If a New York City Bitcoin startup has its way, there will soon be a much easier way to transfer the cryptocurrency between the digital world and actual, usable, real-world fiat cash.

In an IRC chat with Ars on Tuesday, Charlie Shrem, the co-founder of BitInstant, said that he hopes this new system, set to open "within two months or so," will make it easier for ordinary people to use Bitcoin. The company has already started a signup page on a public Google Doc.

"This will be our foray into the real world," he added, "not just Bitcoiners."

Bitcoin, the online currency popular amongst tech geeks, cryptographers, venture capitalists, and shady individuals wanting to buy illicit substances, has had a rocky few months—although the markets seem to have restored faith in the currency, as it recently broke $10 per bitcoin.

"Bitcoins are dollars with wings," Shrem quipped.

Personal information required

The card would work similarly to a prepaid debit card, where a fixed value can be held on the card. Shrem declined to say which banks would be issuing the cards, but he did say that one would be in the United States and another would be outside the country.

The cards, which would have a QR code printed on the front and the Bitcoin address on the back, would allow cardholders to not only withdraw cash anywhere in the world drawn against their prepaid bitcoin balance, but would also allow individuals to transact directly simply by using the account information on the card.

"You’re at dinner with a friend?" Shrem said. "Forget PayPal, just scan his or your card with your Bitcoin app."

The card would have a built-in limit of $1,000, as per federal regulations on prepaid cards. In order to get a card, customers would also have to submit personal, verifiable information—known in the industry as "Know Your Customer" (KYC) details.

It appears though, that the bank isn’t actually holding a bitcoin-denominated balance.

"The bank isn’t doing anything; everything to them is US dollars," Shrem added. "The question you should be asking: is the customer getting his balance in US dollars at the time he sends the 50 bitcoin to it, or does it stay in bitcoin? The answer is, we can keep it as BTC and do the currency conversion when the card is swiped or we can convert it all to US dollars."

BitInstant, Shrem added, is assuming the entire currency conversion risk. Of course, as with most currency conversions, including between bitcoins and US dollars currently, there are small fees attached. Once this card is released, BitInstant and the issuing bank would both likely take a cut.

"The fee structure is still being worked out, but in theory, yes," Shrem underscored. "And again, I need to stress all of this is not set in stone. We’re still working out many details."

Skepticism abounds

Nicolas Christin, the associate director of the Information Networking Institute at Carnegie Mellon University, has done extensive economic research on the use and scope of Bitcoin. He remains a bit skeptical that this debit card will make a big impact among the general public.

Recently, he penned an academic study of Silk Road, the largest online marketplace of illicit substances, which operates using Tor and Bitcoin. He found that the collective vendors did nearly $2 million in monthly revenue as of earlier this year.

"It is great to add new means of payment for BTC, and I think this is a nice idea," Christin wrote to Ars in an e-mail.

"But again the price you pay for that convenience is the lack of anonymity (the backing bank almost assuredly will want to know the identity of the card holder), which is one of the major reasons for adopting Bitcoin. The most successful marketplace I know that does all of its business in Bitcoin is Silk Road, and the key reason for their using Bitcoin is the anonymity properties it helps provide."

UPDATE (Wednesday): Following the publication of our article, BitInstant published a statement on its website, clarifying the company's relationship between itself and MasterCard (whose logo appears on the mockup we published).

"BitInstant’s partners, who are issuing the card, have been working with MasterCard for many years, and the specific relationship will be between these partners and MasterCard (not directly between MasterCard and BitInstant)," wrote Erik Voorhees, the company's marketing director, in a blog post.

"It should also be stated that BitInstant’s Paycard program follows the strict AML and KYC policies which are required for such programs. All balances for the purposes of the card are held and collateralized in USD (or the cardholder’s native currency). BitInstant instantly funds the cards in USD, after receiving the user’s Bitcoins. These will not be 'anonymous' debit cards, but rather a highly convenient means for verified customers to spend Bitcoin value around the world."