Coinsetter CEO: Taking on Credit Cards Isn't Bitcoin's Big Opportunity

Coinsetter CEO Jaron Lukasiewicz talks about the challenges bitcoin faces in the credit card market, and why he's bullish on its impact in remittance.

AccessTimeIconJan 31, 2015 at 12:06 p.m. UTC
Updated Sep 11, 2021 at 11:29 a.m. UTC
Jaron Lukasiewicz, Coinsetter
Jaron Lukasiewicz, Coinsetter

Jaron Lukasiewicz wants to find the room where the rock stars hang out.

The 29-year-old CEO of US bitcoin exchange Coinsetter radiates energy as we pace the halls of Miami's famed Fillmore Theatre, cutting past utility rooms and navigating stairwells adorned with images of rock 'n' roll excess.

It’s early in the first day of the North American Bitcoin Conference and Lukasiewicz has just delivered an impassioned speech, one in which he railed against the perception that bitcoin is a viable alternative to credit cards for consumers. Though not necessarily related directly to his business-to-business (B2B) exchange, he seems unusually passionate about where the industry is going wrong in this area and how it needs to refocus.

Finally at rest on a beat-up backstage couch, Lukasiewicz launches into a more detailed criticism of how bitcoin has so far been positioned as a payment solution for consumers, tying his ideas to the bigger picture for his New York-based exchange.

Using his first company Ticketometer as an example, Lukasiewicz argued that just because something has perceived benefits, doesn’t mean it will gain traction in the market.

Lukasiewicz told CoinDesk:

“At Ticketometer we thought, 'why would you ever sell tickets in a risky fashion? You should just risklessly sell tickets, and if a minimum number of tickets are sold then the event will happen'. What you learn in doing that is it’s a logical idea, but when you do it, there are so many reasons why someone would not want to do that.”

Lukasiewicz suggests the bitcoin industry is at a similar moment in its history. With the initial excitement of discovery fading, he believes more entrepreneurs should start asking hard questions about consumer behavior, should the industry want to expand its reach.

He also acknowledged that this thought process was inspired by his need to believe in the industry and widen its message. The remarks echoed the sentiments of OKCoin CEO Star Xu, who also used the event as a forum for talking about how the fate of his exchange is tied to the network at large.

“I’ve learned about where the opportunity is in the credit card space, and it wasn’t what I thought. It was more like, becoming the last mile,” he added.

The problem of exchange

To Lukasiewicz, the root of the problem goes back to the nature of Coinsetter’s business: exchange. While currently beneficial for merchants, he contends that consumers are overpaying when making a purchase with bitcoin.

“One of the problems I figured out with the industry is that merchant defines the exchange rate,” he said, explaining how bitcoin payment processors set the price at which they will accept bitcoin for a sale before sending US dollars to a business.

It’s here, Lukasiewicz argues, that consumers are being short-changed, as bid prices represent the maximum price a buyer is willing to pay.

“By using the bid, merchants are able to pass 100% of the costs onto the consumer, so they get rid of the spread. The spread is a cost that’s passed on to the consumer as well as the slippage and any other fees associated at the ‘ask’ price,” Lukasiewicz continued, adding:

“If you buy something for $100, you should have $100 taken off your bank statement, that is the price.”

Lukasiewicz argues that bid-based pricing leads bitcoin buyers to pay more, say $102 on a $100 purchase, whereas consumers making credit card purchases are typically offered rewards.

As for changing the underlying issue, however, Lukasiewicz is less optimistic, here again suggesting that entrenched practices will erode any benefit.

Payment processors, he said, could encourage merchants to offer consumers discounts, but he suggests they would face pressure from merchants who want to avoid added costs. Rather, Lukasiewicz believes the true potential of bitcoin in this industry will lie in helping credit card users to pay with their preferred brand in more places.

"Allowing card payers to pay with their AmEx more places and things like that," he said.

The case for remittance

Rather than focusing on bitcoin for e-commerce, however, Lukasiewicz advocated both in the interview and his speaking slot that entrepreneurs should focus on the far more costly global remittance market.

“It just fits so clearly,” he said. “You do have these challenges of teaching immigrants to buy bitcoin and hold it and send it somewhere, but it’s still been made pretty good.”

Though high bitcoin ATM fees might be a continued sticking point for consumers in the developing world, Lukasiewicz believes the reduced costs provided by this infrastructure will be compelling, even despite the learning curve some users will have.

“If you go [via] bitcoin to another currency, they’re not going to understand the exchange rates, but they will understand the reduced fees,” he added. “I don’t think it’s a blocker.”

In this view of the ecosystem, consumers will be able to use bitcoin ATMs and wallets as alternatives to traditional banks. Lukasiewicz added that Coinsetter is seeking to develop business connections in this space, serving as a source of liquidity for ATM providers, such as BitAccess and Robocoin.

“For us, it would be creating connectors for the various ATM manufacturers,” he said.

'Win or die' situation

Overall, Lukasiewicz indicated that the bitcoin industry needs to operate more effectively and concertedly in certain areas of the financial ecosystem, and that companies need to see how they can specialize in serving a useful role toward this end.

“When I talk to people starting remittance companies, they think they have a network effect,” Lukasiewicz said. “I tell them, you don’t, that doesn’t exist in bitcoin. Bitcoin is the network and that’s the only network that exists, we all win or we all die.”

For its part, Lukasiewicz said Coinsetter is still narrowly focused on serving larger market makers and on improving its liquidity, factors he framed as essential to its survival.

Still, Lukasiewicz argued specialization can yield important and overlooked insights.

“When you start to build an exchange and you offer it to a market, you hear what people want. When I started building our FIX API, I had no idea how important that would be, and that’s the most important thing we offer right now,” he explained.

Yet another part of the equation, Lukasiewicz suggested, is that a business can’t be the best at everything. In particular, he cited his company’s front-end user interface as a potential turn off to more retail clients – a factor he intends to put right this year.

Ultimately, though, he is confident that this philosophy has prepared Coinsetter well for what appears to be a coming uptick in US bitcoin exchanges serving the market.

“I think what we built and have a chance to build, other people don’t anytime soon," Lukasiewicz concluded.

Credit card image via Shutterstock


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