Bitcoin: Heading mainstream?
It’s no surprise that Bitcoin forced its way to the World Economic Forum Annual Meeting’s agenda, which took place last week in Davos, where the world’s top politicians, financiers and academics were discussing the most pressing issues facing the world today. The theme of this year’s conference was “reshaping the world” and, given how Bitcoin has reshaped the way people think about money, it would be rude to leave it out! However, the overall sentiment towards Bitcoin seemed rather sceptical.
Martin Arnold, Banking Editor at the Financial Times, who attended the summit, reported that top US financial leaders believe Bitcoin could be used to fund illegal activities. Given the recent arrest of Charlie Shrem, the vice chairman of the Bitcoin Foundation, you can understand their concern. As a result of these fears, Bitcoin may not be able to survive the regulation standards that will apply to it. The US Treasury secretary, Jack Lew and Jamie Dimon, chairman and chief executive at JPMorgan, stated that regulatory uncertainty has deterred banks from offering services to virtual currency businesses; this will make it difficult for Bitcoin businesses to survive rigorous regulatory conditions.
However, according to International Business Times, here in the UK, HMRC is expected to change Bitcoin’s classification from a “tradable voucher to a private currency” as soon as next month. As a tradable voucher, Bitcoin will be subjected to a “double tax”. This means, when you purchase Bitcoin, you pay an initial 20% VAT. And then, when you use it to purchase that new album you’ve had your eye on, you will also pay an additional 20% VAT on it.
Therefore, the re-classification helps eliminate uncertainties over capital gains tax and produce a reduced VAT, making Bitcoin even cheaper to use. In addition, Bitcoin does not come with the heavy transaction fee that applies to electronic payments such as Visa. It uses a direct peer-to-peer technology and removes the middlemen, which empowers the consumer to take charge of their own balance sheets.
Since the demand for Bitcoin has continued to grow, countries such as China has issued user guides for their citizens. Analysts from Bank of America Merrill Lynch have begun to cover Bitcoin, issuing the first report quoting a single Bitcoin’s market value at $1,300, as of May 2013.
Furthermore, an article published by CoinDesk states that London is to have its first Bitcoin ATM installed in February this year, with plans to launch five ATMs per month. Simultaneously, the Financial Times reported this week that the US Department of Financial Services will be taking steps towards regulating Bitcoin as a way of welcoming it into mainstream.
Overall, this looks like a natural transition. Just as social media has transformed the way people communicate, Bitcoin will continue to change the way we think, exchange and utilise money.
by Hiwot Wolde-Senbet