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Apple-Bitcoin Rift Has Currency’s Fans Ditching IPhones

An Apple Inc. iPhone5 displays the Bitcoin Wallet smartphone app in this arranged photograph at the Pembury Tavern in London on Oct. 9, 2013. Photographer: Simon Dawson/Bloomberg
An Apple Inc. iPhone5 displays the Bitcoin Wallet smartphone app in this arranged photograph at the Pembury Tavern in London on Oct. 9, 2013. Photographer: Simon Dawson/Bloomberg

Feb. 7 (Bloomberg) -- Apple Inc.’s decision to remove a program used to send and receive Bitcoins from its App Store prompted Barry Silbert to end a love affair with his iPhone.

“I’m switching,” Silbert, chief executive officer of New York-based SecondMarket Inc., said in an e-mail after Apple this week removed his Bitcoin application of choice, Blockchain.info. “Shopping for a new phone this weekend.”

From Wall Street to Silicon Valley, technology enthusiasts who used to see the Cupertino, California-based company as a kindred spirit are voicing their frustration over its policies. Apple requires apps to be legal everywhere they’re offered, and some governments including China and India have questioned Bitcoin’s legal status.

The ouster of Blockchain is causing a backlash, and some are going to extreme measures to show their displeasure. Several people posted videos online destroying their iPhones. One user shot his iPhone with a sniper rifle, another smashed it with a metal bar and another threw it down a flight of stairs.

Bitcoins exist only as software, and transactions are completed via computing devices. Even though no physical currency exists, merchants from car dealers and Web stores are accepting the digital money. Mobile apps such as Coinbase, which was removed from the App Store last year, and Blockchain have become a popular way to make payments.

Shut Down

Blockchain had been downloaded 120,000 times before being removed. Apple has already shut out several other applications that facilitate digital-money payments from its online store.

“Apple has been acting to suppress Bitcoin apps for years,” said Rob Banagale, the CEO of Gliph Inc., a Bitcoin app that Apple allowed to remain in the store only after the ability to send and receive Bitcoins was removed. “Few consumers are using Bitcoin actively yet, including Apple customers,” Banagale said.

Since removing the apps “affects only a tiny fraction of their customer base, it isn’t worth having Bitcoin as an additional consideration for the company to worry about regulatory oversight,” he said.

Tom Neumayr, a spokesman for Apple, declined to comment.

Backers of Bitcoin, including the venture-capital firm Andreessen Horowitz, see it as an alternative to the global-payment system currently dominated by companies including Visa Inc., Western Union Co. and large banks. Bloomberg LP, the parent company of Bloomberg News, is an investor in Andreessen Horowitz.

Early adopters of Bitcoin technology, many versed in cryptography, saw it as a way to thwart government control of currencies.

Big Business

Jerry Brito, director of the technology program at George Mason University’s Mercatus Center, said Apple probably banned Blockchain due to concerns that Bitcoin transaction apps would run afoul of the law.

“Apple removing Bitcoin apps is stupid, but I don’t think it’s doing it to thwart competition,” Brito said. “But it’s so opaque, people will speculate.”

Apple curates its App Store by approving every game, productivity tool, news-reading and social-network app before it can be downloaded by customers. That contrasts with Google Inc., which has a more open approach that allows software developers to post their wares more freely.

The App Store is a big business. Apple said in January that the digital storefront was available to users in 155 countries and had sales of more than $10 billion in 2013.

Payment Systems

Currently, all transactions made in the App Store are facilitated by Apple, which has more than 400 million credit cards on file for the store. The company also is exploring expanding its payments system to allow iPhones to be used to make purchases of physical goods at stores, a person familiar with the plans said last month.

Andreas Antonopoulos, who joined Blockchain last month as chief security officer, isn’t buying the legal theory. App upgrades go through a payments system that Apple controls and profits from, as do subscriptions, so Apple “does already compete with Bitcoin” through the App Store, he said.

Antonopoulos predicted that Apple’s move would drive developers to create more websites that are accessed through a smartphone’s browser, bypassing the App Store altogether.

Recent workarounds in HTML5, a software protocol, have enabled browser-based apps to link up with smartphone cameras. Many Bitcoin-related programs need to capture QR digital codes to complete transactions.

“We’re working on an application that would do all the very same things, for any mobile device at all,” Antonopoulos said.

To contact the reporters on this story: Carter Dougherty in Washington at cdougherty6@bloomberg.net; Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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