Bitcoin for procurement – feasible or desirable?

bitcoin

(We’re pleased to welcome a guest post from Dr Gordon Murray, whose own Dr Gordy blog is highly recommended!)

Bitcoin seems to be getting quite a bit of airtime at the minute but there has been  little discussion on how this new ‘digital currency’ might fit within commercial procurement processes.

Visualise the scenario: you have one contractor who has a unique set of expertise you want to procure, as they will really deliver your organisation an unassailable competitive advantage. The problem is that the supplier does not like the idea of paying wads of cash over to the taxman and says they will only help you if you pay in Bitcoins - what do you do?

For those of you who have never heard of Bitcoins, they are a virtual cash, a digital currency which really doesn't exist, but can be exchanged into cash. Over the last five years they have been used in the seedy world of drug dealing and on-line pornography. Those who trade in bitcoins are anonymous. They are beyond either the taxman or the law - so there may be some questions of ethics.

But Bitcoins are now being used legitimately for some consumer purchases and recognised in some countries as legal tender. They do away with all those expensive credit card charges. There are about 12 million Bitcoins in existence and there is an understanding that there will never be more than 21m.

If you wanted to trade in Bitcoins, you'd need to take the risk of wide fluctuations in the exchange rate (for example from £175 to £50 to £105 within six hours, and separately between £800 to £550 in one day). And the currency even went into freefall on 18 December when the Chinese government placed a restriction on their use - but maybe that doesn't matter if you really need something and you can perhaps find a means of hedging.

You'd need to think how you were going to enforce a contract, but that may not be hard if you are paying for personal services and after they have been delivered.

So, I ask you again: you have one contractor who will really deliver your organisation an unassailable competitive advantage. The problem is. .. you have to pay them in Bitcoins - what do you do?

Another interesting issue for the contemporary, up to the minute, state of the art procurement thinker to consider!

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