Southeast Bitcoin Considers Bringing Virtual Money to Charleston

At the Dig South conference, Coley Hudgins and Trey Morrison had one of the most unusual show-and-tell items: an ATM.

Operating out of Boone, N.C., the co-founders and owners of Southeast BitCoin were in Charleston to attend the conference, to demo and discuss bitcoins, and, they hoped, to find a site for the area's first Robocoin vending machine.

If they locate a site in the area, Charleston will join Austin, Boston, Seattle and a few other cities in being among the first in the nation -- and the first in the Southeast -- to have a Bitcoin ATM machine.

"Charleston is becoming an important high-tech corridor," said Hudgins. "Here they're more receptive and more tech-oriented than in most places. Charleston is definitely in the running."

Hudgins said they are also looking at the Myrtle Beach area.

"There are a couple of really good prospects there. We're evaluating quite a few places and weighing our options. We're looking for places that have long hours and high traffic."

Locating a place for the ATM is one of several challenges Southeast Bitcoin faces. Another is educating the public about exactly what a bitcoin -- and its dispensing ATM -- is.

"Of the people who stopped by our booth at Dig South, it was a 50/50 mix of those who are familiar with the concept and those who had no idea at all," Hudgins said. "And actually, that's a pretty good ratio, because that (Dig South) was a venue where people are technologically astute."

The average person isn't the only one who needs educating. Southeast's demo at Dig South came just days after a similar ATM was unveiled to members of Congress. The event, which was limited to 50 attendees, was held April 8 at the Rayburn House Office Building in Washington, D.C, and kicked off with a demonstration of how to create a bitcoin wallet and how to buy and sell the currency.

Jordan Kelley, CEO of Robocoin, the company Southeast Bitcoin has partnered with on the ATMs, was on hand to enlighten the nation's public servants.

"We're honored to be the first bitcoin company to demo and educate officials about bitcoin on Capitol Hill," Kelley said in a statement.

Essentially, the bitcoin -- known also as crytocurrency -- enables monetary transactions without an intermediary, such as a bank. Kelley referred to it as replacing the bank teller with hardware and software, although he pointed out that the businesses that buy and operate the ATMs must adhere to strict anti-money laundering laws.

Bitcoin was introduced as an open-source software code in 2009 and has since grown into a $1 billion industry. The virtual currency is popular especially in the tech community.

Cryptocurrencies like the bitcoin employ instant, global, peer-to-peer transactions for making and receiving payments over the Internet. Using mobile apps or computers, Bitcoins can be purchased or sold through exchanges such as Bitstamp or directly from individuals. To date, more than 21,000 merchants accept bitcoin from customers and businesses, including Overstock.com, Richard Branson's Virgin Galactic and even some Subway sandwich shops. There's even a Bitcoin yellow pages .

The bitcoin ATM -- like the one Southeast Bitcoin showcased -- will allow customers to buy and sell bitcoins at market prices, as well as deposit cash from customers' accounts. Making transfers to or from a user's bitcoin virtual wallet is accomplished through the Robocoin interface. The Robocoin security features include user identity verification, including the scanning of a government-issued photo ID and biometric sensors.

According to a release from Robocoin, there are currently 10 machines overseas and one in California. Robocoin operates with the Bitstamp and Vault of Satoshi exchanges and is working to integrate with others in the future. Each ATM retails at $20,000, and the company says it has sold 100 so far.

Another business challenge facing Southeast Bitcoin -- and the entire digital currency industry -- is that it remains unregulated, with calls for government intervention, particularly as the unveiling in Congress came just a few months after MtGox, the largest bitcoin exchange in the world, lost $620 million in bitcoin in a "digital heist" and filed for bankruptcy protection in Japan.

The topic is not new to Congress. Last November, the U.S. Senate held hearings on virtual currency, looking at both the security concerns and the entrepreneurial interests of virtual currency. At those hearings, Jennifer Shasky Calvery, director of the Financial Crimes Enforcement Network (FinCEN), noted that bitcoin itself is more or less neutral and that the IRS should provide guidance on the treatment of bitcoin.

Some lawmakers are open to the idea of treating bitcoin like cash. Rep. Steve Stockman, R-Texas, recently introduced the "Virtual Currency Tax Reform Act."

If enacted, the legislation would change the tax status of virtual currency. After visiting the New York City Bitcoin center, Stockman called it "a nascent industry. Along with 3-D printers and nanotubes, cryptocurrency is the future. We need to encourage it, not discourage it. There is risk associated with every budding industry in America."

However, earlier this month the IRS determined that the bitcoin is property , not currency, which means its price must be tracked at the point of purchase for tax purposes.

Adding to the confusion, FinCEN has classified bitcoin sellers as "money transmitters," which would assume the item being transmitted was, in fact, currency.

"It's really a question mark, all of the regulatory agencies wrestling with how to treat bitcoins," said Hudgins. "But there are upsides and downsides to that."

If it's not currency, he said, the upside is that money transmittal rules may not apply. The downside is that buyers and sellers would have to go through the IRS on a cost basis, having to account for what is spent, along with where and why.

"This could be a real challenge," he admitted. "And the regulators are still scratching their heads, trying to decide what to do. But the encouraging thing is that all of these agencies, so far, have at least decided to issue guidance and tried to figure out how to treat it as legitimate rather than ignoring it or dismissing it. At least they're looking at the proper regulatory means. Which is good, because it's going to be out there regardless."

In fact, it's "out there" already. Click here to watch Bitcoin trade in real time.