Billionaire entrepreneur Sir Richard Branson, whose Virgin Galactic airlines was the first to accept bitcoins for space flight, recently describedbitcoin as “the pioneer of a global currency” in an interview in the April issue of Delta’s SKY Magazine. Branson clearly believes in bitcoin. Not only is he accepting it, but he’s invested in it as well. But his comments indicate that he does not believe bitcoin will be the ultimate winner in the cryptocurrency wars.
“It may not be the perfect global currency of the future yet, but it’s the pioneer of a global currency,” Branson said.
He joins other tech giants in his assessment. “The Foundation is involved in digital money but unlike Bitcoin it would not be anonymous digital money,” Bill Gates said in February. “In Kenya M-PESA is being used for almost half of all transactions.”
Gates, Branson, and Jack Dorsey, co-founder of Twitter and CEO of Square all believe any successful online payments system will need more transparency than bitcoin currently offers.
So what “transparency” does M-PESA offer that bitcoin doesn’t?
Well, first, all customers must provide M-PESA an original identification document in order to open an account. Retailers who accept M-PESA are trained and required to check customers’ ID cards every time they make a purchase and each purchase requires a three-factor authentication involving ID, the SIM card, and a PIN.
Like bitcoin, every single transaction in M-PESA is recorded and can be monitored by Safaricom, along with the location of the device used in the transaction. Safaricom runs what it calls bank-grade anti-money laundering checks, and sends regular reports to the Central Bank of Kenya.
Between the value of customer data and how much easier it makes anti-money laundering reporting, it’s clear why Gates, Branson, and Dorsey might be interested in such transparency. However, there is a tension between transparency and security. One of the reasons bitcoin transactions are by-default more secure than credit card purchases is that its transactions involve transmissions of personal data.
In addition, while bitcoin transactions are by-default only semi-anonymous, some bitcoin users appreciate the privacy of the fully anonymous transactions bitcoin makes possible.
Like Friendster and Myspace, bitcoin is probably not the be-all and end-all of decentralized, peer-to-peer online currencies. But it’s impossible to know what exactly the Facebook of cryptocurrency will look like. Only time will tell if transparency is something customers will value as much as entrepreneurs.