BitInstant Card

Bitcoin MasterCard: Followup Interview With Charlie Shrem

I was recently witness to some breaking news that garnered quite a response. In the first 72 hours, the news of the Bitcoin MasterCard resulted in 200+ tweets, I was cited as a source for over a hundred other blogs including heavy-hitters like Engadget and made it to the #2 spot on the front page of Hacker News. I have never in my life written anything that garnered quite so much attention. Apparently, the folks at BitInstant were caught just as off-guard by the unexpected product release. Luckily, co-founder Charlie Shrem was about to spend the weekend just a few miles away from my home in Las Vegas and graciously agreed to an interview. We met in the Vesper bar in the lobby of the Cosmopolitan hotel/casino to discuss the Bitcoin MasterCard and Bitcoin in general. These are the results of that interview.

First, the bullet points for those that lack the stamina to read the whole interview:

  • BitInstant absolutely confirms the card’s existence – we can all stop saying things like “allegedly” and “unconfirmed” now.
  • My previous blog post apparently shut down BitInstant for about 3 hours while they investigated the leak. Sorry!
  • There are multiple options for card funding being investigated. BTC->USD conversion could occur:
    • When the BTC arrives at the address on the card (Charlie called this the “worst-case scenario”)
    • When a purchase is made with the card (Charlie called this the “best-case scenario” and said it relies on integration with the banks that probably won’t happen)
    • On-demand via a smartphone app or web site (Charlie called this the “middle-of-the-road scenario” and confirms it’s the most likely to actually happen)
  • Basically none of the numbers given in IRC logs were actual figures, just 3AM guesstimates made by Charlie. These include but are not limited to:
    • $1,000 load limit
      • There will be a limit, but it might not be $1,000.
      • This is only the limit for what is accepted with zero confirmations, larger amounts can be loaded, just not instantly.
    • 1 to 1.5% load fee
    • 1,000 first cards free, $10 thereafter
  • BitInstant is playing with the idea of doing their own currency conversions for cheaper using Bitcoin, but it would require the same kind of bank integration as their best-case scenario, thus making it unlikely.
  • BitInstant will be available in Canada in 2 to 3 weeks.
  • This isn’t Gavin’s famous September announcement.
  • No one will publicly express an opinion about PirateAt40.

And now, the interview…


Me: First off, sorry about letting the cat out of the bag. I didn’t realize at the time how far from ready you were to release this news.

Charlie: No, it’s OK, things turned out well. We really didn’t want to release any information, the whole thing was my fault. I was super-excited because we’d just gotten the banks’ approval and I wanted to tell people

Me: I do feel a little bad about it, though. When I sat down and re-read the transcript after I’d posted I realized you’d said you’d deny the mockups were official and kind of indicated in a few other places that this wasn’t meant to be a press release and I sort of turned it into one.

Charlie: But didn’t someone ask me if they could post it to reddit?

Me: Well not me, but someone did.

Charlie: So I guess when I gave him that permission…

Me: Yeah, I guess it was kind of open season at that point.

Charlie: Me talking about it on IRC is open season enough.

Me: I heard there was actually a security investigation following my post?

Charlie: Yeah, you published your blog, I went to sleep, I woke up, and there were 5 or 6 other sources and no one knew it was me. So we had both our lawyers on the phone, we had the whole team in an emergency meeting, we shut down the whole server. We weren’t processing orders for almost 3 hours, we though we’d been hacked, we didn’t know what was going on…

Me: Well I suppose it’s better to have an over-reaction than no reaction at all. I’d definitely rather see BitInstant shut down for 3 hours to address what ends up being nothing than to see you become the next Bitcoinica and shut down forever.

Charlie: So, you gave me a lot of attention from a lot of regulators, I have to meet with the Department of Banking and Finance…

I winced visibly.

Charlie: No, it’s good, I want to… We already federalized this, if it’s going to get us all the right licenses I’ll do it. I know we’ll get one, we already follow all their standards anyway.

Me: That reminds me, is BitInstant ready or able to release the identities of your super-secret partners, the two banks that are actually issuing the card?

Charlie: No, sorry, only because we can’t. I can’t legally release that yet.

Me: So it’s been sort of addressed in the Free Talk Live interview as well as the IRC logs but it’s still not 100% clear – exactly how does the funding of the card happen, in detail? I mean, I scan the QR code with my phone and send a few bitcoins to that address, when do those bitcoins get converted to U.S. Dollars or Euro or whatever?

Charlie: So there are a few options that we’re working on, and we’re still not sure which is going to happen. Obviously a Bitcoin-denominated card is what everyone wants, but we have to work with what’s possible. It may be technically possible, sure, I mean someone could write software, but that would require integration with the banks and they’d have to agree to that. Our best-case scenario is that you fund the card, the bitcoins stay there until you swipe the card, the bank receives a notification and we make the conversion happen, best case scenario. That’ll require integration with the banks though, so that’s more up to them than us. Worst-case scenario, you send the coins to the card and the conversion happens right there, zero confirmations, as long as it’s under $1,000. What we really think will happen, though, is kind of a middle-of-the-road solution where you have an app or a web site you can go to and see and manage both balances and do the conversion whenever you want – we can do that without the banks’ help so we’re thinking that’s what will actually end up happening.

Me: OK so you’ll probably end up delivering that middle-of-the-road solution. What kind of integration would you need for the Bitcoin-denominated card?

Charlie: The thing is, to do that, we’d really need MasterCard themselves on board and so far they’ll just approve our card design and that’s it – they don’t want anything else to do with it.

Me: Yeah, I can’t really imagine MasterCard getting on board with anything Bitcoin. We’ve kind of said since day 1 that we intend to be their death knell, so…

Charlie: American Express already hates me. I feel like I’m gonna get all my credit cards declined tomorrow, cut me off from the network.

Me: Well, it’s good to know that you’ve got a middle-of-the-road solution available since MasterCard integration doesn’t seem like it’ll go through. A smartphone app seems like a good way to go.

Me: So who do you see as the target demographic for this card? Personally I see it as being a big hit for the miner/merchant community, people who have a natural influx of bitcoins and no easy way to spend them, but do you think it’s going to be in everyone’s wallet?

Charlie: I think it’ll be good for that niche but I think it’ll be bigger. I want it to be global remittance.

Me: And what about the statement that the first thousand or so cards were going out for free and subsequent cards would cost about $10? Are those hard numbers or just guesstimates?

Charlie: No, those aren’t hard numbers, those are me being on IRC at 3:00 in the morning.

Me: How has the reception been? I know you released a signup form, have you hit your thousand card mark yet?

Charlie: Yeah, actually we’re around 3,700 so far. I mean, that’s just people being added to the list, but even if half get a card that’s pretty good. Our first batch should be 5 to 10 thousand cards.

Me: So you shouldn’t have any issues meeting demand?

Charlie: No, not at all. Worst-case we could always do print-on-demand but it’s a little more expensive so we’d prefer to pre-print.

Me: Now you said earlier that it would be zero confirmations under $1,000 – is that a hard limit or is that just the beginning of a new fee range or a confirmation requirement?

Charlie: Again, I think that was me on IRC at 3:00 AM. I don’t know if it will be $1,000 but there will be some upper limit to what goes through instantly. You can definitely load it with more, you’ll just have to wait for confirmations to avoid double-spending. I don’t know what the number is yet, but I think it’ll be something like $1,000.

Me: And you’ve quoted some pretty decent rates for the conversion too. Do you have any figures more exact than “one to one and a half percent” for Bitcoin conversion?

Charlie: No, not yet, we’re still figuring out a lot of the numbers.

Me: What about the 0.8% for international spending? That’s a very specific estimate…

Charlie: I think that’s the fee for the U.S. card spending in Euros, which I think is a very attractive conversion fee, compared to what you’d be paying Western Union or your Bank.

Me: Now, from previous discussions I’m assuming that the 0.8% fee is more a feature of the card than your ability to do clever things on the back-end with Bitcoin?

Charlie: We could do both – we’re still playing around with it. We were meeting about it all day today, actually.

Me: That sounds like it could be a really good selling point, not just for the card but for Bitcoin itself if that’s the mechanism for creating almost-free currency conversions. I would assume, though, that this would require some integration on the banks’ part and this would also be part of your best-case scenario, though?

Charlie: Exactly.

Me: You also mentioned that you were working on getting pre-loaded credit cards into stores?

Charlie: Not credit cards, just BitInstant cards, like a gift card.

Me: So a BTC-denominated gift card that you can redeem at BitInstant or something?

Charlie: Yeah, basically.

Me: Do you have any plans for a Bitcoin Visa or MasterCard gift card? I know there are a lot of Bitcoiners who would rather have a card with “Gift Recipient” on the front than a verified identity.

Charlie: Not really, you can buy prepaid gift cards with Bitcoin in a bunch of places, so I don’t really see it as a market we need to get into, you can already do it.

Me: Fair enough. OK, totally unrelated to the card, but I’m curious. You’ve seen the Bitcoin episode of “The Good Wife,” right? – if you had the ability to put Bitcoin on any other TV show, what show would you like to see it on?

Charlie: I would personally like to see a bunch of Bitcoiners get together and get a SuperBowl ad or something. Get a nice ad and, like, blow Bitcoin out of the water and make a simple commercial where it’ll leave everyone’s jaws dropped and wanting to Google what the hell this thing is.

Me: And a SuperBowl commercial would tap a completely different demographic than what Bitcoin typically attracts right now, too.

Charlie: Exactly. I want this commercial to be a statement to the banks and governments of the world and say “Look, your people don’t like your fiscal policies, you’ve put us in a recession, you’re screwing us up so much. We’re taking control of our own money, the way we’re doing it is Bitcoin.” I want to scare them.

Me: That’s actually a big part about what attracted me to Bitcoin in the first place. I worked at Verifone for a while and spent half of my time looking at the systems and thinking “I could do this” or “I could do better” – all they’re basically doing is managing a big transaction database, which is hardly a special skill any more. I just didn’t see what, exactly, they were doing to deserve their billions.

Charlie: Yeah, they’re not storing money any more, I mean what are they actually doing? They’re doing nothing.

Me: Well, your answer blows mine away. I wanted to see Bitcoin featured on “Breaking Bad.”

Charlie: That would be awesome. But it would probably be for buying drugs and that wouldn’t be good for us.

Me: I don’t know, silk road does account for a lot of our volume.

Charlie: Something like 20%.

Me: At the very least, it’s a blockbuster show. I’d love to see a silk road episode of Breaking Bad.

Charlie: I would love to see that too. “Why don’t we sell it for bitcoins on silk road” or something.

Me: Yeah, even the one little mention would get the Google juices flowing.

Me: So a little while ago, Gavin said that there was a big announcement coming up in September. Any chance this is it?

Charlie: No, this is not it. What he’s announcing is an announcement, not… Well, I don’t wanna say any more.

Me: Fair enough, didn’t expect you to go on-record with it if you knew.

Charlie: No, he would kill me if I said anything. He was just here recently. He would kill me.

Me: Last thing I’ve got written down here – I’ve heard and wanted to confirm that BitInstant is getting set up to do business in Canada?

Charlie: Yeah, it should only be another 2 or 3 weeks.

Charlie: Anything else? Because I’ve gotta get going.

Me: Got an opinion on PirateAt40?

Charlie: No comment.

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