Imagine you have $100. That’s U.S. fiat dollars, mind you. You’re in a foreign country, like Morocco or France. In order to spend your money you either need to find someone that will exchange your U.S. dollars to the local currency, or find merchants that accept U.S. dollars. That’s probably not overly challenging in a world dominated by the U.S. economy. An economist might say that U.S. dollars are liquid, easily exchangeable for goods, services, or an equivalent value in other currencies. You would likely visit an exchange which would take a small percentage of the transaction, as low as 0% for interbank transfers, or as high as 13% via traditional exchange services. You could pay even more to a local business if you’re in a pinch. Now change the scenario. You’re at home on your computer, you’ve got a stack of Amazon gift cards, and you’re taking a 33% loss to convert Amazon gift cards to bitcoin, arguably moving from a liquid asset to a less liquid asset. Why would any rational person do this? Answer: They wouldn’t. Purse.io has built a business upon the grey and black market of stolen credit card information, supporting a potentially criminal clientele by laundering their proceeds.
The premise of Purse is an attractive idea for users: Receive a discount on goods you want, delivered right to your door by Amazon. The same motivation that leads consumers to clip coupons and wait for sales drives users to Purse, who doesn’t want more for less? This makes advertising Purse an easy proposition, and if the story were that simple it would end there. For Purse and its users, however, the story is much less straightforward than simply receiving a discount.
Purse users are paired with buyers who accept payment in bitcoin for purchasing items that the user wants. The buyers accept the loss of the difference between the bitcoin they’re paid and the dollars they must spend to purchase items on Amazon. This means buyers have dollars to spend, since they are purchasing goods on Amazon. If buyers have the money to spend and want bitcoin, the most rational, and cost effective, means of acquiring bitcoin is to buy it on a service like Circle or Coinbase. The fee for these services is a paltry amount compared to the 15% haircut the same buyer would accept on Purse. Would you give away 15% of your cash for no real benefit?
Another incentive must be present for buyers on Purse who desire to have bitcoin. Maybe they don’t have cash, but instead have Amazon gift cards? Most folks have probably found themselves in possession of gift cards they really don’t have a use for. Holiday seasons bring lots of gifts, and lots of gift cards. A number of sites offer gift card exchanges or outright buying and selling, as high as 95% of the balance for Amazon cards, which are considered among the best due to the selection on Amazon. These gift cards are actually very liquid, and that liquidity and utility means their value on the secondary market is relatively close to face value. For a Purse buyer with an abundance of Amazon gift cards, why not buy things you need? Or sell them for cash, or trade them dollar for dollar for other gift cards you do want? What rational person gives away money?
There must be another reason that Purse buyers don’t want to use mainstream services like Coinbase or Circle. There must be a reason that buyers have access to Amazon goods, but seemingly not other services or sites. And there must be a reason that buyers are willing to give away huge discounts to receive bitcoin when other services offer more in credit or cash. So what’s the reason? Maybe it’s credit card fraud. To be clear, I don’t think Purse is engaged in fraud, they’re simply a matching service. They only match buyers and sellers, offering a valuable service, how the quid pro quo occurs is not up to Purse. A great workaround for a gray market; what they don’t know, they can’t be compelled to testify about.
Ultimately, the buyers on Purse are likely engaged in nefarious activities that put them in a position to use lots of credit cards, accepted on Amazon to purchase goods, and translate some portion of the proceeds into bitcoin, which is less traceable than a normal bank account. The discounts don’t matter to carders because the money isn’t theirs in the first place, and bitcoin is liquid enough to allow them to turn their dubiously acquired credit card data into real value. The circumstantial evidence for this extends beyond the logical thought experiment and to real customer experience, where several Purse users have tangled with the law or other scammy issues.
Purse.io probably isn’t doing anything overtly illegal. Acting as a blind middleman, or a blind fence more accurately, has a certain amount of insurance as long as the middleman can maintain and document that they didn’t know the source of the credit cards. Given the attention being paid to cybercrime and the negative connotations attached to bitcoin, it wouldn’t be surprising if Purse is either already working with law enforcement out of their own self-interest to avoid repercussions, or will end up being the target of law enforcement action in the future. Acting as a fence probably isn’t the killer app for bitcoin. Who knew?
US $100 bill – Work of the U.S. government (public domain image) (Author: Bureau of Engraving and Printing) (Source)
Purse logo – Courtesy of Purse via PR firm Wachsman PR