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Bitcoin company Coinbase to launch eurozone consumer service

Richard Waters
George Frey | Getty Images

One of the most ambitious US Bitcoin companies plans to launch a consumer service across a large part of the euro zone on Thursday, as use of the cyber-currency starts to spread.

Coinbase, which has raised $31 million in venture capital, much of it from start-up investors Andreessen Horowitz, is among a group of Silicon Valley start-ups trying to bring Bitcoin into the mainstream.

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The company had linked a Bitcoin "wallet" service to the euro payments system,making it possible for users to send money to and from a Bitcoin account more easily in 13 of the 18 euro zone countries, said Fred Ehrsam, one of its founders.

The link relies on an alliance with a European bank that is connected to Sepa, the system for settling euro payments between banks. Mr Ehrsam declined to identify the bank, saying he did not want competitors to use the same institution to offer copycat services. Most banks have taken a cautious approach to Bitcoin and do not support the currency.

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How bitcoin can change the world

Extremely high volatility, the difficulty of buying and selling the currency and scandals such as the collapse earlier this year of Bitcoin exchange Mt Gox have all added to the controversy surrounding the online currency. However, Bitcoin has become more stable in recent months and some of Silicon Valley's leading entrepreneurs and investors have rushed to become involved, seeing it as a way to disrupt the banking industry.

The Coinbase service will be available in most of the euro zone,including France, Spain and Italy. Extra regulations in Germany, where Bitcoin is defined as a type of investment requiring a special licence, means users there will not be able to use the service, Mr Ehrsam said. He added that the company has talked to banks in the UK about accepting sterling payments.

Bitcoin has attracted initial interest from technology early-adopters, libertarians wanting to support a currency outside government control and from speculators drawn by its wild price swings. Companies such as Coinbase hope to capitalize on a broadening interest as mainstream consumers start to see it as an investment vehicle and means of payment that bypasses existing channels.

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Coinbase claims 1.6 million wallet accounts, up from 620,000 last December, with more than 90 per cent of them in the US. Like other Bitcoin companies, it is counting on rising consumer interest to encourage merchants to accept the currency which would then encourage more people to use it for transactions rather than simply hoarding it.

Europe is "maybe eight months behind the US" in terms of Bitcoin adoption, making this the moment at which wider use could start to take off, Mr Ehrsam said. US companies that have said they will accept payments in Bitcoin include online retailer Overstock, PC maker Dell and travel company Expedia.

Among likely first users of the European service were software developers in eastern Europe who are paid Bitcoin in return for work they do for US employers, but who did not have an easy way to hold the currency or make payments with it, Mr Ehrsam said.