Virtual currencies are gaining momentum in the market, but the largely unregulated use of schemes such Bitcoin are a drag on mainstream adoption.
Bitcoin users have blamed recent FINCEN rules for causing some bitcoin exchanges to shut down this year due to licensing requirements, but safety and security are table stakes for any payment form no matter how innovative. The National Treasury in Canada is taking a different approach to digital currencies and is issuing electronic money in place of physical tender. The idea is called MintChip.
From the Toronto Star:
Since 2009, funds have been put toward “improving the efficiency of Canada’s currency” and international expertise has been enlisted to develop an “eCoin” for Canada, according to internal documents, interviews and international patents. MintChip, as envisioned, could enable paying someone back by tapping phones together, scanning a QR code to donate to charity, or clicking to spend cents on an online article.
Unlike bitcoin, the government would issue MintChip as legal tender. The government’s goal would be to migrate transactions under $10 to MintChip, and user would load funds onto USB sticks or MicroSD cards. Transactions fees would be ultra low, if any at all. Details are still being worked out, but the concept is being piloted. Last year, a contest was held to find applications for MintChip and the winner was a product called MintWallet. The Treasury is consulting with stakeholders, which include financial institutions.
At some point, cash will become enough of a nuisance that financial institutions and governments will take these schemes more seriously. The competitive market, however, is just now heating up, so the question becomes if any form of cash will survive the onslaught of digital payment forms? MintChip is interesting because it specifically targets low-value physical transactions while bitCoin is used for online payments putting on a competitive basis. Other attributes are the same, however: very low cost acceptance, real-time value transfer, and no recourse. It’s highly unlikely that a majority of consumers will select one and only one digital payment type, just as they use multiple physical forms of payment today. Once digital wallets become pervasive, being able to put digital cash in them will make just as sense as any other payment type.
Click here to read more from the Toronto Star.