On April 2, 2014, the Berkeley Business Law Journal in partnership with the Berkeley Center for Law, Business and the Economy hosted as part of its Speaker Series a presentation by Thomas Brown entitled “Regulation and the Future of Money: Mobile Payments and Virtual Currencies” to explore how mobile communications are changing the way we define value and authenticate transactions.
Thomas Brown, a subject matter expert on payment systems, provided valuable information and memorable insight about the current status and future of mobile payment systems and virtual currencies. Mr. Brown is currently a Partner at Paul Hastings in San Francisco, and he used to serve as Senior Counsel for Visa U.S.A. Inc.
Mr. Brown called upon students and professors to think carefully about some of the implications of the movement toward mobile payment systems, in terms of both regulatory consequences and consumer benefits. For example, he pointed out that being able to buy something using one’s phone may solve some security issues inherent in using credit cards. He noted that those of us that use Uber, a mobile application that provides a cashless taxi service, are already getting a taste of the experience that mobile payment systems can offer. He observed that “mobile wallets” are still seeking traction, but improving security measures and optimizing the point-of-sale experience could increase consumer confidence and lead to more widespread use. Recent high-profile instances of credit card fraud perpetrated at the time of swiping may drive customers to card-less options.
As for “virtual currencies” such as Bitcoin, which recently piqued journal interest, recent developments have made for a rough outlook. Bitcoin value has taken a big hit, likely due to security concerns and prospects of regulation. Mr. Brown stressed that Bitcoin cannot even be accurately characterized as a currency in the first place, especially now that the Interal Revenue Service has concluded that Bitcoin and other virtual currencies are “property” for federal tax purposes. “Mining” Bitcoins on a computer is therefore subject to reporting requirements for payments made in property, making it feel much less like a normal currency.
Still, Mr. Brown noted that the Bitcoin movement is raising some compelling questions about what virtual currencies might be able to accomplish in the future. For example, they may be able to provide asset stability where fiat currencies are instable, and accelerate money movement at lower costs. And critically, the role of federal regulators, which is up in the air, will ultimately determine whether the banking industry can adopt and utilize electronic currency in a way that both preserves convenient and secure payments, and enhances payments through the use of new technology.