Bitcoin News

Australian Bitcoin Industry Reacts to Tax Proposals

The Australian Tax Office (ATO) today released its long-awaited guidelines on how bitcoin businesses and individual users will be taxed in Australia.

The guidelines are similar in nature to those issued by Singapore in January, which received a mixed response from the bitcoin community.

In summary, bitcoins will not be regarded as ‘money’, and will be taxed in a similar way to other non-cash or barter transactions. As in Singapore, this raises the specter of double-taxation for some bitcoin transactions.

Likely to be impacted most are businesses who have been transacting in bitcoin and treating it equally to the national currency, the Australian dollar (AUD).

Titled Tax treatment of crypto-currencies in Australia – specifically Bitcoin, the four-page guideline document is a “general in nature” draft version only, and not yet legally binding.

The ATO has also not indicated when the rules will begin to apply, or whether (in the case of IRS guidelines in the US) they will be applied retroactively.

Defining terms and setting out rules

“Transacting with Bitcoin is akin to a barter arrangement, with similar tax consequences”, the paper noted.

“The ATO’s view is that Bitcoin is neither money nor a foreign currency, and the supply of Bitcoin is not a financial supply for goods and services tax (GST) purposes. Bitcoin is however an asset for capital gains tax (CGT) purposes.”

Items such as shares, bonds, loans, derivatives and foreign currencies are regarded as ‘money’ or ‘financial supply’ under existing regulations, and are not subject to GST (similar to sales tax or VAT in other jurisdictions).

These definitions are bound to cause some controversy. The bitcoin industry had argued that the broad definition of money could also include bitcoin, and asked for it to be defined as such.

Were bitcoin to be defined as ‘money’, ‘foreign currency’ or even ‘financial supply’, exchanging it would not incur GST. This may, however, require legislative change and would likely have wider implications for other forms of non-money units, such as store loyalty points.

Most tax authorities and regulators around the world have so far expressed reluctance to refer to bitcoin as ‘money’, despite some jurisdictions requiring bitcoin handling companies to apply for ‘money services business’ licenses.

Personal and business compliance

To comply, Australian tax-domiciled businesses and individuals involved in bitcoin transactions will be required to keep records of: (a) dates of transactions; (b) the value in Australian dollars as listed on a “reputable online exchange”; (c) the purpose of the transaction; and (d) who the other party is (a bitcoin address will suffice).

Non-business personal transactions using bitcoin would not be subject to income tax or GST. In such transactions, any capital gain or loss from disposal of the bitcoins will be disregarded if the value is under AUD$10,000 (USD$9,300).

A business or enterprise receiving bitcoin as payment for goods or services, however, would need to record the dollar value as part of ordinary income (as with any other non-cash payment).

Businesses would also be charged GST on that transaction, though some deductions may be applicable.

Salaries, wages, miners and exchanges

Employees could still elect to have their salaries paid in bitcoins instead of dollars, but their employers would be subject to provisions of the Fringe Benefits Tax (which covers non-salary perks like company cars, frequent flyer points, memberships, etc).

Employers would still be required to deduct ‘pay-as-you-go’ income tax from bitcoin salaries.

Those in the business of mining bitcoins (not individual miners) would pay income tax on the value of bitcoins transferred to a third party, with losses permitted as a tax deduction. Bitcoins would be regarded as ‘trading stock’ and their total value would need to be declared at the end of each tax year.

Exchanges and bitcoin ATMs would be taxed depending on whether they were acquiring/supplying bitcoins as part of a regular business transaction, or as an investment. Applying GST (currently 10%) to anything sold by an exchange could see Australians paying more for locally-acquired bitcoins.

Reactions from the Australian bitcoin industry

The Bitcoin Association of Australia (BAA) said it was “disappointed” with the guidance and that it “could be better”, though it appreciated the ATO’s level of consultation with experts within the community.

President Jason Williams said in a statement.

“The BAA believes that as bitcoin is being used as money, it should be taxed as money. Applying double GST to some bitcoin transactions will adversely effect investment in the bitcoin economy and may push bitcoin businesses to relocate to other, more favourable jurisdictions.”

The statement described the ATO’s guidelines as an “onerous administrative burden” on bitcoin businesses, and would put Australia “behind the curve” of a potentially revolutionary technology.

Ashley King, CEO of bitcoin wallet provider CoinJelly, was more optimistic, saying the guidelines might actually help bitcoin participate more in the mainstream economy.

“The release of the ATO guidelines finally gives the Australian bitcoin community some clarity. We’ve been expecting this kind of response from them, so we’re not surprised. Hopefully this legitimises the community and our fellow bitcoin businesses and makes simple things like getting a bank account easier. We know not everyone will be happy, but now we all know where we stand.”

Businesses will go offshore, warns commerce association

Ron Tucker, chairman delegate of the Australian Digital Currency Commerce Association (ADCCA) and CEO of Sydney startup Bit Trade Australia, said the ATO’s approach to the impact of GST on bitcoin transactions was “impractical” and took a line that had already been rejected by other jurisdictions, such as the UK.

“The ATO has engaged in the process of consultation but there is no evidence in the ATO’s paper that they have responded to the issues raised by the bitcoin industry and the practical problems pointed out to them. Indeed, the approach of the ATO rejects the international trend.”

Rather than become a regional center for innovation, the new rules would more likely see bitcoin driven underground and startups move offshore. Several proprietors, Tucker continued, had already expressed they would consider relocating.

He added it was now up to the government to respond with legislative change to avoid stifling a budding industry.

“This is the beginning, rather than the end of discussions on this issue and the ADCCA looks forward to a continuing dialogue with the ATO.”

Consultation a positive sign

Amor Sexton, a leading digital currency-focused lawyer with Adroit Lawyers in Sydney, told CoinDesk the bitcoin industry’s reaction would likely be mixed, but was happy with the ATO’s level of consultation.

She said:

“The very fact that the tax office is taking the time to go through the consultation process, and get this far, shows there’s some legitimacy to the concept of bitcoin being money.”

Bitcoin adoption rates were still relatively small compared to the rest of the economy, she added.

“The fact that it’s gotten this much attention from the tax office is a really good thing. Even if you don’t end up getting the answer you want in the short term, I think it sets the stage for a consultation process that will see change later on.”

Sexton co-wrote a research paper on behalf of the Bitcoin Association of Australia with recommendations on how the ATO should tax bitcoin, which was presented to the agency at the beginning of June. That paper had recommended bitcoin be treated as money to avoid double-taxing through GST.

The ATO announced its intention to issue bitcoin tax rulings in February, initially intending to release detailed guidelines by the end of the 2013-14 financial year on 30th June. Later, however, it decided to delay its announcement in order to provide a “comprehensive and robust” ruling and seek additional legal advice on the matter.

Source : http://www.coindesk.com

BlinkTrade Opens New Bitcoin Markets in Venezuela, West Africa

This evening New York-based technology platform BlinkTrade is unveiling UbuntuBitX, its West African bitcoin exchange.

It is the second exchange the company has introduced in a week, having launched SurBitcoin in Venezuela last Thursday.

BlinkTrade provides clients with its technology, thereby offering them a cost-effective way to start their own bitcoin exchanges and removing the need to hire a developer. Other exchanges use their own proprietary software, centralizing bitcoin, fiat money and liquidity, team head Rodrigo Souza explained to CoinDesk.

But one thing BlinkTrade is especially proud of is its ability to give exchange users access to bitcoin liquidity in regions where bitcoin trading is not yet widespread.

Souza explained:

“My mission statement is very simple: let’s lower the costs for bitcoin exchanges, using an open-source, cloud-based platform for exchanges like BlinkTrade, and also allow bitcoin exchanges to share liquidity.”

BlinkTrade itself does not hold users’ bitcoin or fiat money; the brokers have custody and are required to publish all of their bitcoin addresses as a transparency measure.

Souza said that one day the company would be able to give users worldwide the option to select their region’s best brokers – but this is looking far into the future. For the time being, he continued, it is focused on empowering as many exchange operators as possible in the developing world.

Entering the Venezuelan market

SurBitcoin, the company’s Venezuelan client, launched in beta on Thursday. The exchange is giving Venezuelan users 200 Venezuelan bolivar fuertes (VEF), or about $32 at press time, in credit upon signup to buy bitcoins. Since the launch at least 160 users have signed up.

Although there is no official data on the number of unbanked citizens in the country, Souza estimates the figure is around 70%, and that as many people therefore struggle with inflation, which was up to a rate of 56.3% by the end of last year – the highest on the continent, according to World Bank data.

Souza added that it is difficult to remit money to Venezuela without going through the black market, where the fees can exceed 20%. Few people use money transfer services like MoneyGram or Western Union, deterred by the steep exchange rate.

Souza said:

“Venezeula imposes a set of challenges. If we can succeed in Venezuela, we can succeed in any country of the world.”

Regulatory limbo

Whether the monetary policy and fiscal objectives driving up inflation will affect the region’s bitcoin economy remains to be seen. Regulators have not given an official ruling on how to control bitcoin or whether to classify it as a currency, a commodity or otherwise.

Souza sees bitcoin as a digital asset, and hopes for his business that the government will rule from a similar stance.

“Venezuelan law doesn’t allow you to trade any currency outside of their central bank,” Souza explained. “So, it is very important for us that Venezuelan authority does not rule that bitcoin is a currency, because it is not.”

Presently, bitcoin’s prospects are in the hands of the local people, he added, saying:

“Local people might influence their government. We are not going to try to fight governments with bitcoin, we will follow their local laws and regulations so we don’t get bitcoin banned in those countries.”

Targeting West Africa

This evening BlinkTrade will introduce UbuntuBitX, the Benin-based exchange that will operate for users in eight West African countries: Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Sénégal and Togo.

Centralized exchanges don’t help the remittances market from any country, Souza explained, adding that high fees and a lack of liquidity restrict bitcoin from thriving as remittances.

Africa is important because of the need and potential of micro-remittances (those less than $100), he explained, saying:

“You send $100 to West Africa, and the other person there will get $90. If we establish a market there with low fees, bitcoin can thrive in the micro-remittances market. For larger remittances you need more liquidity.”

About BlinkTrade

BlinkTrade’s next move is to Brazil, where it is in talks with Bitcointoyou.com about using the BlinkTrade platform.

The platform is built on a WebSocket API, allowing any front-end developer to build applications with which users can convert bitcoin to fiat.

“Providing easy access to liquidity to developers will create an infrastructure that will probably change the way people use bitcoin today,” Souza said.

BlinkTrade is a product of a three-man team of developers: Souza, Clebson Derivan and Roberto Santacroce Martins.

The team use multi-signature technology to protect the customers and brokers. The platform is open source. The code, available on github, is still in beta, but has been public since its inception.

Source : http://www.coindesk.com

How Cryptoagency is Building Bitcoin’s Better Business Bureau

Cryptocurrency forums are littered with stories of scams and bad customer service.

Now, a cryptocurrency ratings agency is hoping to quantify the community’s view of various bitcoin businesses. Cryptoagency.org will use a reputation system to reflect a company’s quality.

But, the question remains, do we need a ratings system for cryptocurrency businesses?

Roger Ver, bitcoin entrepreneur and CEO of Memory Dealers, who has had to deal with malicious parties himself in the bitcoin world, said that he doesn’t believe the bitcoin industry has been disproportionately affected by scams.

He explained:

“In my business career before bitcoin, I saw entire ‘businesses’ set up with the sole purpose of scamming others.”

Ver has seen firms attempt to use stolen credit cards, fake purchase orders and fraudulent cashiers checks sent via FedEX.

“These same dishonest people just see bitcoin as another tool in their arsenal to cheat others,” he said.

Bitcoin’s quasi-anonymity doubtless makes it easier for these bad actors, but in many cases, what seems to be a scam often turns out to be ineptitude.

Inspired by poor customer service

It was just such an experience that caused Larry Fenton to start Cryptoagency.org in March, after an encounter with an exchange went sour.

“There was no one really to turn to to try and figure out how to deal with this company that I was having problems with. That’s where the idea came from,” he says.

Fenton bought $800 in bitcoin from an exchange, but found that when he submitted the online transaction, he received no confirmation message. Assuming a system glitch, he did it again. The second transaction was confirmed.

“Everything was fine, until on my bank statement a couple of days later I noticed two withdrawals for $800,” he says. “I checked with my bitcoin exchange account again and there was only one credit for $800.”

The first $800 was trapped in limbo.

“I called up the company, sent them an email, described the problem and they said they’d look into it. Three or four days later, nothing had happened,” Fenton recalls.

Eventually, he had to begin his own investigation. He called the support desk and talked the front line staff into giving him the name of the company’s owner. He surfed online and lucked out: a WHOIS account yielded the owner’s name and address.

After calling the owner, he got a promise to have his money returned. The cash eventually made its way back to him, but with no explanation.

“The company never did give me an adequate reason for why their system didn’t acknowledge my transaction,” he said. “So it was a very unprofessionally run situation, and after I got my money back, I cancelled my account. I no longer wanted to do business with that company.”

How rating works

But accreditation isn’t something that you can automatically pay for, and there are rules governing it, Fenton explains. Companies must disclose any theft of cryptocurrency, resulting in the loss of accreditation for a year. They also lose accreditation if they fail to repay loans.

The value of the system lies in the community rating, Fenton says. Membership of the community is free for the general public, and they can rate and leave reviews of companies that they have dealt with.

Firms are rated on a ‘five-coin’ system. If a company falls below a three-coin rating for a month, it loses its accreditation until it can regain the three-coin rating, sustaining it for at least a month.

If this sounds similar to the Better Business Bureau, you’d be right. Fenton originally wanted to use the BBB in the company’s name, but decided against it to avoid trademark disputes. But whatever Fenton calls it, Ver likes the concept.

“Reputation-based systems are super important. We already know that we can trust Expedia and Overstock with our bitcoins, but we don’t know the same thing about other new businesses,” he says.

Gaming the system

There is a potential for people to game the system. Fake accounts could easily be used to post bad reviews and depress a company’s rating. That’s the sort of thing that will take manual work from the company’s three-person team to prevent.

Fenton said:

“We check the web site daily and we read all the reviews and the comments. Someone would be anonymous to the rest of the world but we know their real name, email address and number. We can personally contact them to verify their information.”

Ideally, as the industry matures, we may see the risk landscape change. “I think we will see more and more businesses with great reputations starting to accept bitcoin,” says Ver.

In the meantime, people may still use credit cards or cryptocurrency escrow services when dealing with companies that don’t have a track record, he concludes. And while we’re in this phase, reputation will be even more important.

Source : http://www.coindesk.com

Chamber of Digital Commerce Proposes Small Business Exemption for BitLicense

The Chamber of Digital Commerce (CDC) has submitted its official comments to the New York Department of Financial Services (NYDFS) regarding the BitLicense proposal.

Launched in July, the Washington-based lobbying group led by president and former Forbes contributor Perianne Boring is seeking to influence broader bitcoin policy in the US, while advocating for smart regulation that will support the digital currency industry.

The CDC offered a broad critique of the proposal, suggesting that the NYDFS needs to revise its definition of ‘virtual currency’ and ‘virtual currency business activities’ to avoid what it called an “egregious act of regulatory overreach”.

The full 10-page filing goes on to suggest that the NYDFS should include a safe haven provision for startups, exempt small businesses from regulation, make better use of existing regulation and extend its current 45-day comment period so that the industry would have more time to fully respond to the proposal.

Further, the CDC offered its services to the NYDFS, suggesting that it could provide the department’s members with the necessary information to revise the proposal, and expressed its hope that its comments could provide a similar service to the community.

Boring said:

“We have been very vocal in encouraging the industry to submit comments to the NYDFS. The Digital Chamber’s comments are posted on our website and the industry is welcome to use them as a resource.”

The news follows a similar 6th August filing submitted by the Bitcoin Foundation, and comes amid a period of increasing scrutiny for the proposed laws. In recent days, Circle CEO Jeremy Allaire and the Mercatus Center’s Eli Douardo and Jerry Brito have criticized the regulations.

Small business exemption

Perhaps most notably, the CDC advocated for small businesses, defined under New York law as those that employ 100 people or less, to be excluded from the law. Businesses that hold under a certain amount of assets, Boring said, should also be exempt from compliance.

Boring argues:

“Startups are hotbeds for innovation; they often keep larger players on their toes by offering superior products at lower prices. The regulator of a market should avoid building any artificial barrier to entry. Artificial barriers to entry so will deter intelligent minds from developing interest in the market, make existing players complacent and hurt consumers.”

The filing further states that the NYDFS is required to accommodate small businesses when writing its proposed rules, saying that this is mandated by Section 202-B of the New York Administrative Procedures Law.

Freedom to invest and innovate

The CDC also took aim at Section 200.8(b), which relates that bitcoin businesses maintain their profits and earnings in permissible investments denominated in US dollars, arguing businesses should be able to invest profits without restrictions provided they maintain full reserves.

Under the proposal, permissible investments include certificates of deposit, money market funds, state or municipal bonds and US government securities.

Section 200.10, the provision that requires bitcoin businesses to receive written approval from the NYDFS for any new product, service or activity, was also cited for revision.

Arguing that the provision be struck from the proposal, Boring said:

“It is dubious that NYDFS has, or can be expected to develop, the technical and business sophistication to make quick and astute decisions as to product development.”

She added: “Having a regulator calling the shots in the marketplace, rather than protecting consumers, would cripple any industry and would take NYDFS far outside its competence and appropriate role as regulator.”

Source : http://www.coindesk.com

LibraTax IRS-Compliant Bitcoin Accounting Software Nears Launch

Libra has announced the imminent release of LibraTax, a new software suite designed specifically for digital currency users.

The California-based software developer said LibraTax allows individuals and small businesses to comply with the latest IRS regulations and file returns reporting bitcoin, XRP and other cryptocurrency transactions. The suite should become available by the end of August.

LibraTax allows bitcoin users to comply with accounting requirements put forth by the IRS earlier this year.

Libra said the software will accommodate “all 2013 and earlier” digital currency users as well as those who filed for extensions in spring 2014.

“Even those who have already filed will want to amend their tax returns once they discover that reportable capital gains may be significantly reduced with optimized accounting options,” the company said in a statement.

Automating bitcoin accounting

Libra pointed out that recent IRS guidance on digital currencies requires that taxpayers report digital currency gains and losses on state and federal returns. The problem with this approach is that it requires a lot of manual calculation, making it extremely time consuming and prohibitively difficult.

LibraTax was developed to automate the accounting process by retrieving the user’s transaction history from the block chain. Once it collects the necessary data it synchronizes the value with the digital currency’s historical fair market value. All types of taxable events are supported, including donations, gifts and income.

This allows the software to dynamically compute gains or losses in a few seconds and Libra says it can output a “tremendously beneficial” report to realize minimized or no reportable gains.

More software on the way

Libra said it is also working on a new product suite designed for small businesses and enterprise needs. There is still no word on a launch date for the new suite, but the company said pre-registration will commence with the public beta.

“Our primary objective is to have approachable, convenient software that simplifies the end-user experience associated with taxpaying – ultimately saving users precious time and money. We’ve accomplished that without a doubt,” said Libra founder and CEO Jake Benson.

Libra has been working on LibraTax for months. The company revealed its plans back in April, when it promised to deliver an accounting suite compliant with IRS guidance in the third quarter of 2014.

At the time, Benson told CoinDesk that compliance is one of the most critical issues surrounding digital currencies. He pointed out that tax software might not be the “sexiest business” in the digital currency industry, but it is one of the most essential ones at the moment.

Source : http://www.coindesk.com

Bitcoin traders and companies can now use LibraTax to calculate tax obligations

Meet LibraTax, the first Bitcoin-friendly tax calculation tool especially created for all cryptocurrency traders and related companies. Or at least for the ones that intend to report their Bitcoin activity to the official authorities.

Unlike other similar tools designed to work with fiat currency, LibraTax is a cloud-based service that scans the Bitcoin blockchain to determine how much you gained or lost when purchasing or selling BTC.

According to PCWorld, the tool turns the necessary accounting operations into an automatic process based on the user’s transaction history. It then generates a report after scanning the blockchain and attaches that same document to the schedule D form.

The great thing about LibraTax – once again, for the users who actually intend to report their Bitcoin-related profits or losses – is its ability to track all taxable events (income, gifts, donations, etc) without having to perform manual searches. And the users can still remain anonymous by uploading a spreadsheet of their transactions with no public address or identifiable details, or use a throwaway email address.

But the company behind LibraTax has other plans: they also intend to integrate the app with services like Intuit’s TurboTax and QuickBooks.

Using LibraTax will be free until the tool’s official launching, which will happen in mid-September. Besides the plans available on a subscription basis for tax professionals and accounting firms, the company that developed the tool is also planning a premium version that should cost between $10 and $19.

Source : http://bitcoinexaminer.org

Deckbound : A Competitive Card Game Based On The Bitcoin Blockchain

Deckbound is a series of upcoming collectible card games that will feature cards backed by transactions on Bitcoin’s Blockchain; each unique card will be assigned a specific transaction on the Blockchain. Because each card is simply a transaction on the Blockchain, players will have a free market to buy, sell, and trade their collection of Deckbound cards. The game will play like a strategy card game such as Magic The Gathering, and Hearthstone, both of which I am a seasoned player that plays competitively. Strategy card games involve constructing your deck out of desired cards, and out playing your opponent and accomplishing a goal. Both players will have the same goal, but there are many different ways to try to go about that goal. Games like MTG and Hearthstone have several archetypes of decks that seek to defeat their opponents with a unique style of play. Deckbound will likely have many similar mechanics and many new ones.

Because the cards will be unique and can be traded between players, the card brings in aspects of both digital and analog card games. I got a chance to interview the lead developer of Deckbound, Gareth, about the game:

What is Deckbound?

Deckbound is a set of collectible trading card games and supporting services where every card is based on a Bitcoin transaction, and can be traded, levelled up and tracked across the blockchain.

What inspired you to create Deckbound?

Primarily frustration with not being able to explore traditional “analog” collectible card games in the digital space, but also my enthusiasm for blockchain-based applications, especially things that can leverage the unique and immutable nature and history of transactions.

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What sets Deckbound apart from other Card Games?

That it leverages the best of both the digital and analog collectible card game spaces: the versatility and availability of digital cards, along with the permanence and tradability of analog cards.

How will Deckbound be played?

The first Deckbound game, Deckbound: Heroes is a browser-based game. Deckbound: Land Grab is also currently being tested as a browser-based game, and the third, as yet unannounced, game is a real time game that can be played on desktop (PC, Mac and possibly Linux) computers.

Will Deckbound feature art work?

Yes, we’re exploring options for this — both procedurally generated “themed” art, as well as community contributions. We’ll launch with some commissioned work but hope to get the community involved in this process as soon as possible.

When is Deckbound set to be launched?

Heroes is launching in a limited test Alpha in September, and see a general release as soon after that as possible. We will be iterating on all Deckbound games throughout their lifetime, and consider them to be part of a modern set of evolving games (as opposed to traditional versioned titles).

What are your goals for Deckbound after launch?

Between the three games planned and the supporting services and features we’re pretty clear on where the next couple of years takes us — but as above we are clear that these are all evolving products that we’ll iterate on continually. We’re looking forward to getting feedback and working with the community.

Conclusion:

Deckbound seems like a unique game, and it is certainly the first card game to include the Blockchain as the main mechanic of card generation. Deckbound’s alpha testing is set for September. For more information about the game and the testing head on over to the Deckbound website.

Source : http://www.cryptocoinsnews.com

How Cryptoagency is Building Bitcoin’s Better Business Bureau

Cryptocurrency forums are littered with stories of scams and bad customer service.
Now, a cryptocurrency ratings agency is hoping to quantify the community’s view of various bitcoin businesses. Cryptoagency.org will use a reputation system to reflect a company’s quality.
But, the question remains, do we need a ratings system for cryptocurrency businesses?
Roger Ver, bitcoin entrepreneur and CEO of Memory Dealers, who has had to deal with malicious parties himself in the bitcoin world, said that he doesn’t believe the bitcoin industry has been disproportionately affected by scams.
He explained:

“In my business career before bitcoin, I saw entire ‘businesses’ set up with the sole purpose of scamming others.”

Ver has seen firms attempt to use stolen credit cards, fake purchase orders and fraudulent cashiers checks sent via FedEX.

“These same dishonest people just see bitcoin as another tool in their arsenal to cheat others,” he said.
Bitcoin’s quasi-anonymity doubtless makes it easier for these bad actors, but in many cases, what seems to be a scam often turns out to be ineptitude.