Someone credible is finally trying to compensate for the abysmal failure that is Bitinstant (see http://bitinstantscam.com and basically any Bitcoin forum). That is fantastic.
However, let's not get carried away. This is not instant for first-time users. You still have to go through verification and wait at least 4 business days for your first purchase to go through before reaching the qualifications for instant purchases. Coinbase really needs to adopt convenient, instant deposit methods such as Western Union and Moneygram in order to reach critical mass.
Western Union would never allow their service to be used for instant buying of bitcoins, if they find out you're using it to trade any kind of digital currency they seize your next transactions and block anything going to your service. This is to prevent scammer MITM auction fraud, credit card fraud on their online transfer sending service, to comply with anti money laundering nonsense and to crush competitors.
MG is the same. To reach critical mass, you'll need to sign up existing stores or prepaid card distributors to sell vouchers for you much like how Ukash works. Then you can walk into a corner store and buy with cash a voucher to plug into the site and get coins immediately. For this not to fail like bitinstant you need a huge amount of VC finance to float between collecting cash revenues and fronting coins to buyers.
Ukash still isn't allowed into the US market, Paysafecard was only allowed in because they sold crippled vouchers that can't be used for online gambling. Bitcoin can be used for anything, so unlikely the feds would greenlight this either and not end up seizing your company and jailing everybody whenever Nevada government complains about your service enabling gambling that doesn't benefit them, or copyright lawyers cry it is being used to pay for one of those automatic torrent download services so you don't reveal your US home IP.
That is not the case. Bitinstant has been using MG for a long time, they still use them today. The fact that Bitinstant itself has gone off the rails doesn't change the MG policy apparently allowing these transactions.
They use ZipZap which is owned by moneygram, it's a different setup where retailers can accept cash payments and isn't available everywhere like Wu or regular MG
Is this really 'instant'? I tried using Coinbase to buy Bitcoins a little over a month ago. Spent a week or so logging in repeatedly, including right at 6 AM EST, which is supposedly when the site 'resets' and the day's limit goes back to 0. I was never able to buy; kept getting "Sorry, we're over the day's limit" error messages again and again. Tried a solid 10 or 12 times over the course of a week. I guess that means things are good for Bitcoin if it's turning away that much business (I assume there are legions more and I'm not the only one), but it certainly sent me, for one, looking for alternatives.
They're just both services that are run by folks who weren't expecting to hit the scale they are now, have no experience building financial systems, and are waaaay in over their heads.
Bitinstant recently laid off all of their support staff and has gone quiet for nearly two weeks on support related matters. Their CEO, Charlie Shrem, used to constantly tweet several times per day. He hasn't tweeted in 9 days now and seems to have vanished (https://twitter.com/charlieshrem). Over the holiday weekend, their $8/mo SquareSpace account used for hosting their blog was suspended for billing issues (though they have since scraped up the $8).
Bitinstant is taking money from new orders and allocating it to old orders (aka Ponzi Scheme). I suppose that means that as long as new orders continue to arrive, customers will be made whole and eventually they could earn enough in fees to cover up whatever they did that caused the mess they are in. That's if someone doesn't complain to the FBI first and get them shut down.
Their bitcoin service to top up phones disappeared pretty quickly too and never came back, also their debit card service never happened. They used 'VouchX' which was run by a shady guy who disappeared after LR went pop so maybe that's why they can't afford staff.
Bitinstant regularly provides a worse price to customers than they could possibly have obtained on any public exchange at any time between receiving payment and sending the coins. Users can apparently recover funds stolen by BitInstant by making noise in public places.
It's not shocking that a DEA agent thinks that 5%-10% of WU transactions are drug-related. DEA personnel are constantly looking for reasons to validate their own pointless existence. When you're a hammer, everything looks like a nail. I would be incredibly shocked, however, if that number were even remotely accurate.
I've used Bitinstant, and it worked well enough (was a small transaction, however). My impression is that it isn't a scam, but more of a bunch of nerds in over their head.
The problem is that most people who find themselves in need of Bitcoins for the first time need them immediately. Having to wait several days is a deal killer for many people in this position. That puts a huge damper on new adoption.
Lucky for coinbase is now prepaid credit cards you buy in stores have an activation delay for unknown reasons, here it is a 3hr delay and they don't bother telling you except for tiny fine print, and everytime you try to use it before delay is up, it resets all over so seems like your card never works.
So if people are still buying PPD cornerstore visas then they'll wait for bitcoins, especially since bitcoins are used for niche items like drugs (lol), VPNs/hosting, speculation or cheap remittance
However, let's not get carried away. This is not instant for first-time users. You still have to go through verification and wait at least 4 business days for your first purchase to go through before reaching the qualifications for instant purchases. Coinbase really needs to adopt convenient, instant deposit methods such as Western Union and Moneygram in order to reach critical mass.