MSN Money spoke with Bitreserve’s new CEO, Anthony Watson — formerly of such companies as Nike, Barclays, Wells Fargo, Citi, and Microsoft — on Tuesday to talk about the business model of the Bitcoin startup he now heads, and the “challenges and long-term goals” of both his company and Bitcoin.
Watson’s main banking experience lies in payments. “I’ve built some of the largest payment platforms in the world, for some of the biggest banks,” he said in the MSN interview. According to Fortune, when he worked with Barclays, “he treated their tech department like a small startup [...], and led the launch of a slew of mobile banking apps.”
Watson told MSN, “Bitcoin has three fundamental challenges [to overcome in order] to become a ubiquitous, world currency.” He said:
“The first challenge is it’s highly volatile. Bitreserve is the first company in the world to offer stability for free. The second issue with Bitcoin is predominantly today is its user population is traders and speculators. The third problem, and the biggest problem if it’s going to become a ubiquitous world currency, is the fact that it’s probably the most inequitable, unequal form of value the world has ever known.”
“Bitcoin currently, [at] the US dollar equivalent value aggregated, is about US$3.5–5.5 billion, depending on who you speak to. Nine hundred and fifty-seven people in the world own 50% of that value. Until those challenges are overcome, it’s going to be very difficult for Bitcoin to grow as a global, ubiquitous form of value.”
Why a Bitcoin Company
Bitreserve announced the change in their leadership on their blog on June 22. Watson joined the company two months ago as president and COO. He noted that the move to take over the CEO position from founder Halsey Minor was already in the company’s plans at that time.
Fortune raised the question why Watson would choose to go from Nike, “a Fortune 500 company with US$28 billion in annual revenue, to Bitreserve, a fledgling startup less than one year old, with less than US$15 million in funding.”
Their answer was that he was “always [...] a technology guy,” and Nike wasn’t satisfying that interest. Watson told Fortune he was convinced to join Bitreserve after spending just 10 minutes with Minor because the company “spoke to him on a social and equitable level.”
Watson’s goal with the company is to “democratize how people access, hold, and move value.” This fits well with Minor’s vision. Minor said in an H1 Investor Communication released on June 22 that he started the company “to address the unfairness of the legacy financial system.”
The company markets itself as helping members to “transfer and convert the major currencies of the world instantly, safely, and for free.” When MSN asked how they can offer “free stability” and make money, Watson said:
“Our model is based on a reserve-type model. When people send and receive value using our platform, they hold value on our platform as well, which is what we call our reserve. Within that, our long-term vision is to make sure that we can take a revenue stream by holding in non-risky or low-risk securities — for example, U.S. government bonds or treasury bonds.”
Minor offered a summary of Bitreserve’s operating financial data in the investor communication. He said:
“Currently our reserve sits at a little over US$2.06M, which means we are OVER-RESERVED [emphasis Minor’s] by almost US$132K ensuring ALL our members’ money is more than 100% protected in our legally separated reserve. No other financial services company on the planet offers greater than 100% protection to its customers' deposits.”
Critics of Bitreserve
Some Bitcoin users have reservations about Bitreserve, which publicly launched little more than six months ago in November 2014. Critics go as far as to say the company “isn’t a Bitcoin company” because its ultimate goal is to give users ways to transfer out of Bitcoin and into other currencies. It offers transfers into eight worldwide currencies so far, plus four precious metals.
The company also holds users’ funds and controls private keys, which pose possible security risks. One redditor pointed out that Bitreserve offers “excellent service,” but it is only a “basic version” that “doesn’t yet take advantage of the full value of Bitcoin.”
The company claims to be responsible for US$16 billion financial transactions globally, with 16,000 users from 145 countries. But “the bottleneck for Bitreserve’s growth,” said Minor, “remains bitcoin.” He said:
“That now ends in 2H 2015. Starting this summer, we will be able to start to speak to that other 99.99% of our addressable market who are not confined to holding bitcoin.”