Virtual Currency Bridge Between BitCoin and US Dollar

[infra172]

I just discovered BitCoin and would like to use it on a website I'm developing. But one of the things that has me worried is how difficult and slow it seems to buy and sell bitcoins.

Without giving too much away, my website will allow people to buy and sell services to each other. Here's what I was thinking. I would conduct the transactions using a virtual currency local to my website (like Facebook credits). I would allow people to purchase this virtual currency with US Dollars using their credit card. Facebook does this all day long so it has to be legal. I would allow people to buy and sell the virtual currency with BitCoins. Unless the act of trading in BitCoins itself is illegal, this should be legal as well. To protect myself, I would put a delay on exchanging from my virtual currency to BitCoin.

I would charge a transaction fee to cover the cost of credit card transactions but BitCoin transactions would be free. I plan to make money by taking a percentage of every virtual currency transaction.

Does anybody see anything wrong with this strategy?

                           
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US Dollars -----> Points on my Website
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                                 BitCoin

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[Jaime Frontero]

if you could create a transparent transaction window - transparent in *both* directions - it might have value.

but it will have to be a helluva lot more convenient than what already exists.

i buy something on ebay >> i click something >> the merchant receives payment in his preferred form.

i sell something on ebay >> i get payment in my local currency and ebay either doesn't see the conversion from BitCoin or they're convinced not to care >> i send it out.

it has to be /that/ easy to compete.  a widget, basically.

[joey.rich]

infra,

A reliable cash in / cash out system like the one you're describing is the next big thing for the Bitcoin economy.
Bitcoin cannot become widespread until people have a reliable and safe way to buy and sell their bitcoins in large
volumes at a fixed exchange rate.  A single bitcoin broker could make this breakthrough by attaining a large number
of bitcoins and then selling them on a reputable exchange website.  A trusted middleman like this could become more
popular than Mt. Gox because bitcoin buyers and sellers would be willing to pay a premium to go through a trusted,
reputable broker.  If someone was able to successfully build a "currency bridge between BTC and USD" then I think
business people and large scale investors would be willing to invest in Bitcoin.

I attempted this with BuyBitcoins.com but lost 120,000 BTC to credit card fraud.  BuyBitcoins failed because:
1.  I didn't use address verification for CC payments
2.  I used API methods to automatically send bitcoins without human verification or a waiting period.

-Joey

[malditonuke]

infra,

A reliable cash in / cash out system like the one you're describing is the next big thing for the Bitcoin economy.
Bitcoin cannot become widespread until people have a reliable and safe way to buy and sell their bitcoins in large
volumes at a fixed exchange rate.  A single bitcoin broker could make this breakthrough by attaining a large number
of bitcoins and then selling them on a reputable exchange website.  A trusted middleman like this could become more
popular than Mt. Gox because bitcoin buyers and sellers would be willing to pay a premium to go through a trusted,
reputable broker.  If someone was able to successfully build a "currency bridge between BTC and USD" then I think
business people and large scale investors would be willing to invest in Bitcoin.

I attempted this with BuyBitcoins.com but lost 120,000 BTC to credit card fraud.  BuyBitcoins failed because:
1.  I didn't use address verification for CC payments
2.  I used API methods to automatically send bitcoins without human verification or a waiting period.

-Joey

I've been working on something for the past few weeks.  I'm talking to various banks, and I won't settle for anything less than extremely strong fraud protection.

I believe the true bitcoin community would be willing to put up with an extra security hoop or two - for the convenience of using cc's.

[Alex Beckenham]

I would allow people to purchase this virtual currency with US Dollars using their credit card. Facebook does this all day long so it has to be legal. I would allow people to buy and sell the virtual currency with BitCoins. Unless the act of trading in BitCoins itself is illegal, this should be legal as well.

I don't know about American laws, but will use an Australian supermarket as an example:

Coles can legally accept cash or credit card payments for purchases.
Coles can legally refund cash or credit card purchases.
However Coles cannot (as far as I'm aware) legally accept credit card for a purchase and then refund that same purchase in cash. It can only be credited back to the exact same card that was used.

I think this maybe has something to do with money laundering.

[malditonuke]

I don't know about American laws, but will use an Australian supermarket as an example:

Coles can legally accept cash or credit card payments for purchases.
Coles can legally refund cash or credit card purchases.
However Coles cannot (as far as I'm aware) legally accept credit card for a purchase and then refund that same purchase in cash. It can only be credited back to the exact same card that was used.

It is the same in the US.

[infra172]

A person buys a sweater. They return it to the store and are given store credit.  Store credit is a virtual currency. It can't be converted back into cash, but this person could trade their store credit to a second person for a CD.  Then, the second person could go to the store and use it to buy a sweater. I don't see how that could possibly be illegal as long as the business doesn't turn a blind eye to money launderers.

[bitcoindr.com]

A person buys a sweater. They return it to the store and are given store credit.  Store credit is a virtual currency. It can't be converted back into cash, but this person could trade their store credit to a second person for a CD.  Then, the second person could go to the store and use it to buy a sweater. I don't see how that could possibly be illegal as long as the business doesn't turn a blind eye to money launderers.

Yes, not only have I seen people do this all the time. Not only that, I've also seen stores allow it all the time.

As a matter of fact, my girl has bought detergent from the store, didn't like it (opened!) and returned it, was given credit on a gift card, gave the gift card to someone else who then bought something from the store. In one case they gave her the $0.96 back in cash instead of leaving it on the card.

Bitcoin Dr