The very week that New York’s financial regulators held hearings on the possible regulation of digital currencies, a Schenectady cafe and bakery became the first business in the Capital Region to accept bitcoins, a virtual currency created in 2009 that today still has many scratching their heads.
But that’s OK, according to local business owner Paul Paterakis. He doesn’t have to fully understand the thing. At the end of the day, his business just has to get paid.
“It is a valid currency,” he said. “It has an exchange rate. So we weren’t hesitant at all. It all comes down to working with the right company, and we have a company that ensures these bitcoins are real and result in U.S. dollars in my register.”
A bitcoin is a unit of currency just like any other, except that it only exists online. You can hold onto bitcoins in a virtual wallet or on computer software, and you can buy things with them as long as the person you’re buying from accepts them.
Perhaps it’s no surprise that Coffeetime@Hellasbakery — a
business whose name includes an “at” symbol — is the first in the region to try out this still-new virtual currency. Paterakis, a former GameStop manager, started his traditional Greek cafe and bakery shop in the Philippines and expanded it last year into Schenectady. He opened a local shop at 1491 State St. in September and within a month will open another one in Albany.
All of his stores are bitcoin-ready, said Paterakis. He uses BitPay, an electronic payment processing system for bitcoins that is available as a mobile checkout app on smartphones and tablets. When a customer goes to check out at Coffeetime@Hellasbakery, the app will ring up their order and create a barcode that the customer can scan with their own tablet or smartphone. Scanning the barcode completes the transaction.
So far, more than 20,000 businesses and charities accept bitcoins with BitPay. The system allows businesses to receive payment in bitcoins, but the preferred method — at least for beginners — is to have the payment direct-deposited into their company bank account in the currency of their choice.
“We have had 20 transactions so far, and they have been mostly younger folks,” said Paterakis. “It’s just an extra currency that we now accept. Our employees are excited. They know that this is the wave of the future, and they’re excited to have the technology to do this.”
Chris Dosch knows how eyes can roll at such a statement. The 25-year-old materials science engineer at GE Global Research in Niskayuna became interested in bitcoins a few years ago and was actually the person who convinced Paterakis to accept the currency. He watched as bitcoins were met with skepticism, and he compares it to the skepticism prevalent when the Internet first came on the scene.
“People, by nature, are skeptical of it,” he said. “And it’s been hard for them to understand it when they compare it to their current use of currency because people don’t really realize how money actually works. The average person doesn’t know when the Fed is allowed to print more dollars and what the rules are, and that’s understandable. It’s complicated. But I would argue that bitcoin is less complicated than our current system of doing business, which people only trust because it’s been around for so long.”
In just the past few years, people have begun to accept that virtual currency is here to stay, said Dosch. Large companies like Overstock.com and Virgin Galactic have begun accepting bitcoins. And just this week, the New York Department of Financial Services held a two-day hearing on virtual currencies to discuss how state government should deal with the rise of bitcoins.
Coinmap.org, a sort of Google Maps for places that accept bitcoins, shows the largest concentration of bitcoin merchants in North America and Europe. In New York, most users are based in New York City, with the only upstate presence at three locations in the Syracuse area, two locations in the Rochester area and now two locations in the Capital Region. (Dosch said the other Capital Region location is new and is a frequent user of bitcoins rather than a merchant.)
The Capital Region has Dosch to thank for its bitcoin presence. He started an online forum for bitcoin enthusiasts on the site Meetup.com about a month ago in his search for fellow enthusiasts.
“It’s interesting to see how different their backgrounds are,” he said. “They are working professionals, economists, social media gurus, computer scientists and college students. My plan was to find people who are already interested in this and say, ‘OK, let’s go out there and tell businesses we’re really going to spend bitcoin if they will accept it.’ There are no downsides for them. We just need to get them over the initial skepticism hump that seems to follow this.”
It doesn’t help that bitcoins have attracted illicit activity since their launch. Last year, the FBI shut down an online black market known as the Silk Road that uses bitcoins. And earlier this week, the founder of a well-known bitcoin exchange company was arrested and charged with running an illegal scheme to sell the currency to drug traffickers.
Bad press aside, legitimate merchants don’t have to look hard for incentive to use bitcoins. While credit card companies typically impose a 2 to 3 percent transaction fee on merchants, bitcoin payment processors charge something closer to 1 percent.
Once Dosch found a local customer base, he sent an email blast to about 130 local businesses outlining how easy it would be to set up a bitcoin payment system and asking if they were interested. The response was a lot more positive than he expected, he said.
“I wasn’t expecting much,” he said. “Paul wrote back that he had heard of bitcoin and was interested. But even six months ago, people would just say ‘I don’t want anything to do with this,’ and that response is starting to switch to ‘Hey, I’ve heard about this, tell me more.’ If any business spent any amount of time looking into it, their decision would be, ‘Yes, I’ll accept it.’ ”