Cool Hip Tech Brands Don’t Get Bitcoin, But Global Brands Do

Singh, a financial technology veteran hired by BitPay for his ability to bring new products to market, believes Bitcoin is the least expensive way for …

“I talk to cool hip tech brands who are spending all this money on marketing right now,” says BitPay Chief Commercial Officer Sonny Singh. “All they have to do is accept bitcoin to get new customers. The whole crypto community, which has been valued as high as $800 Billion, would know about these brands. [They] would probably be doing about 5-10% of their online sales in bitcoin. And of that 5-10%, nearly 60% of those customers will be first-time customers.”

BitPay hired Singh for his fintech experience.

Sonny Singh, Chief Commercial Officer, BitPay

Karina Louise Photography

Singh, a financial technology veteran hired by BitPay for his ability to bring new products to market, believes Bitcoin is the least expensive way for brands to acquire new customers quickly.

“Yet, cool hip tech brands are the ones not doing it,” he says. “It boggles my mind when I talk to these mid-tier brands and they don’t even know about [bitcoin]. These are cool tech kids that are running these companies, backed by VCs. And they don’t even understand how Bitcoin works?”

Global brands like Microsoft, NewEgg, ATT, Avnet, Dish Networks all accept Bitcoin, but very few silicon valley startups or technology unicorns do.

“I get snail mail every day from new startups trying to get me to buy their sleeping mattresses or eye glasses when they could increase their sales dramatically by accepting Bitcoin,” he says. They’ll say they’re too busy or that they can’t hold bitcoin on their balance sheet.

“And we tell them they don’t have to,” says Singh. “They can settle in US dollars the next day. It is still not interesting to them. They’re going to get [potentially millions] in new revenue per year. Do they care about that? Still, they say, it’s not a fit for them right now or they’re too busy.”

According to Singh, merchants tell BitPay – which processed over $1 billion-worth of cryptocurrency transactions in 2018 for the second year in a row – that 53% of their customers that spend with bitcoin are new customers. Since you’re not spending much money to acquire these customers, the customer acquisition cost is, therefore, relatively low. And growing companies need revenue the most. But, while they might pay millions of dollars for an advertisement, they won’t implement Bitcoin and court its community.

“If you want to go after a community that is 18-45, affluent, 80% male, then the quickest way to do that [for those companies] is to accept Bitcoin,” says Singh.

When compared with credit cards, BitPay offers real savings. Accepting Bitcoin through BitPay costs 1% and is cheaper than a credit card by about 4%. There is no chargeback exposure. Merchants pay 2.75% through Stripe with a 2% chargeback risk on top of that. “You can make 4% margin on every product you sell Bitcoin versus credit cards,” says Singh.

Air Baltic, one of the largest airline carriers in Europe, charges a 5 euro fee on credit card purchases. With bitcoins, which the company accepts through BitPay, there is zero fee. Airlines and cell phone providers, such as new bitcoin accepting AT&T, have tight margins. Though mid-level tech brands aren’t always convinced by increased revenue and lower fees, payment managers at Microsoft and Newegg, both of which accept Bitcoin, recognize the payment value proposition. Singh doesn’t think they’re too concerned about $10 million to $20 million in new revenue.

When first considering accepting Bitcoin, big brands first want to know the legal implications of accepting Bitcoin. The legal team looks at it, and since there is nothing illegal about accepting Bitcoin payments, they sign off on it. Their next question often centers around if the payment method needs to be marketed any differently. They don’t.

“A lot of the project managers at Microsoft and AT&T, and the people doing the implementation, don’t know bitcoin and neither do most of the executives,” says Singh. “It takes longer to explain because they haven’t used bitcoin before.” Sometimes, BitPay’s educational efforts lead to individual converts. By the time BitPay went live at Avnet, for instance, a couple of the guys on the implementation team owned their own bitcoins. But, in general, big companies don’t have a lot of bitcoin champions internally.

When implementing Bitpay, big corporations assign project teams, and make a big deal of the timeline. “It’s great to watch them do it that way versus regular merchants [who] install a code and put it live,” says Singh. “They accept their timeline and dates and update calls every week, and do testing every week – it’s pretty amazing.” Eventually, it goes live.

“They just see it as a great payment option that they themselves might not use,” he says. “Then they learn why it’s better during the whole implementation process, and how supportive the community is by all the media attention they get. When big brands see Microsoft and Dish Networks go live, they take notice. It helps move brands.”

BitPay processed $1 billion in transactions in 2018.

A mobile, QR-code payment made via the BitPay app.

BitPay

BitPay has executive meetings with Fortune 2000 companies, and their executive teams often want to learn about Bitcoin. They want to know what they can do with it. BitPay sometimes does more education in these meetings than selling, giving them background on Bitcoin, how it works, the crypto community, cryptocurrency regulation and things like that.

The Fortune 500 brands BitPay talk to generally don’t understand how bitcoin transactions work. And so BitPay talks to them over and over again. Payment managers, who are supposed to be payment experts, don’t know how Bitcoin works. “They assume they have to hold it on their balance sheet and it is too volatile,” says Singh.

When they learn they do not need to do this when using BitPay, accepting Bitcoin makes more sense. The follow-ups begin to look more like traditional sales once the educational aspect is through.

For big brands like AT&T, it comes down to the pros and cons. “It’s cheaper and quicker than a credit card,” he explains. “People all throughout America get it.”

AT&T began accepting Bitcoin through BitPay in 2019. Anything that’s in their web app and the mobile app can be paid for in bitcoin. BitPay started engaging with AT&T a year and a half ago. AT&T is actually charging that 1% fee back to the customer.

“The AT&T excitement gets all these other brands moving faster now, that really helps everything out,” says Singh.

When Avnet, a world-leading distributor of electronic components and services, began accepting bitcoin payment process BitPay in March 2019, the news made Avnet the third largest technology company in the U.S. to accept Bitcoin payments, behind Microsoft and Dell.

“If you’re in Brazil, and you need to buy $2 million IBM servers from Avnet, you send Avnet $2 million and you pay 2% FX spreads on both sides, and it takes five days,” says Singh. “We can help Avnet get paid in one day, for a 1% fee and settled in USD.”

To BitPay, that’s really the pain point that Bitcoin can solve for cross border payments. They’re cheaper and quicker than wires in most regions in the world. “CFOs hate bank wires,” said Singh. “You send a million dollars from Thailand and it comes out in America at $950,000 dollars. What happened to the $50,000? FX fees. They might not even tell you how much it’s going to be half the time or how long it’s going to take.”

While some Bitcoin purists are upset that the whole world’s not accepting bitcoin yet, Singh is convinced of BItcoin’s value position in payments and confident in the progress it has made.

“From a Fintech point of view, Bitcoin’s actually working,” says Singh. “It’s making great progress. Everyone around the world knows the name Bitcoin now and understands bitcoin a little bit. It’s got the same brand recognition as Coca Cola or IBM, Argentina, Brazil or India now, which is pretty remarkable because it happened naturally and virally. Nothing in fintech moves fast, and this is moving faster than anything we’d ever seen in fintech before. “

Singh, is not concerned Bitcoin is not yet at McDonald’s. “It doesn’t solve a pain point at McDonald’s. But, we’re slowly seeing its adoption in use cases around the world.”

BitPay employees in the US, Europe, and Latin America receive part of their salaries in Bitcoin. In Argentina, its employees take one hundred percent of the salary in bitcoin. Why?

“Not because they think bitcoin is going up,” says Singh. “Because their own currency goes down. That’s the value of Bitcoin the American’s don’t quite see. Because in America it’s just been trading or speculation. People outside and America and Europe need bitcoin. They trust it more than their own currency.

He adds: “In the US, we all trust USD, and in Europe they trust the euro. Outside of that, most people don’t trust their own currency. Bitcoin enables them as a currency hedge. If you’re in India, and you want to buy something on Microsoft’s website, your Indian credit card wouldn’t work anyway. Bitcoin enables people all over the road to be part of the global economy now and you are getting the same Bitcoin in India as in Argentina and the US, which is the same bitcoin that Microsoft accepts. It’s actually working in a full circle and brings everyone together. That’s the message people miss.”

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Bitcoin Price Drops Sharply Below $10K, Marking New Weekly Low

Chicago Mercantile Exchange (CME) Group’s managing director Tim McCourt recently said that Bitcoin futures saw an average daily volume of $515 …

The price of Bitcoin (BTC) has dropped dramatically today, falling by $600 at 6:00 p.m. UTC on Aug. 28.

In the course of an hour, the Bitcoin price sank from $10,269 to $9,630, but is currently attempting to stage a recovery. At press time, the coin is trading at $9,721.

Bitcoin price. Source: Coin360

Bitcoin price. Source: Coin360

Bitcoin’s current position marks a weekly low for the seminal cryptocurrency, after hitting a seven-day high of $10,791 on Aug. 20. On its 30-day chart, the coin is down to just above where it started at $9,519 on July 28.

The recent drop in price follows news that Bakkt — the much-anticipated Bitcoin futures platform — will let clients start depositing assets in its custodial offering Bakkt Warehouse on Sept. 6. Earlier this month, Bakkt announced that trading in its physically-delivered Bitcoin futures contracts would begin on Sept. 23.

Chicago Mercantile Exchange Group’s managing director Tim McCourt recently said that Bitcoin futures saw an average daily volume of $515 million in May 2019. On May 13, Bitcoin traded a record daily volume of 33,677 contracts, equivalent to over 168,000 BTC.

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So you received a letter from the IRS about your bitcoin. Here’s why, and what to do next

At first, confusion about how to deal with the tax side of virtual currency was understandable. At the end of 2013, right when the cryptocurrency hype …

The Internal Revenue Service has fired its loudest warning shots yet across the bows of bitcoin investors. In late July, the agency started sending letters to more than 10,000 cryptocurrency holders, warning that they may have violated federal tax laws.

This should not have come as a surprise to anyone, but it’s surely creating headaches for taxpayers and tax professionals who haven’t been sweating the details on cryptocurrency for the last few years. The good news is, it’s not too late to get up to speed. The bad news is, the days of getting a pass by claiming ignorance on the finer points of cryptocurrency tax compliance have come to an end.

At first, confusion about how to deal with the tax side of virtual currency was understandable. At the end of 2013, right when the cryptocurrency hype cycle was starting and bitcoin was valued at roughly $650, major banks, tech companies and accounting firms were convening industry summits to figure out whether cryptocurrency would be taxed as a capital asset, like a stock or a commodity, and thus subject to capital gains rates, or as a fiat currency, such as dollars, euros and yen, for which gains are generally taxed as ordinary income.

By March of 2014, though, the IRS had issued clear guidance on virtual currencies, explaining that it will tax the digital assets as property, not currency. What followed was a five-year drumbeat of announcements and actions that made it clear the IRS was getting serious about crypto. In November of 2016, the agency filed a John Doe summons to the bitcoin trading platform Coinbase, asking for names and other information of everyone who is trading bitcoin. Then, in the summer of 2018, as the price of bitcoin had climbed above the $8,000 mark, the IRS’s Large Business & International Division launched a compliance campaign into how investors who own bitcoin are filing their taxes.

It should have been clear by then that what was once the Wild West was now being carefully monitored. Still, the IRS warning letters issued last month caught many recipients off guard. The reason, of course, is that many people — even tax professionals — still don’t really understand the details of how cryptocurrency is being taxed.

Sure, the IRS categorizes cryptocurrency as property, but keeping track of the tax basis for that piece of property is not as straightforward as many other assets. For one, the price is wildly volatile. This July, the price of bitcoin topped $12,000, which is more than three times its value in December of 2018. In order to accurately calculate gain or loss, anyone selling their bitcoin needs to keep track of its value the day they received it and the day they sold it, and also factor in different tax brackets and other variables that can impact the total amount owed to the IRS. For those who are transacting with bitcoin frequently, those calculations can become exponentially complicated.

Fortunately, the IRS’ steady ramp-up in enforcement acknowledges this complexity, and even those cryptocurrency holders who have received letters still have time to get their houses in order. To help them get started, the following is a general primer on how virtual currency taxes will affect the three primary types of cryptocurrency holders.

Cryptocurrency miners

Many cryptocurrency miners are under the mistaken impression that they are only subject to tax on the amount it costs them to mine the bitcoin. However, according to the IRS, when a bitcoin is mined, the miner is supposed to keep track of what the asset was valued at on that day, and subsequently treat that value as income.

Cryptocurrency mining rigs composed of Antminer S9 ASIC machines operate on racks.

Cryptocurrency mining rigs composed of Antminer S9 ASIC machines operate on racks.
Akos Stiller/Bloomberg

Miners that are engaged in a trade or business are subject to ordinary income, plus self-employment tax. The value of the coin becomes the tax basis, and if you trade or use that bitcoin later, then you have to include in income the value of what you get, minus that tax basis. That requires onerous record-keeping, which many bitcoin miners are not currently set up to do, but is vital to staying compliant with the IRS.

Vendors accepting bitcoin as payment

In May, AT&T announced it would begin accepting bitcoin, which could well be a harbinger of the future of e-commerce. But not all businesses are created equal. A huge corporation like AT&T has armies of accountants and accounting firms to keep track of these transactions. Most, if not all, small businesses don’t have that luxury.

Take, for instance, a small retailer or a consultant that may begin accepting bitcoin. When that small business receives the cryptocurrency, that value is included in the business’s income. But at that moment in time, they now need to track their tax basis in the bitcoin they receive.

For example, if a company sells something for $5,000 in bitcoin, but then uses the bitcoin to buy something else a year later when the price has climbed to $10,000, they now have a reportable gain of $5,000. It’s easy to see how confusing this can get for businesses that don’t have the resources to employ a full-time accounting team to track the daily value of their digital assets.

Investors

While there are many different types of cryptocurrency investors, the principle for them all is roughly the same: Investors have to track when they acquire and how they use the bitcoin.

If an investor is in the business of selling bitcoin, it will be taxed differently than if an investor is engaged in casual tinkering in the cryptocurrency market. The gain recognized by bitcoin sellers will be taxed at ordinary income rates (with a top rate of 37 percent). However, those not in the trade or business of selling bitcoins will benefit from lower capital gains rates (with a top rate of 20 percent).

Employers could also start using bitcoin to pay employees. If they do that, it will add another layer of complexity because the bitcoin would need to be reported on W-2 wages, income tax withholding, employment taxes, etc.

Be prepared

Whether you’ve already received one of these letters from the IRS or you do in the future, it’s undoubtedly unsettling. Frankly, it seems threatening. Rest assured, though, that it is just part of the forced education process the IRS is introducing to the cryptocurrency marketplace. The IRS is essentially putting cryptocurrency holders on notice: We know you have this, and you’re probably treating it improperly on your taxes. That’s why it’s so vital that practitioners help their clients get their ducks in a row. Tax professionals need to change their practice to make sure they are asking and tracking all relevant data. Otherwise, eventually those IRS warning letters will become audits.

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Can Bitcoin replace currencies issued by Central Banks?

The issue of whether Bitcoin (BTC) can replace Fiat currency issued and … The Bitcoin Standard: The decentralized alternative to central banking.

The issue of whether Bitcoin(BTC) can replace Fiat currency issued and administered by the central banks across the globe is raging for some time now. There are many positives and negatives related to Bitcoin, and one has to take a holistic approach towards the issue in order to arrive at a fruitful conclusion.

Debating Grounds:

Recently, we have witnessed a debate between George Selgin who is acting as the director of the center for Monetary & Financial alternative, Cato Institute, and Saifedean Ammous, a well-known economist and author of the Book, The Bitcoin Standard: The decentralized alternative to central banking. While Selgin elaborated all the reasons why Bitcoin can’t possibly replace the central currency of any nation, Ammous emphasized that only BTC has the ability to free the monetary system from the clutches of the central banks around the world. The debate was primarily focused on three main issues: Speed of transactions, cost related to transactions, and the safety and security aspect related to transactional procedures.

Argument and Counter-argument:

Selgin argued that the overall cost of transactions and their final settlement cost are far higher in case of Bitcoin than other fiat currencies. The expensive mining procedure of BTC has the cost implications, and that’s why probably we witness the higher net cost of a final settlement through the use of BTC and some other cryptocurrencies. The argument of the Ammous, on the other hand, remains focused on the ability of BTC to settle the payment faster than any other conventional currency available today. Ammous also emphasized that BTC is the only way through which the monetary and financial system adopted by various countries can be freed from the clutches of government controls and central banks. He said that there is no other way out to achieve the objective of decentralization and BTC is the only hope that could accomplish this primary objective. However, turning the tables on Ammous, Selgin drew the attention towards high security and safety threats associated with cryptocurrency exchanges. According to Selgin, around one-third of the total Bitcoin exchanges operating in the world are hacked at one or another point in time which comes across as a serious security threat for investors. This is indeed a genuine concern and one of the most critical stumbling blocks when it comes to the wider adoption of cryptocurrencies including Bitcoin. However, it must be noted that technology has evolved over the years and thanks to the highest scrutiny and tighter controls, the incidents of online frauds have come down considerably.

Pulling it together:

Both sides presented their arguments, and in terms of key takeaways, one can easily acknowledge the power of the decentralized system adopted by Bitcoin and other cryptocurrencies to change the world. But at the same time, many concerns need to be addressed before BTC becomes a mainstay of financial transactions and money exchange.

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Bitcoin Got too Close to Facilitate a Murder Plan

Jonas got caught after CBS Chicago, which was conducting a press investigation on the sale of illegal services, intercepted her bitcoin transaction …

Bitcoin has been named as an accessory in a murder-for-hire scheme.

The cryptocurrency, which allows people to exchange value over the internet without having to go through a bank or any other financial institution, facilitated an online transaction involving an assassination plot. Tina Jones, a nurse from Des Plaines, allegedly hired a gunman via darknet to have the wife of her ex-lover murdered. She paid $10,000 in bitcoins for the job.

Jonas got caught after CBS Chicago, which was conducting a press investigation on the sale of illegal services, intercepted her bitcoin transaction down. The media agency reported the Woodridge police immediately, leading to Jonas’ arrest.

“DuPage County prosecutors have said, less than two years after she was married, Jones began having an affair with a married man; a colleague at Loyola University Medical Center, where she worked as a registered nurse,” reported CBS.

The agency informed that Jonas turned herself in last year and is now facing criminal charges, including attempted first-degree murder and solicitation of murder for hire. She is currently living in Georgia as she prepares to file a fresh plea.

Illegal Bitcoin Transactions Rising

The case follows years of worrisome reports about the use of bitcoins in financing crime-related activities. In 2017, an Italian woman confessed for plotting the murder of her former lover as she looked for assassins on dark websites. She admitted paying a hitman about $4,000 in bitcoin, a transaction that would later be presented as evidence to prove her criminal intents.

Just last month, a man received prison time for hiring a murderer – after paying $6,000 in bitcoin – to kill the boyfriend of her former mistress.

Chainanalysis, a blockchain forensic firm, said in its latest July report that use of bitcoin in financing illegal operations could reach up to $1 billion this year. The company informed that the bitcoin network had already processed $515 million worth of financial transactions that might have benefited money launderers, drug dealers, and whatnot in large.

The findings came as a reminder of the regulatory risks that surround bitcoin and the rest of the cryptocurrency market. In June this year, the Financial Action Task Force – an interministerial agency for combating terrorist financing and money laundering – named bitcoin as one of the financial tools of criminals. The agency recommended mandatory know-your-customer measures for exchanges and firms involved with cryptocurrencies.

Banks are not Behind

According to Bloomberg, well-regulated banking institutions launder an average of $2 trillion every year. The media agency prepared an interactive report suggesting that JP Morgan Chase, City Group, ING, HSBC, Commerzbank, Deutsche Bank, Danske Bank, Standard Chartered, Commonwealth Bank of Australia, 1MDB, and many other financial giants assisted criminals.

Europol, meanwhile, portrayed bitcoin as an inferior alternative to cash-based illicit activities, arguing that the latter does not leave a trail behind.

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