paysafecard Could Be Huge

By Jon Matonis

Yes, that is my professional opinion for the potential of paysafecard. How do they become huge? All they have to do is adjust their 'Webshop' Terms and Conditions allowing online merchants to accept paysafecard for the sale of the bitcoin product. The global demand is certainly there. Sadly, paysafecard does not permit their product to be used for the purchase of bitcoin today because they do not view bitcoin as a valid consumer end-product -- but as a monetary intermediary. However, bitcoin is not defined in any jurisdiction as a monetary instrument, currency, or prepaid item and it is more of a fun 'cryptography product' than anything else.

The paysafecard group is an international company based in Vienna, Austria. They have more than ten years of experience in the area of prepaid online payment solutions and operate in 28 countries worldwide. paysafecard makes Internet payments as simple as using cash and ensures absolute protection against data abuse. No credit card or bank account is required and financial privacy remains fully guaranteed when making payments. The prepaid solution works like a prepaid calling card for mobile phones. The p2p transferable 16-digit code purchased at sales outlets is sufficient to carry out a payment transaction and the paid amounts are booked from the credit of the paysafecard, which may be accessed at any time online. Codes can be purchased in several denominations and then up to ten codes may be combined to make a single purchase not exceeding the equivalent of 1,000.00€ in most jurisdictions, well below the threshold for most anti-money laundering guidelines. With 350,000 sales outlets worldwide, including many in the United States, there are fourteen different currencies supported and a currency converter helps you pay in foreign currencies.

Now, a workaround does exist for purchasing bitcoin if you are willing to go through a virtual currency as a conduit. Currently, the virtual world exchange, VirWoX, accepts paysafecard for the purchase of Linden Dollars, the virtual currency of Second Life. In April 2011, VirWoX started accepting bitcoin and enabled two-way trading between bitcoin and Linden Dollars, which are in turn convertible to CHF, EUR, GBP, USD, and the other virtual currencies traded on VirWoX, the Open Metaverse Currency (OMC) and Avination's C$.

Astonished by these foreign exchange gymnastics, we decided to ask paysafecard about this apparent virtual currency exception which allows users to acquire bitcoin with paysafecard indirectly. Following is the official response received from paysafecard UK:

"Paysafecard is an anonymous payment option – there is no customer identification. By establishing a connection with another anonymous payment service as Bitcoins we would not only lose complete control over the flow of funds but also collide with local AML regulations. At this point we will not work with bitcoin exchanges."

"We allow paysafecard to be used on Virwox as Linden Dollars is a closed loop payment method, it can only be used for 2nd Life. The concern we have with working with a bitcoin exchange is we would enter into a payment cycle where we lose an element of control. If someone uses paysafecard to buy bitcoins we have not control how those bitcoins are used. They could be cashed out through another payment method or used on sites such as Silk Road, which goes completely against our merchant acquisition policy."

If the Mt. Gox floating-rate bitcoin exchange is any indication of market demand, the volume for paysafecard transactions could be substantial. In the last 30 days, the cumulative trading volume of $19.2 million at Mt. Gox alone would estimate a conservative $4.8 million per month for casual retail purchases of bitcoin, assuming a 25% small-denomination retail demand component. This amount does not even include the existing trading volume at other exchanges, such as TradeHill and Crypto X Change, and the volume that is sure to come from the newer category of fixed-rate exchanges, such as GetBitcoin and blizzcoin. At an extrapolated annual turnover of $57.6 million, paysafecard would do well to garner a piece of that up-for-grabs payment processing.