Bitcoin Expert Kirsch Pushes Virtual Currency: Onsite Coverage

SAN FRANCISCO – Steve Kirsch, CEO of Cointrust, said he has made money every year on his bitcoin investment of $1 million.

“I've wired $1 million to Slovenia. It does show up at the other end,” said Kirsch at America's Credit Union Conference on Thursday.

“You have to be willing to take a risk to get involved. You might find it's the best investment of all time,” he added.

According to Kirsch, only 21 million bitcoins will be produced. He said the most important aspect of bitcoin to remember is the current value is set by supply and demand.

“It's kind of an arbitrary number – 13 million have already been used,” he said.

“It's not until 2025 when all bitcoins will be used. They keep slowing the rate of issuance,” he said.

Kirsch laid out a series of facts about bitcoin during his breakout session, including:

• Bitcoin is a common global currency not controlled by governments.
• Bitcoin with an uppercase B refers to the technology of mining and digitally signed coins while bitcoin with a lowercase b refers to the virtual currency.
• All funds are kept on computers by programmers called data miners.
• 1 bitcoin (BTC) is currently valued at $650.
• With bitcoin, Kirsch said there are no chargebacks.
• As a virtual currency, bitcoin has faced many challenges, which have prevented it from moving mainstream, such as volatile pricing and trust issues.
• If you invest in bitcoin, you receive a private key.
• If the key is lost, Kirsch said you would lose your entire investment. “You're screwed,” he added. Kirsch said most people do not trust themselves to store the private key.
• The IRS currently treats bitcoin investments as property.
• According to Kirsch, if you bought a bitcoin for $650, sold it for $750 but did not report it to the IRS, there is a chance the IRS might find out and you could end up in jail.

Kirsch encouraged the audience to invest $10 in bitcoin to see how it works. Almost zero members of the audience raised their hand when he asked if they would like to get involved.

“I expected zero hands,” Kirsch said. “That's not because it's a bad thing, it's just because credit unions tend to be kind of chicken, for good reason, right? You've got a nice business. Why jeopardize it? Let's let other guys take the risk and if it's safe, then we'll follow them.”

However, when Kirsch explained more about his own company, conference attendees seemed a bit more interested.

“It opens up the ability for people to write electronic checks that work really fast and are really secure,” he said. “This technology allows you to move money in between accounts in a secure way.”

Kirsch also said credit unions could issue virtual currencies without compliance issues using his company's services.

“What would do is encapsulate the bitcoin so that it complies with all federal and state laws regarding money because right now with bitcoin, you do not know who the other party is,” he said.

“We can make it so that you encapsulate bitcoin so it can't be sent to another party without making sure that it applies with all the laws and regulations,” he added.

Some audience members asked Kirsch if the federal government is going to crack down on bitcoin.

In response, Kirsch said regulators announced earlier this year that they are not going to take action against bitcoin.

“It's quite scary that it is out there and unregulated. It certainly is something that could be a competitor for us, but I'm not sure if it's something we would make available to our members,” said Deb White, vice president of operations at UCU University Credit Union in Orono, Maine. “From a compliance standpoint, it's very scary.”

John Worthington, ‎executive vice president at Security Service Federal Credit Union in San Antonio, said there are a lot of variables about bitcoin that have no answers.

“I'm confused. It's a very interesting concept but it's not ready for primetime,” he told CU Times.