The Bitcoin Boom Could Be Great for Sex Businesses

Sex-toy entrepreneur Polly Rodriguez is sick of bankers giving her funny looks.

Her online shop, Unbound, sells candy-colored vibrators, bangle handcuffs and other intimate products for women. Despite selling out inventory, Rodriguez said she struggled to find a bank that would extend her a small-business loan. She chalked it up to finance industry jitters when it comes to sex.

Now she sees a ray of hope coming from digital currency.

“When you get labeled as an adult company, you get blacklisted, effectively,” Rodriguez said. “The moment you put it into code and take out the subjective moral judgment, it’s a shift.”

Banks and credit-card companies can be hidebound when it comes to adult businesses, which can be big moneymakers. Sex toys alone haul in more than $20 billion a year around the world, and by 2020, sales are expected to reach almost $30 billion, according to London-based market-research firm Technavio. Still, financial firms consider sex-toy sellers high risk, lumping them in with businesses such as escort services and pornography websites, which can sometimes flirt with illegality.

Chargeback Wariness
Credit-card companies are also wary of chargebacks, which happen when a cardholder claims a transaction is fraudulent. For instance, a man charges his porn-watching to his card, then denies he was doing it when his wife discovers the payment, leaving the card company to eat the money.

Freedom from such complications has some adult companies cheering the swell of digital currencies, including Bitcoin and Ethereum, and the rise of digital-payment tokens, which could help them skirt skeptical intermediaries and allow customers to make direct payments.

Xavi Clos, head of production at BaDoink VR, a virtual-reality porn-production company, said that tokens show big potential in the adult industry because they’re anonymous and direct ways to accept payment. The problem, he said, is “for actual commercial use, there’s nothing that’s ready for prime time yet.” Transaction costs are still too high, and the infrastructure, subject to hacks and freezes, must improve first.

Cottage Industry
That’s not for a lack of trying. A cottage industry of digital-payment mechanisms for sex-focused businesses is emerging. One early entrant, SpankChain, is setting up a payment ecosystem based on the Ethereum blockchain. In a white paper, authored by “Spanktoshi Nakabooty” -- a reference to Bitcoin’s anonymous creator with the nom de guerre Satoshi Nakamoto -- SpankChain explains how the tokens can be used as payment tools for webcams. The virtual payment arrangement will differentiate itself by charging a 5 percent fee on performer earnings, compared with the 30 percent to 50 percent charged by traditional cam services, according to the Nakabooty white paper.

Such tokens would revolutionize webcams, which allow performers to stream live shows while users reward them with virtual tips. Payment-processing costs currently chew up a lot of their earnings. This year, Chief Executive Officer Ameen Soleimani said SpankChain would promote its own webcam site as a demonstration project. Porn actress Giselle Palmer starred in its first live-cam show on New Year’s Day.