Digital Transactions Authoritative, insightful and timely information for payments professionals
By John Stewart
Few tactics lend instant credibility like adding heavy-hitter names to a company’s board. On Wednesday, the 5-year-old Bitcoin digital currency, and at least one startup offering Bitcoin wallets, gained a few notches on the credibility index when Xapo GmbH said Dee Hock, John Reed, and Lawrence Summers had joined its newly formed advisory board.
Founded in California only last year and now based in Switzerland, Xapo operates a vault for secure storage of Bitcoin and offers a debit card linked to users’ wallets. Along with other startups, the company has had to contend with a litany of issues linked to Bitcoin, including wild swings in price, spotty merchant and ATM acceptance, and doubts among many payments experts about the currency’s staying power.
But now some of those experts agree Wednesday’s advisory-board announcement by company founder and chief executive Wences Casares can only help. Hock is credited with hammering together the Visa card network in its early days and developing it into the world’s biggest general-purpose payments system before stepping down as its first chief executive in 1984. “Dee Hock is a great addition,” says John McDonnell, chief executive of Bitnet, a Mill Valley, Calif.-based company that processes Bitcoin transactions for merchants. “Kudos to Wences for tracking him down.”
Reed is well-known for his championing of retail payments, particularly ATM networks, during his tenure as chairman and chief executive of Citicorp and Citigroup Inc. in the 1990s. Summers, an economist who served as president of Harvard University for five years, was Treasury Secretary during the Clinton Administration and in 2013 a prominent candidate to succeed Benjamin Bernanke as head of the Federal Reserve.
“Casares adding Dee Hock, John Reed, and Larry Summers to his advisory board was shrewd,” Eric Grover, principal at Minden, Nev.-based payments consultancy Intrepid Ventures, says by email. “In payment systems trust matters enormously. Xapo can only benefit from Hock’s, Reed’s, and Summers’s reputations.”
Steve Mott, principal at BetterBuyDesign, a Stamford, Conn.-based consulting firm, agrees the names carry potent star power and could help insulate Casares from his biggest backers. Xapo has raised $40 million in two Series A funding rounds. “Adding these three luminaries buys a lot of protection from [venture-capital] impatience,” Mott tells Digital Transactions News via email. A Xapo spokesperson says the company has no comment on the matter beyond Casares’s blog post.
Mott is particularly intrigued by Hock’s involvement, pointing to the contrast between the decentralized, distributed-ledger Bitcoin structure and the hub-and-spoke Visa system Hock pioneered. “Hock invented the strong, centralized, all-controlling network; now he\'s viewing a decentralized, distributed, lightly governed network as the solution to digital transacting,” Mott says. “If he believes that (and a lot of people do) then the implication for the Visa business model is pretty profound.”
That may prove true, but it’s not clear how much authority the new board will wield inside or outside of Xapo. Casares was not available to comment, according to the Xapo spokesperson. “We look forward to continuing to build the global Bitcoin ecosystem with the help of these accomplished leaders and visionaries,” he says in his blog post.
Nor will the addition of these three big names, in the end, necessarily dispel at least some experts’ skepticism about Bitcoin’s prospects. “Will it make the difference in whether Xapo, and more broadly Bitcoin, succeed?” asks Grover, a Bitcoin doubter. “Probably not.”
Xapo is not Casares’s first venture in electronic payments. In 2007, he co-founded Bling Nation Ltd., which offered closed-loop contactless-payments networks for small banks. Payments relied on RFID tags that could be affixed to users’ cell phones. That venture closed its doors in 2011.
