“BITCOIN accepted here”. This announcement about the option to pay with the virtual currency bitcoin can be found not only on the websites of several online Slovak shops, but also on the door of a fast-food outlet in Bratislava. Moreover, a bitcoin ATM is expected to be installed in downtown Bratislava. But Slovak officials warn against this virtual currency, pointing out that the bitcoin is unregulated and unstable, and that investors participate in this scheme at their own risk.

Marián Jančuška, operator of the website Mojbitcoin.sk (Mybitcoin.sk in English), has found the virtual currency so appealing that he has invested in a bitcoin ATM. The device premiered in Bratislava in mid November and until its permanent installation within the next month in a passage between Laurinská and Gorkého Streets in downtown Bratislava, it will be placed temporarily in Progressbar.

“The launch of this ATM will make people’s access to the bitcoin currency easier, which can be a motivation for sellers to begin accepting the bitcoin as a tender,” Jančuška told the Profit weekly. The virtual currency first attracted his attention in early 2012 and he has followed its development closely ever since. “I believe this can be motivation for instigation of new services; realisation of new projects. In any case I expect the bitcoin economy to develop.”

The bitcoin ATM, manufactured by the Lamassu company, operates as a bitcoin wallet, Jančuška explained to the zive.sk website, adding that it exchanges euro banknotes for bitcoins at a rate set by the Mt.gox exchange. The usage is simple: the ATM adds bitcoins to the virtual bitcoin wallet of the client after he or she feeds it with euro banknotes. The ATM works as a one-way machine, i.e. it is not possible to withdraw physical bitcoins, which do not actually exist.

The first bitcoin ATM was installed in Vancouver, Canada, in late October and Jančuška indicated that if the ATM in Bratislava gets off to a successful start, he would consider installing another bitcoin ATM in Slovakia, for example in Košice.

Officials warn

“The National Bank of Slovakia warns the general public that virtual currencies, for example the so-called bitcoin, are not national currencies and thus they do not fall under national regulations,” the National Bank of Slovakia (NBS) wrote in its warning on November 26, provided by its spokesperson Petra Pauerová to The Slovak Spectator.

The central bank further warns that operations with the virtual currency are neither regulated nor supervised by the NBS or the European Central Bank. Moreover, in Slovakia only the Slovak central bank is authorised to issue euro banknotes and coins and that the issuing of any other money and putting it into circulation is a punishable offence.

The Slovak Finance Ministry added that the bitcoin is a very volatile currency and that a potential regulation would require a more detailed analysis focused on specific aspects of virtual currencies, for example, money laundering, consumer protection and others.

“Participation in this scheme is at the risk [of the investor] and the money of investors is not protected,” Finance Ministry spokesperson Alexandra Gogová told The Slovak Spectator.

Bitcoin accepted in online shops

Since mid November a Subway fast-food outlet in Bratislava has been accepting bitcoins, too. Martin Petrus, the manager of the fast-food outlet, explained that the introduction of the option to pay with the virtual currency via smart phone is a curious phenomenon.

“I do not expect that because of the bitcoin a gush of people would arrive [here], but I already see that it has raised interest in the community around the bitcoin,” Petrus told the Sme daily. The exchange rate of the euro and the bitcoin is fixed and it will change once per week.

The virtual currency is also accepted in the online shops of LP Platne, the sports wear producer Alfatex, coffee seller Roast Station Project, the MarSal Tech - 3D tlač printing company and many others, according to the bitcoins.sk website. Isper, an internet services provider in Bratislava, also accepts payment with bitcoins.

The views of market watchers

Jozef Dvorský, the executive director of the Slovak Association of Electronic Commerce (SAEC), actually sees no advantages to using the bitcoin currency, estimating that in the upcoming years it may affect some specific sectors of the market, but he does not think that it will have any flat impact.

“This is something really new and it is difficult to forecast any future of it,” Dvorský told The Slovak Spectator. “We do not think that it will in any significant way affect Slovakia and [local] online shopping in the near future.”

Dvorský does not expect Slovakia to play a significant global role and believes it will follow the development on key markets, i.e. in the US and western Europe.

The fact that some e-shops started accepting bitcoins is like a “litmus test” of how the market would respond, but this should not result in any significant changes in the market for the time being.

Pavol Lupták, a security specialist and the executive director of the Nethemba IT security company, sees the bitcoin as a pioneer and the first generation of a decentralised crypto-currency.

“It is probable that already after a few years we will have here something better and more secure,” Lupták told zive.sk in May, adding that some alternatives already exist. “Bitcoin is only the first massively spread crypto-currency, which has features similar to gold, which is also a decentralised analogue currency, because nobody issues it centrally.”

Matúš Pošvanc, the director of the F. A. Hayek Foundation, expects use of the bitcoin currency to spread among common payments, for example in restaurants. The bitcoin has an advantage compared with traditional payments methods, in that paying with bitcoins does not require a third party, he told the Hospodárske Noviny economic daily. The payment is carried out between users and the fee for it is lower compared with a bank transaction or a card payment.

What is bitcoin?

Bitcoin is a consensus network that enables a new payment system using completely digital money, the bitcoin.org website writes. It is a decentralised peer-to-peer payment network that is powered by its users with no central authority or middlemen. The bitcoin is the first implementation of a concept called “crypto-currency”, which was first described in 1998 by Wei Dai on the cypherpunks mailing list, suggesting the idea of a new form of money that uses cryptography to control its creation and transactions, rather than a central authority. The first bitcoin specification and proof of concept was published in 2009 in a cryptography mailing list by Satoshi Nakamoto. The bitcoin currency enables one to anonymously conduct quick money transactions anywhere on the internet for minimal fees.

The popularity of the bitcoin has been increasing around the world. Great Britain and many other countries are embracing the new form of payment and exchange, while the German Finance Ministry has recently endorsed bitcoins as a form of private money. Thus Germany legally accepts bitcoins.

Because bitcoin transactions can be completely anonymous, the virtual currency is reportedly used when paying for illegal drugs, weapons, child prostitution and other illegal activities.

Those who have invested in bitcoins have already made considerable profits from their deals. While at the beginning of 2013 one bitcoin was available for €30, on November 28 it cost more than €750. But experts warn that its exchange rate is unstable and is subject to sharp fluctuations.