiners about privacy vs. anonymity and to what extent regulations are appropriate for a decentralized technology. Talk to average consumers, though, and they tell you its a question of trust.  They simply won’t share their personal info online unless they know the merchant or third party and trust them.  Similarly, Bitcoin will not reach mass adoption if consumers don’t trust its leading companies. From easy, intuitive online tools to systems that tolerate user error or negligence to consumer protection mechanisms, we have our work cut out to establish an intimate level of trust with our customers.  Pushing for anonymity under the guise of consumer protection may actually have the opposite effect and lead consumers to distrust Bitcoin.

4.      Stability: Volatility has been cited as a major deterrent for mass adoption.  Economist and Bitcoin evangelist, Tuur Demeester recently noted that “The best way to handle Bitcoin volatility is to market Bitcoin in places where volatility has become the norm”.  For people living in Argentina, Venezuela, Cypress and Egypt, Bitcoin is a lot less volatile than their own fiat currency.  Thus, Bitcoin needs a go to market strategy that prioritizes the best use cases such as remittance and micro transactions, were the pain points are large enough to overcome any concerns about volatility.

5.     Utility: The number one question consumers ask when learning about Bitcoin is where can I use it?  Companies like BitPay and Coinbase have done a great job of furthering the cause of mass adoption by going after recognizable names in online retail for Bitcoin acceptance. However, it is not until we get the Starbucks, WalMarts and Home Depots of the world to accept Bitcoins (online and offline) that we can say we have truly arrived as a technology community.

There are many specific tasks that need to be completed to accomplish the above objectives including those related to technology (e.g. creating user friendly solutions), security (preventing fraud/theft/crime), smart regulation (establishing consumer protection laws), investments (in infrastructure), marketing (user friendly terminology, branding strategy) and promotion (consumer incentives). 

The good news, however, is that some of the brightest minds on the planet are flocking to Bitcoin to work on these issues.

As we move past our winter of discontent and enter the next phase of Bitcoin’s existence, at least we know Bitcoin is in good hands with an army of enthusiastic supporters who will work day and night to improve the platform, infrastructure and ecosystem.

It’s time for the Bitcoin Spring.

                                                    # # #

Alan Safahi is CEO of ZipZap, Inc, an entrepreneur and a digital currency evangelist who lives and works in San Francisco Bay area.  

Alan can be found on Twitter @alansafahi

ZipZap Introduces CashTabs and Announces Integration with the Ripple Wallet

CashTabs Gives Cash Customers Access to Expanded Marketplace

Las Vegas, NV - October 08, 2013: Today, ZipZap introduced CashTabs, a solution for digital wallets, digital currency exchanges, prepaid card providers, and similar businesses to enable their cash preferring consumers to easily add value to their account through any of ZipZap’s global network of 700,000 Payment Center locations.

“CashTabs eliminates the friction for cash consumers looking to top up their accounts with cash,” says Alan Safahi, CEO of ZipZap. “It also gives account providers the added security and control of full KYC (Know Your Customer) compliance and velocity checks, which are crucial in maintaining compliance.”

How it works:

Each CashTab number is tied directly to the consumer’s account at their wallet, currency exchange,or prepaid card provider, and is granted only after KYC validation is achieved. Once a CashTab is created, the consumer may use that CashTab number to deposit funds to their account at one of ZipZap’s Payment Centers.

Key benefits:

By eliminating the need for pins, vouchers, additional cards, and bank accounts, CashTabs improves the experience for cash preferring consumers looking to transact online. The new product allows consumers to make purchases without exposing sensitive financial information, a key concern for more than 80% of online shoppers according to Consumer Reports. CashTabs adds additional security to all digital wallet and digital currency transactions by introducing full KYC compliance and velocity controls to the wallet loading process.

CashTabs and Digital Currencies

ZipZap announced direct integration with Ripple wallet today as the first CashTabs partner. Ripple is an open-source protocol that enables free and instant payments to merchants, consumers and developers with no chargebacks and in any currency. Using CashTabs, Ripple users can fund their wallets with cash without needing a bank account.

“ZipZap brings important utility to the Ripple network by enabling in-person cash deposits for users that may not have a bank account,” said Chris Larsen, CEO of Ripple Labs. “Through ZipZap, Ripple users are able to load their wallets with cash in the U.S. today, with global expansion to the rest of the ZipZap network coming in the near future.”

This global expansion will allow a greater number of the world’s unbanked consumers, estimated at half of the global population, to use a Ripple wallet. Thereby enabling them to bypass expensive money wiring services that typically charge more than 8% of the total transaction in fees. ZipZap and Ripple will demo CashTabs at Money2020. Conference attendees can visit the  ZipZap or Ripple Labs kiosks in the Money2020 Exhibitor Hall between October 7th and 10th, 2013 to receive a $10.00 to $20.00 voucher to fund a Ripple Wallet. This offer is available on a limited, first-come, first-served basis.

About ZipZap:

ZipZap, Inc. a global payment network providing consumers the ability to buy, sell or use digital currencies.

Founded in 2010, ZipZap is headquartered in San Francisco, California, with operations around the globe. For more information about ZipZap, visit www.zipzapinc.com

Contact:

press@zipzapinc.com

The future of Bitcoin: Is mass-market adoption imminent?

Digital currencies like Bitcoin are getting their moment in the spotlight. Over the past few months, the value of the decentralized currency (i.e. currency that is not governed by the central or national banks) has been increasing while national economies are taking a dive.

Recently, Bitcoin market cap (i.e. total value of all Bitcoins issued) reached the $2 billion mark, surpassing small countries like Liberia and Guinea.

With this new threshold, Venture Capitalists and other investors are now paying attention and funding companies in the crypto currency segment where Bitcoin is the largest player.  We have seen recent investments in companies like BitPay and Coinbase with many other deals in the pipeline, paving the way for Bitcoin to reach new highs in market cap and value. 

Even with the current hype, though, Bitcoin is merely a small blip in the overall FX market, which is moving at an estimated $4 trillion a day. However, it is only a matter of time before Bitcoin, or another alternative digital currency, will reach mainstream adoption status. 

But, there are several challenges to be overcome before any “alternative” currency can reach global, mainstream adoption:

Ease of Use:  Widespread adoption will depend on how quickly and easily consumers can adapt. Bitcoin is far from easy to use and although there are some wallets available for free download online; buying, sending, receiving and selling Bitcoin has not reached a level of intuitiveness consumers need to be for everyday use.

The concept of mining for Bitcoins is puzzling and complex for the average person. Companies like BitInstant have been created to help consumers rapidly pay funds into Bitcoin exchanges like MtGox, simplifying the process to go from dollar to Bitcoin and back. 

There are also companies like TradeHill and Exante who are targeting savvy investors with their sophisticated tools that would enable easy entry into the Bitcoin market and bulk trading. 

While these companies have done a great job of simplifying the Bitcoin buying and selling, much more needs to be done to streamline this process.

Consumer Awareness:  Not quite reaching the level of general conversation topics, Bitcoin will only be considered “mainstream” when 95% of consumers are aware of what it is. It took gift cards about a decade to reach this level of consumer awareness. Given its current growth trends, Bitcoin may be able to reach this level of popularity in less than seven years. Recent media attention has put the spotlight on Bitcoin, driving consumer awareness (and Bitcoin prices) to new highs.

Government Oversight/Protection :  Many Bitcoin supporters, including early adopters tout its anonymity as its best feature. However, I feel nothing could be farther from the truth.

To start, the anonymity of Bitcoin is not 100% certain in today’s connected world, especially with close partnerships between law enforcement and Internet Service Providers, financial institutions and exchanges. This is actually a good thing. This will ensure that new innovations like Bitcoin are not undermined with negative reputations for enabling prostitution, child pornography, terrorism, illegal drugs and human trafficking. 

Recent Financial Crimes Enforcement Network (FinCEN) ruling has required exchanges to be registered. Some industry observers see this ruling as a positive sign that Bitcoin is moving towards mainstream acceptance as a currency while others view this as the first step in a series of anti-competitive measures that will drive smaller exchanges out of business 

Like it or not, government oversight is a necessary evil when it comes to protecting the public and will ultimately benefit Bitcoin users who will be served by much stronger and better managed exchanges.

A good example of the proper amount of government oversight can be seen France, where an e-Money license was granted to Bitcoin-Central, a Bitcoin exchange which suffered a series of DDOS attacks and losses in recent days but was able to provide full refunds to all its customer due to the fact that it was fully capitalized.

Merchant Acceptance:  There are thousands of merchants accepting Bitcoin but for it to be considered mainstream big box retailers (like WalMart, Home Depot, etc) will need to jump on board as Bitcoin Merchants. 

With market caps hovering around $2 billion and millions of consumers using Bitcoin, major retailers will be likely to watch Bitcoin closely and may start considering Bitcoin as method of payment. Meanwhile, many retailers will tip toe around Bitcoin acceptance by initially allowing their partners to resell the retail e-gift cards to consumers online and accepting Bitcoin as a method of payment.

Mobile wallets based on Bitcoins will soon be enabling consumers to shop offline as well as online and pay for food and other goods and services at brick and mortar retailers worldwide. Many retailers are already equipped with QR code readers that helps them accept Bitcoin as a method of payment at the cash registers.

For these retailers, avoiding credit card fees and reducing fraud and chargeback costs may be incentive enough to speed up retail adoption of Bitcoins offline almost as fast as online.

Mass distribution by Financial Service Providers:  Retailers are not the only ones looking closely at Bitcoin.  Digital currencies in general disrupt financial services with extremely low cost and easy transaction processes. The enhanced consumer experience will challenge large and powerful entrenched players such as traditional retail banks, card networks and money transfer companies.

Some of these entities will try to legislate Bitcoin out of existence while the progressive minded ones will find a way to use the Bitcoin phenomenon to their advantage and adapt this technology to reduce costs, enhance delivery times and better service their customers.

For the past year, my company, ZipZap, has been working with many regulated and licensed global money transfer companies and banks to enable cash-payment for online transactions with much success.

Western Union recently announced that they too would start looking closely at working with crypto currency providers and exchanges. 

I believe banks will start offering Bitcoin as a currency in the same way they now sell fiat currencies, travelers checks, money orders and prepaid cards.

 This mass distribution through retail bank branches will be the final act signaling the arrival of Bitcoin to the mainstream.

                                                       ###

Alan Safahi is CEO of ZipZap, Inc, an entrepreneur and digital currency evangelist who lives and works in San Francisco Bay area.

Alan can be found on Twitter: @alansafahi

The Challenge to Serve the Unbanked and Cash-Preferred Market

Imagine the following scenario – a consumer walks into a brick-and-mortar merchant, selects some merchandise, wants to buy it – paying cash, and is informed that he/she can’t, the merchant only accepts credit or debit cards. 

Preposterous - you are thinking, this just doesn’t happen; because if it did the merchant would be turning away a lot of business. And you would be correct.  Studies show more than 50% of consumers prefer to use cash and over 25% of the US population does not have a bank relationship.

Yet this scenario happens all the time on most merchants’ internet sites.   Their check-out process does not support a cash-channel.  In spite of this, statistics show that more and more purchases are made on web-sites and ecommerce has grown substantially year over year.  Imagine what these numbers would be if the cash-preferred customer could complete their purchase.

Consider the following statistics:

  • 27% of US families don’t have credit cards; 24% don’t have either either credit or debit cards;
  • 82% of banked consumers are uncomfortable providing their financial information online (Consumer Reports National Research Center);
  • 30% of consumers will spend more on-line if they can pay with cash (Javelin Research); and
  • 54% of US adults site cash as their preferred form of payment (Consumer Payment Trends in the US).

I am sure that some e-merchants believe this is not a problem; if cash-preferred or unbanked consumers really want to purchase something online, they can go and buy a pre-paid debit card, and use that card to complete their purchases.   This is an option; but the question is how costly and how convenient/easy is this process for the consumer.

Most prepaid debit cards, especially the open-loop ones, are not inexpensive – it’s difficult to find one priced under $3.95, and the customer rarely can guess the exact card-amount to purchase - making ‘breakage’ though popular with the card-issuers, a real-turn off or disincentive for the consumer, with no benefit to the merchant. 

To go back to the initial ‘brick & mortar’ analogy, the pre-paid card solution for the cash-preferred customer would be analogous to telling the walk-in customer – leave, buy a pre-paid card (making sure that it has enough funds on it to pay for your purchase) and then come back to complete your transaction.  Clearly, no brick-and-mortar merchants would ever think of telling their walk-in customers to do this.

Many check-out processes are starting to accept ‘alternative payments’ and many PSPs support some of these new payment methods.  It’s important to determine if the alternative payment service requires the consumer to have a bank-account for funding.  If the answer is ‘YES’ than  this payment method is not providing a solution for the cash-preferred or unbanked customer, and therefore not enabling this market to purchase the goods or services they desire.

In the spring of this year, a big-box merchant provided a cash-payment option on their internet sites.  Their cash-orders are 50% larger than the average of the other on-line orders, 30% of the purchasers are new customers, and cash-sales account for 2% of all on-line sales.

I manage Business Development for ZipZap, one of the leaders in offering the cash-payment alternative for internet merchants, both open-loop and proprietary.  We have processed millions in cash-payments since our public rollout in May and our metrics reflect an average payment of over $150 with a high percentage of repeat users.   You can contact me for additional information at 201 314-3587.

Simon Nahnybida                                           

SVP – Business Development

ZipZap