The U.S. dollar is up, the Chinese yuan is down and both have had a ripple effect on the entire global economy. With businesses at the mercy of currency fluctuations in today’s international markets, innovators have looked for a way to ease that pain point.
Cryptocurrencies were, in large part, one answer to the problem. Bitcoin was supposed to have been a global currency, but as we all know today, that’s not exactly the way things turned out.
Could the answer have been right under our noses the whole time? BitGold CEO Darrell MacMullin says yes, and that the answer is in gold.
His company has just begun a phased rollout of its gold-to-gold money transfer services for U.S. customers, and corporates will soon get in on the action with the introduction of BitGold for Business.
MacMullin told PYMNTS about the use of gold as a global currency less exposed to risk, as well as how to use the precious metal as a payment rail for businesses that need a fast (and cheap) way to send and receive money overseas — whether that be to and from customers, contractors, suppliers or even their employees.
Gold As A Currency
Investing in gold is hardly a novel concept, but according to MacMullin, the friction associated with it — buying coins, or acquiring gold through a broker, then dealing with the costs associated with shipping and securely storing the metal — essentially negate any of the benefits linked to protecting value.
“Gold is actually the third most liquid instrument in the world,” MacMullin said, explaining why people go through the hassle of investing in the metal in the first place. “Gold is not only one of the most liquid instruments but also one of the most stable.”
For all the hype that cryptocurrencies have received in the last year or so, MacMullin argued that the market cap is far too low, and volatility far too high, for these technologies to be worth the risks, especially for a business.
“From a business-to-business standpoint, I don’t want to receive bitcoin and have that currency go down by 20 percent by the afternoon,” he said. “It would erode the entire margin of the transaction.”
With this in mind, BitGold wants to help businesses be able to send and receive money in gold, especially for those that are operating in countries plagued with exaggerated swings in local currency values. Gold, on the other hand, “preserves and protects” the value of a transaction or a payment, MacMullin said, making it an ideal currency for cross-border transactions and international operations.
Gold As A Payment Rail
BitGold allows a user to send a payment in gold, and the recipient can choose to obtain that payment in gold for free. But the company is taking the potential of gold and molding it into something more: a payment rail.
Admittedly, while a business may not want to get paid in bitcoin, they probably don’t want to get paid in gold, either — at least, not entirely. MacMullin said that the upcoming launch of BitGold for Business will facilitate B2B transactions, and while companies can choose to receive gold as payment, they will also be able to convert it to their local currency at a charge of 1 percent.
Either way, the executive argued, a business is likely to see wider margins on their business.
“Especially if a business is doing international and cross-border business, you don’t want to get stung by holding onto a currency that has volatility,” he explained regarding why a company may want to actually get paid in gold.
“What, essentially, we’ve been able to do is create a real-time settlement rail,” MacMullin added. BitGold allows users to send gold, and a recipient can receive it in a matter of minutes, even overseas, by transferring titles of gold. “Basically, we created a global debit network based on top of gold,” he said.
For a business, MacMullin stated, the speed at which one can receive gold, and the affordability of a 1 percent charge to convert that gold back to local currency, can be the difference between expanding operations internationally and not.
Getting Businesses Involved
Launching BitGold for Business is an effort to try to ease the friction businesses encounter in cross-border operations: The costs associated with selling to consumers overseas and receiving foreign currency, as well as sourcing from overseas suppliers, paying international business partners and even employees, can all be costly and eat away at the margins.
But paying in gold, or using gold as a payment rail, may not come naturally to a business owner.
“For businesses, it’s kind of a newer concept,” MacMullin admitted. “Some of them may understand gold, and some of them may not care about gold. What they care about is they want to process transactions faster, safer and most cost-effectively.”
With this in mind, BitGold is taking a phased approach to rolling out its services.
For instance, MacMullin said it will begin introducing BitGold for Business slowly, first with more basic services, like the ability for business users to generate an invoice in any currency or add capabilities for their consumers online to pay via BitGold.
The rollout of the gold-to-gold transfer service by BitGold for individuals is itself a phased one, being introduced state by state as the company seeks individual, state-level clearance to operate.
But that can also benefit business clients, MacMullin said.
“We don’t believe you should be outside the regulatory framework,” he explained, adding that BitGold aligns with the Know Your Customer and Anti-Money Laundering regulations that can trip businesses up when operating across borders for the first time.
The company is slated to introduce some new services this week at Money20/20 Europe. Doing so will also surely be part of the education process upon which BitGold will depend to get the word out, especially for potential business customers. But considering the costs associated with international credit cards or the 20-day timeframe it takes for an international check to clear, MacMullin is convinced companies will react positively to the company’s offering — whether they’re interested in gold or not.
“It’ll be a bit of education at first for people,” he said, “but it’s an experience that, once people see the benefits of it, they see that it absolutely makes sense to add as a payment option.”