CEO positions Overstock as financial company

HIGH POINT — Prompted by reports on March 1 that the Securities and Exchange Commission is investigating Overstock.com and other companies involved in cryptocurrency, Furniture Today asked Patrick Byrne, Overstock’s founder and CEO, to explain the company’s involvement and how blockchain, the technology that powers cryptocurrency, relates to the e-commerce business.

Furniture Today: Did Overstock.com receive a subpoena from the SEC? (SEC spokeperson Chris Carofine said the agency does not confirm or deny investigations. On March 7, the agency published a Statement on Potentially Unlawful Online Platforms for Trading Digital Assets.)

Patrick Byrne: We didn’t get a subpoena. We got a letter … called voluntary disclosure. And I support it. I think this ICO (initial coin offering) industry is totally corrupt.

There’s been something introduced in the past year called a utility token. A utility token is a real sort of sleazy way around the rules; that’s how I would describe it. And so the SEC has stepped in, and I figure the more regulatory scrutiny this gets, the better Overstock looks because we’ve done this entire thing in this very credible way. We aren’t doing a utility token; we’re doing a security token. We’re doing something that close to no one else has done.

FT: What would you tell retailers about understanding cryptocurrency and blockchain?

Byrne: The thing to understand is the difference between Bitcoin (a well-known form of cryptocurrency) and blockchain. Blockchain is the underlying technology, and when you apply it to things like money, you get Bitcoin. But it’s separated from the underlying technology.

The blockchain itself is very powerful. It’s going to make for more efficient supply chains at some point. It’s going to be really interesting to see how the market works it out. I’m actually hoping to work with some of the players in that field.

FT: Japan’s Rakuten plans to launch its own cryptocurrency; Alibaba is applying blockchain technology to its supply chain; and a majority of surveyed Amazon Prime members would use a cryptocurrency issued by Amazon. Is a lot of that just trust in the name?

Byrne: You’ll notice that Overstock has introduced all kinds of interesting financial products through our website in recent months. We’ve been thinking along the same lines. We think, because of our name, we can introduce financial products and have a real edge.

FT: What do you plan to do next?

Byrne: We will comply with the SEC, and we want to explain what we’re doing to them. We’re quite proud of what we’ve built, and we’re charging forward.

(In December, Overstock.com’s fintech subsidiary tZERO launched the first SEC-approved, blockchain-based alternative trading system. Overstock.com in August began accepting major cryptocurrencies such as Ethereum and Bitcoin.)

We are raising capital to build out a blockchain financial ecosystem that we think will be extraordinary. We know we’re going to rub shoulders with various people at agencies down the line, and we’re trying to stay in good standing with everybody and do the right thing.

FT: Do any of these projects have to do with using Overstock.com as a testbed for blockchain applications? (Overstock.com’s second and third quarter earnings calls, Byrne mentioned the possibilities of taking the company private or transitioning ownership to another party.)

Byrne: That is absolutely in my mind, depending on what happens with the company.

The one area we do not have a strong blockchain presence that I would like to is in blockchain meets supply chain.

We could be a wonderful test bed and development platform for all kinds of blockchain/supply chain technologies, but that’s going to depend on how this strategic process turns out in the near future.

FT: How do you see blockchain changing retail and e-commerce?

Byrne: It’s going to make supply chains more efficient; it’s going to make payments instantaneous; and … the opportunities for cheating are going to get squeezed out of the system. Blockchain really resolves a lot of issues regarding cheating, without requiring third-party institutions that we have to trust.