'Applecoin' Has Potential, Not Necessarily Bitcoin

...or is that iCoin? Referring to a post I made earlier on all you wanted to know about Bitcoin, I did not believe it could not come into widespread usage for two reasons. First, Bitcoin did not have the support of major financial institutions that (literally) held the important cards in debit/credit cards, money transfers, bank deposits and so forth. Second, without clear regulatory approval in the United States and other major consumer markets, establishments would be wary of transactions inhabiting the 'grey' area between what's legal and illegal.

I suppose that it was only a matter of time that the most innovative of major corporations, Apple, would be first out of the blocks in experimenting with virtual currency operations. More specifically, Apple is allowing virtual currencies to ply their trade amongst apps (and is not the virtual currency developer itself). Previously, it removed apps from the iTunes store that run Bitcoin presumably since it wasn't entirely sure of the legal ramifications. The knock-on effects here could be potentially huge. With Major Name Backing and an Established Track Record of introducing new product categories, Apple has sufficient clout to get financial institutions, credit card operators, and money transfer services to sit up and take notice. If someone can deal with possible legal entanglements down the road, it's certainly Apple who faced down the challenge of the Beatles franchise when it began selling music in 2003. From Bloomberg:

While Apple didn’t mention bitcoin specifically, its developer terms now allow for certain “approved virtual currencies,” without saying what those were. Apps that use the digital money must comply with state and federal laws wherever they’re designed to work, the terms say.

The change signals that Apple is warming up to virtual currencies after previously blocking programs like Blockchain.info from its App Store. Bitcoin is the most popular digital currencies, which governments are struggling to determine how to regulate because they exist only as software. “This is a sign that the ecosystem is maturing and gaining credibility,” Bill Lee, an investor in bitcoin wallet BitGo, said in an e-mail. “To be clear, I still think bitcoin is in its infancy as a technology, but its acceptance is becoming more and more mainstream.”

Bitcoin entrepreneurs were already predicting an explosion of activity. “Get ready for a plethora of bitcoin iOS apps!” bitcoin venture capitalist Adam Draper said in an e-mail. “Very exciting news!”

Unlike the Bitcoin fanboys, I's be especially wary about the proviso that these virtual currencies would only be permitted to ply their trade on Apple devices if they complied with state and federal laws. Again, this is murky legal territory that may allow Apple to (again) suspend their operations should they run into legal entanglements. Also keep in mind that this is a very limited Amerocentric framing: aren't virtual currencies also used internationally to transfer money and settle transactions?

My guess is that the legal issues that need to be hammered out will be international to meet anti-money laundering and counter-terrorist finance (AML-CTF) that were put into place largely at the American's behest after the September 11 attacks. If you are interested in the technical details of AML-CTF compliance, CGAP wrote a paper in the similar context of mobile wallets sometime back. These problems are not insurmountable, however. The Bitcoin fanboys may not have sufficient clout to sort out the legal aspects of virtual currencies, but Apple with its hundreds of billions in cash sitting around certainly can. AS I said, 'Applecoin' has potential, not necessarily Bitcoin.

BTW, the app store review guideline in question is 11.17 under 'Purchasing and currencies':

Apps may facilitate transmission of approved virtual currencies provided that they do so in compliance with all state and federal laws for the territories in which the app functions