Why has Amazon created its own money? A bit of fun, a short-term promotion, or could Amazon be testing the water ahead of a BitCoin-like move?
Amazon.com Inc. (Seattle, Wash.), the world's largest online retailer, announced on May 13 that it has launched Coin, a virtual form of money that customers can use to purchase software and add-on features for games at its Appstore.
And to "celebrate" the move Amazon deposited 500 Coins in the Amazon accounts of all its existing Kindle Fire customers in the U.S. Apparently that was tens of millions of dollars worth of Coins given to account holders to encourage them to visit the appstore. Those that want to can purchase additional Coins online from www.amazon.com/coins and get a discount of up to 10 percent if they buy in bulk.
Amazon did not give a very compelling justification for the creation of Coins saying that is an "easy way" to make purchases. The good old U.S. dollar, or the euro or the pounds sterling and so on, and credit card accounts denominated in those currencies, are also easy ways to make purchases.
"We will continue to add more ways to earn and spend Coins on a wider range of content and activities — today is Day One for Coins," said Mike George, vice president of apps and games at Amazon, in a statement.
Does this sound familiar?
It reminds me a bit of BitCoin, the notorious online currency that bubbled up in the news a couple of months ago.
The BitCoin started being used to make purchases in 2009 and rumbled along quietly for a while but in late-2011, the Bitcoin exchange rate fell from over $30 in June to below $2 in October, thereby revealing the online currency's liability, in the Internet era, to speculation and bubbles. In 2013 it happened again when the BitCoin reached a high of $266 on April 10 before falling back below $100 within a few days.
The point must be made that right now Amazon's Coin is tied to the dollar, with one Coin being equal to one cent. There is no indication that Amazon has any intention to let the Coin float free, thereby encouraging it to become an object of speculation. But as Mike George said, this is Day One for Coins.
Multinational companies – including those in the upcoming digital generation – like to play national governments off against each other when it comes to taxation. In the last few days in the U.K. we have had a senior Google employee being quizzed by a Parliamentary sub-committee over the way Google organizes its affairs so that European sales are conducted in Ireland, which offers a lower tax regime than the U.K.
Imagine how tempting it would be for companies from the digital generation to use their key positions in the online world to try and take control of money from governments so that it can be controlled for their shareholders' benefit – but probably not for the benefit of customers or the general public. Maybe BitCoin has shown them it is possible.
Related links and articles: