On December 1, the Canadian company formerly known as BitGold, sent an email to their customers, announcing a change that fundamentally affects how their customers use and experience the service.
The essence of the message was that BitGold customers with holdings of more than 1,000 grams of gold could no longer use the service as place to continue accumulating gold savings. For those customers wishing to continue saving, they would need to create an account with GoldMoney, the UK company that BitGold acquired earlier in the year.
(Note that earlier this year, BitGold rebranded as “Goldmoney” to encompass both companies. In this article, however, I’m going to continue referring to them as BitGold to distinguish between them and the UK “GoldMoney” company. In actuality, BitGold now refer to themselves as “Goldmoney Personal & Business”, and refer to GoldMoney as “Goldmoney Wealth”.)
Customers forced to open GoldMoney accounts would experience a number of consequences and disadvantages with respect to what they were used to at BitGold, including:
- Annual storage costs of 0.12% to 0.18%, when previously storage was free.
- Gold purchase commissions of 2.5% on amounts under $10,000, when previously the commission was 0.5%. (GoldMoney doesn’t charge sell commissions, but your gold would have to appreciate by a factor of four before you’d break even with respect to BitGold.)
- Loss of ability to purchase gold with a credit card.
- Loss of the ability to make online vault-to-vault transfers.
- A degraded online user experience.
- You’ll likely have to go through KYC/AML procedures again.
Potentially, A 0.5% vault-to-vault fee to transfer gold in the BitGold network to the Toronto vault, which is the only vault available for transfer to GoldMoney.(I’m relieved to report that they refunded my vault-to-vault fee. Yeah!)
Overall, this announcement was not terrible news. Compared to similar services, BitGold/GoldMoney is still competitive. And through the maintenance of accounts at both BitGold and GoldMoney, one can still maintain 1kg of gold for free at BitGold, and even avoid the high purchase commission by purchasing at BitGold, and transferring to GoldMoney.
But still, this announcement was definitely not good news for affected BitGold customers. And the company should have made that clear in its announcement. They should have said something like:
We’re announcing an important change that’s going to limit your continued use of BitGold, and require you to open an account with our sister company if you wish to continue accumulating gold. There will be some disadvantages, and the migration might be a little inconvenient. Here’s what you need to know…
But they didn’t. Instead, they said this:
We’ve worked to expand the capabilities of the Network and want to share the benefits of applying for a Goldmoney Wealth Holding, as storage fees will apply to Network account balances of or above 1,000 grams at the rate of 0.18% per annum as of January 1, 2017. Please note that you may still hold up to 1,000 grams in a Goldmoney Personal or Business account for free. As you presently hold a balance of 1,000 grams or more in your Network account, we invite you to apply for a Goldmoney Wealth Holding for any storage needs you may require over this amount.
This communication was ambiguous, confusing and played down how fundamental this change really is. It didn’t explain why the change had to happen, nor the impact it would have on affected customers.
Last week, I posted an article arguing that this was a botched communication on the part of BitGold, for not being clear and transparent. I’ve worked in the product industry for 25 years and have some experience in this area, and so I was surprised when BitGold CEO Roy Sebag responded1 with what felt like a dismissal of my position:
In fact, I did approach them first. But at that point, none of the emails I’d sent to their support department since mid-November had been responded to, and the ones specifically about this announcement still haven’t!
After posting my blog article, and the ensuing Twitter conversation, I was contacted both publicly and privately by other BitGold/GoldMoney customers, expressing agreement with my sentiment, and disappointment in Roy’s response.
In fact, one customer went so far as to reduce his holdings as a result:
Since May of 2016, the Canadian company has lost 50% of its market capitalization, and in response to that, Roy posted an article on Medium two days ago, which to my eyes appears as dismissive of that situation as he was to my concerns, basically pointing to Graham’s famous remark that markets in the short term are voting machines. (Note that nobody ever refers to that remark when explaining the high value of their stock.)
I sense a pattern of dismissing problems, and that causes me concern for the future of this company. Of course, I could be wrong, and I don’t know how things look on the inside, but from an outsider’s perspective I think their public-facing position should quickly change to one of humble honesty and transparency, even if that means something like this:
We’re young. We’re growing. We’re trying to innovate in an old, creaky and heavily-regulated system. It might get a little messy as we figure things out, but we’re capable, and we’re onto something good—so bear with us, because in the long run you’ll be glad you did.
- Here’s the full conversation: ↩