Bitcoin Center Berlin officially opened its doors on Sunday, June 15 in the bustling Rosenthaler Platz. The co-working space is one of many fresh projects in Berlin devoted to bitcoin, a decentralized virtual money that we feature in our Utopia Summer Special on June 21.
Economist and entrepreneur Brian Fabian Crain, part of the team behind Bitcoin Center, moved to Berlin in 2013 to devote himself to learning and teaching about the cryptocurrency. He launched the bi-weekly group Bitcoin Startups Berlin, and co-founded the Epicenter Bitcoin podcast. He explains why the currency has risen in popularity in Berlin, how it’s being used for social good, and what skeptics may not understand.
Why is bitcoin so popular in Berlin?
There’s something very rebellious about bitcoin, something that challenges the current system. And this appeals to people in Berlin, because people in Berlin like to try to do that in a variety of ways. And I think they have done that when it comes to art and music and other things.
How in Berlin and Germany in general a good place for bitcoin use, both in terms of start-ups and regulation?
Berlin has a very vibrant Bitcoin community and perhaps the highest concentration of Bitcoin-accepting businesses in the world. There is also a great start-up community, so there is a lot of potential for the future.
Currently, we are very much at the beginning in terms of start-ups and certainly behind places like the Silicon Valley. But there has been a lot of progress, nonetheless.
In terms of regulation, there some worrying statements were made by the Finanzministerium (basically the German IRS) indicating that sales tax might have to be paid on selling bitcoins. This would be disastrous. The problem is that politicians don’t understand the potential of bitcoin sufficiently, so this needs to change.
I’ve heard a lot of small and medium size businesses are reluctant to use bitcoin because it is so volatile. How is bitcoin actually beneficial for these small businesses?
For businesses, the volatility is not really an issue because they can use a payment processor, like BitPay for example. They convert the bitcoin payments and just give them Euros. The advantage of doing that is that they save on fees, because they’only have to pay a very small fee as opposed to three percent with credit cards. So volatility is not a problem in reality, but it is portrayed as a problem by the media and that can deter business from looking into Bitcoin.
And then there can be other advantages. For example, you can accept payments from anywhere in the world. And there can also be no charge backs. So the fraud risk is lower. And of course in Berlin a lot of people also believe in bitcoin. For political reasons because they believe in the potential of bitcoin. So then they might want to hold on to bitcoin because it’s been increasing in value so much.
Why has bitcoin been increasing in value lately?
Bitcoin been increasing in value because many people expect bitcoin to become a major currency and a major payment system in the future. And because the amount of bitcoin is limited, the only way this can happen is if the price of the bitcoin increases massively. So the price has been increasing because people expect bitcoin to be successful, and the consequence of that is that bitcoins will become very, very valuable.
It seems as though when bitcoin becomes more ubiquitous, you’ll have more governments denouncing its use. Will that have a big impact on the value?
So it’s certainly possible that when bitcoin becomes more prevalent, some countries will take a negative stance, and that can have a negative impact on the bitcoin price. But in the medium and long term what will win out is that bitcoin is a superior technology. Countries take a negative stance against cryptocurrencies will end up having to reverse their policies.
Has Germany or Berlin made, on an official level, a statement about bitcoin use?
Yeah, the German BaFin has made a statement last year about Bitcoin being a financial instrument. This has clarified what is required in terms of regulation for Bitcoin business.
There have also been worrying statements made by the tax authorities on the VAT-treatment of Bitcoin transactions that could have a very negative impact, but is not definite yet.
As far as Berlin goes, I haven’t heard anything official from the city, but that’s really not so relevant because what’s relevant is the financial regulations.
Could you describe the bitcoin group in Berlin that you founded?
So I founded Bitcoin Startups Berlin at the end of October 2013. So we’re a group that at the moment meets twice a month, and we do talks. About three to five talks per meetup where people introduce their project and talk about things they care about, things they’ve been reading, things they’ve been researching around bitcoin. And then afterwards we have drinks. It used to be in a very small place called Bitcoins Berlin, and it was very nice but there were people sitting on the floor because we just had no space. Now our group has almost three hundred members and we’ve had up to 70 people at our meetup. So we had to move to a bigger location. It’s great to see the interest and the growth of the community.
And of course what we’re trying to do is help people learn about bitcoin and understand bitcoin better, and in the meantime the goal is to build a vibrant and innovative bitcoin start-up community.
Do you have any number or estimate of the number of start-ups in Berlin currently using bitcoin?
There’s not as much as I would like to see. I think there are five, six start-ups directly doing bitcoin related things. And then there are people working on small programming projects but they’re not yet at the start-up stage.
What do you deem to be the most secure way of storing bitcoin, and have you seen that use in Berlin?
The most secure way of storing bitcoin is some place not connected to the Internet. That could be a computer that’s not connected to the internet, that could be offline on a paper wallet for example. People certainly do that but they don’t tell you in a public way so you don’t know. Of course anyone who has a more substancial amount of bitcoin should certainly keep it that way.
In general, what do you see as the biggest setbacks of using bitcoin versus a fiat currency?
The biggest disadvantage that bitcoin has at the moment is that a lot of the services aren’t there. It’s also very tedious and slow and complicated to take your Euros or dollars and buy bitcoins with them. So that of course can take many days the first time you do that which can of course make it annoying to use.
The biggest advantage is that you’re in control of the money, so it’s not with a bank but with you. And you can send money anywhere for practically no costs. So the biggest advantage is that you’re in control of your money but that you’re of course also participating in bitcoin and its potential.
Can you talk about how start-ups, such as Berlin’s 37Coins, have potential in the developing world as far as helping people send money back home?
Since bitcoin payments or bitcoin transfers can be made practically for free, one huge are of applicability is remittances. Because remittances are a very large sum of money that are sent every year from families at home to families in developing countries. And people pay 10% on transaction fees.
It’s quite absurd if you think of all the aid we give developing countries, and then all the banking fees you charge their families at the same time.
Now bitcoin has the potential to drastically cut those fees down. And one thing that’s very important in that regard is to help people with less access to technology . Here they’re working on an SMS wallet so that people even without a smartphone would be able to use bitcoin.
How viable do you think alternative currencies are? Here in Berlin do you see a big or growing use of any other altcurrencies?
Alternative currencies are very interesting as an experiment because they can change some things about bitcoin and see how they work out. There are different types of alternative currencies. Some try to do the same thing as bitcoin but do it better. And some go much further and try to develop a protocol above bitcoin.