According to Jonathan Johnson, who now serves on Overstock’s board of directors, the company processes between $68,000 and $120,000 per week in cryptocurrency revenues, primarily through Bitcoin and Ethereum. This is just a fraction of Overstock’s overall business, comprising just 0.2 percent of its total revenue. Yet, even with declining prices for Bitcoin and the cryptocurrency market in general, this percentage is expanding. According to Johnson, it’s a better way to do business, and closer to cash than the traditional method of processing credit card transactions.
Johnson represented the Utah company in an address to the Heritage Foundation in Washington, D.C. He said that the company pays processing fees for credit cards, and employs 40 people in its fraud department. By contrast, cryptocurrencies cost the company very little. Coinbase charges Overstock a very small transaction fee that is a fraction of what credit card processors charge, and due to the immutable nature of cryptocurrencies, there is no fraud department for these transactions. In this way, these digital currency transactions are like cash transactions.
In addition to his position on the board, Johnson is the President of Medici Ventures, Overstock’s blockchain division. He believes that cryptocurrencies, as well as blockchain technology will transform the company. In terms of capital and liquidity, he sees these technologies as a means for the general public to participate in capital markets in a way that isn’t possible through traditional investment vehicles, where typically only accredited investors may partake.
Johnson described DeSoto Inc., one of the projects he’s working on. This is a blockchain property rights joint venture with the economist, Hernando DeSoto. With it, they plan to create a pilot program for local property records as a means to alleviate poverty in developing nations where formal procedures for property ownership and transfers either do not exist, or are inadequate. According to Johnson, “Most entrepreneurs I know in the West started their business with a second mortgage on their home. Real property is live capital because we can borrow against it, in the developing world it is not.”
Because of cryptocurrency and blockchain’s role in Overstock’s evolving profit model, and because of other blockchain projects that Johnson is working on, he has called for regulatory clarity. He believes that regulatory uncertainty in the US is limiting the way this new technology may be used. The laws surrounding initial coin offerings and other capital formation methods enabled by blockchain technology are unclear, and companies that wish to remain compliant are therefore unable to use such methods for fundraising and growth.
He believes that the SEC or Congress must provide the appropriate standards for ICOs, tokens and other digital assets. Such clarity will help developers of new technology to understand the boundaries, in terms of what is permissible by law, and what is regulated or prohibited. Recently the SEC probed TZero, the Overstock-backed ICO, and the company complied with the regulator’s requests.
Johnson took a pragmatic stance to the use of Bitcoin and other cryptocurrencies by good and bad actors. He acknowledged that cryptocurrencies will at times be used to fund illegal activities. But he also laid out the very obvious concept that criminals will always find a way to fund their activities.
In this way, if we look at cryptocurrency as a form of cash, or money, then we can understand the concept that it may pass from one individual to another without all of the intermediaries that you would find with credit cards and other payment methods. It can simplify transactions, it can lower fraud, and it can lower costs both for consumers and the companies they conduct business with.
Daniel is an experienced and dynamic entrepreneur with a demonstrated history of launching and operating successful businesses. Skilled in Business Strategy, Technical Consulting, Coaching, Sales, Entrepreneurship, Team Building, and Public Speaking.
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