Serial entrepreneur Steve Kirsch’s latest venture, Cointrust, is creating technology he says can turn Bitcoin into a mass-market currency.
“We show how Bitcoin can be turned into something that is user-friendly and regulator-friendly,” Kirsch told IDG News Service in a recent interview. “Everybody I’ve talked to, every bank that I’ve explained what we are doing to, loves the idea.”
Kirsch wouldn’t reveal the precise technical details of Cointrust’s technology, as it remains in stealth mode before a launch later this year. But the company’s general goals are laid out in some detail on its website.
He particularly wants to woo the financial sector. “Getting involved in Bitcoin today, either directly or by providing banking services to Bitcoin startup companies, is a challenge because of the compliance and regulatory risks,” states a page on the Cointrust site aimed at banking customers. “We’ll show you how we make these transactions as safe and compliant as traditional fiat currency transactions.”
Cointrust’s technology won’t require any changes to banks’ existing software infrastructure, the page adds.
Bitcoin developers are another audience Cointrust wants to court, with APIs (application programming interfaces) for managing financial transactions. The APIs will be “irresistible” to developers because they’ll make their lives so much easier, Kirsch said.
Finally, Cointrust intends to calm the nerves of regulators regarding the virtual currency.
Its technology will make sure problems that have befallen exchanges such as Mt. Gox, which filed for bankruptcy protection, “cannot happen ever again,” the website states. “Regulators we’ve briefed love our innovative approach to solving the compliance problem because we give them control over every Bitcoin transaction.”
Cointrust is the latest company started by Kirsch, a Silicon Valley mainstay who is also known for founding search engine company Infoseek, which was sold to Disney for more than US$2 billion in the late 1990s; and more recently, identity management specialist OneID, among several others.
Now, as he turns his attention to Bitcoin, the currency remains largely a tool for financial speculators, some of whom have been enriched by its volatile price swings while others have lost considerable sums. But its appeal will change dramatically once it gets the imprimatur from the financial establishment, Kirsch said.
“Let’s say you could buy Bitcoin at Wells Fargo bank,” he said. “That’s a lot different from buying it at some exchange I’ve never heard of.”
In fact, Kirsch says he knows of at least one bank that will start offering Bitcoin this year. He declined to name the institution but said it would be a “second-tier” entity and not a juggernaut along the lines of Bank of America or Wells Fargo.
A flood of capital will enter the Bitcoin market once banks get involved and regulators get on board, stabilizing the price, Kirsch said.
Institutions, like consumers, will take to Bitcoin because it can provide “instant, secure payments,” Kirsch said. “Everybody likes fast.”
Bitcoin exchanges will subsequently suffer, Kirsch predicted. “People will use them less and less,” he said. “Exchanges we have now are very dangerous places to hold your Bitcoin. The security is just not there. You have no assurance other than ‘trust me’ that your Bitcoin will be safe.”
While nothing is stopping rivals from pursuing the same ideas as Cointrust, the company’s intellectual property and the fact that its work is already well under development provides an edge, Kirsch said. “It’s much easier for people to use the technology that is way ahead of everybody else’s.”
He sees a bright future for Bitcoin in general.
“There are things that may slow it down and make it a bumpy road,” Kirsch said. “But as far as I know and what anyone knows, there is nothing that could reverse the momentum of Bitcoin.”