Overstock to Embrace Bitcoin, Giving the Currency a Lift

DECEMBER 26, 2013, 7:58 PM

Overstock to Embrace Bitcoin, Giving the Currency a Lift

By NICK WINGFIELD

Patrick Byrne, the chief executive of Overstock, finds the limitations of creating Bitcoins appealing. One of the biggest questions looming over Bitcoin, the digital currency generating attention in the tech business, is when big mainstream merchants will begin accepting it.Overstock.com, the online discount retailer, has an answer: within the next six months, if all goes as planned.

Patrick Byrne, the company’s chief executive, said Overstock planned to let online shoppers pay for goods with Bitcoin by June. The retailer is evaluating the services of several third-party firms that facilitate Bitcoin transactions, with the goal of selecting one by mid-January.

If Overstock follows through on the plan, it will become the most prominent retailer to embrace Bitcoin, an electronic currency that initially gained notoriety as a form of payment for black market drug and weapons transactions and as a new craze for currency speculators. Bitcoin has captivated the imaginations of many technology entrepreneurs and investors, who it as a low-cost payment system that could disrupt established players like Visa and MasterCard. But while many of them are forming or funding start-ups to provide different types of Bitcoin services, not many well-known retailers accept it directly.

Mr. Byrne’s decision to take Bitcoin as a form of payment is driven by philosophical reasons more than business ones. In a lengthy voice mail message explaining his plans, Mr. Byrne said “some fraction, tiny now, of the population” currently wanted to transact using a digital currency like Bitcoin.

He appears more intrigued, however, by the idea of supporting a digital currency that is outside the control of any traditional government authority, echoing a libertarian argument that many fans of Bitcoin have made. Mr. Byrne finds the limitations of creating Bitcoins appealing — there is a finite number of Bitcoins that can be made available and they are released at predetermined pace, unlike traditional government currency.

“You want money to be based on something that no government mandarin can wish into existence with the stroke of a pen,” he said.

In October, Mr. Byrne said that Overstock was thinking about accepting Bitcoin, but that it had suspended its plans because of the regulatory uncertainty around the digital currency. While regulators are still grapplingwith the implications of digital currency, several federal officials said at a Senate hearing in November that they believed digital currencies could operate within existing laws.

Mr. Byrne is a colorful executive who has been known to stake out controversial positions, including against investors he believes manipulated his company’s stock. He also has an unconventional résumé. Once an aspiring professional boxer, Mr. Byrne has a black belt in taekwondo and a Ph.D. in philosophy from Stanford.

One obstacle to mainstream acceptance of Bitcoin may be its wildly fluctuating value, which could scare off consumers. After the value of a single Bitcoin surged to $1,137 in late November, the price has fallen to about $759, deflated largely by a crackdown by Chinese authorities on Bitcoin trading.

Mr. Byrne said Overstock would insulate itself from such fluctuations by using derivatives to hedge the risk from any Bitcoins it holds. Alternately, the retailer may simply convert its Bitcoins to dollars on a nightly basis, he said.