As Bitcoin exchanges drop Dwolla, Milne says company stays focused
Since TradeHill's launch in early June, it had been accepting Dwolla as a way for its users to fund their accounts in order to purchase Bitcoins, a virtual, peer-to-peer currency, on its exchange. According to the blog Bitcoin Money, Bitcoin exchanges, such as TradeHill, have chosen to use Dwolla for its competitive transaction fee (a flat 25 cents) and the understanding, which has now proven inaccurate, that Dwolla transfers are non-reversible.
This news concerning TradeHill, one of the top two Bitcoin exchanges — Mt. Gox is the other — comes less than one week after Dwolla reached its $1 million in transactions per day milestone, a portion of which can be credited to Dwolla's use in the Bitcoin market. "Given Bitcoin’s recent explosion," The Next Web's Brad McCarty wrote on Thursday, "it would stand to reason that at least part of Dwolla’s explosive growth is being caused by the ease of compatibility between it and the Bitcoin currency system."
According to a TradeHill blog post on Tuesday, TradeHill was one Dwolla's top two customers (Dwolla declined to comment on this fact), but now it is no longer.
"We have witnessed nine cases where a Dwolla payment we received (and credited) was reversed days or even weeks later," TradeHill wrote on Tuesday. In a post on Monday, TradeHill said a recent audit of transactions found losses of $37,000 due to reversals by Dwolla, meaning that TradeHill had administered Bitcoins to users after receiving a credit confirmation but then later learned that the Dwolla transaction had been reversed.
Regarding Dwolla's ability to reverse a transaction if a customer dispute is submitted, Dwolla CEO Ben Milne said: "At the end of the day, these processes have been in practice with these merchants — and (by) these merchants, I mean Dwolla merchants as a whole — for quite some time.
"And I think that the unfortunate side is that you know there's an air of uncertainty about Bitcoins as a whole, and I don't think this is probably any exception to that rule," Milne said. "But in this case we require written consent for a reason when [selling] certain goods, and we do retain the right and we always have retained the right to be able to arbitrate these types of disputes and be able to relay those disputes through financial institutions."
More than once, Milne stressed that Dwolla is committed to supporting "legitimate users, purchasing legitimate goods and services that they legitimately want." If a user has a dispute or issue with Dwolla, Milne said his support team can be reached by phone or email, the latter of which never goes unanswered.
Whether TradeHill's decision will lead to a domino effect amongst the Bitcoin trading platforms is yet to be seen. As of today, a second exchange, ExchangeBitcoins.com, has also stopped accepting Dwolla.
When asked what this means for the future of Dwolla, Milne said: "Moving forward, we have to continue to concentrate on our core clients, and we will." Those core clients include Dwolla's banking partners, such as recent FiSync sign up Financial Plus Credit Union, and a future 15 more banks that plan to offer FiSync.
To learn more about Dwolla and Bitcoin, see our post: "Bitcoin: What is it and how is Dwolla involved in its marketplace?" And a guest post by Ben Milne: "Guest Post: The virtual currency debate, exchange and hysteria".