Beepi, a peer-to-peer used auto marketplace based in California, recently announced that it will begin accepting Bitcoin payments through a partnership with Bitpay. Both companies are hopeful the new alliance will help simplify the payment process for customers paying with Bitcoin for used cars.
Michael Dell, founder and CEO of the big PC maker Dell, announced via Twitter on Friday that his eponymous company will start accepting bitcoin as a payment option for anything purchased on the company’s website.
For bitcoin, it’s one of the biggest signs yet of mainstream acceptance. With nearly $57 billion in sales in 2013, Dell would be by far the largest company to take bitcoin. Dish Network, which began accepting bitcoin in May, had $13.9 billion in 2013 sales. Expedia, which in June began accepting the cryptocurrency for hotel bookings, had $4.8 billion in 2013 sales. Overstock, which started taking bitcoin in January, had $1.3 billion in 2013 sales.
Coinbase, one of the major bitcoin payments processors, landed the business. Customers who chose bitcoin as their payment method when on Dell’s website will be sent over to Coinbase’s site to complete the purchase, a fairly common procedure.
Coinbase reached out to Dell a few months ago, according to Adam White, the director of business development and strategy at the company, who worked with Dell on the partnership. “We had some good conversations with them,” he said, and they left it at that. Two weeks ago, Dell got back in touch with Mr. White, and said they’d decided to adopt bitcoin, and wanted to get it done quickly so as to capture sales during the back-to-school season.
Dell is now the world’s largest ecommerce business to accept #bitcoinhttp://t.co/xC41rKTYXihttp://t.co/0YqPK7MfVG
— Michael Dell (@MichaelDell) July 18, 2014
Dell got the same terms every merchant gets, Mr. White said, no matter their size: a waiver on any fees for the first $1 million in sales, and a 1% flat fee after that.
Coinbase has about 35,000 merchants using its processing services, and estimates of the total number of merchants using bitcoin is roughly 65,000. Dell is the by far the biggest company, though, in that group.
For Dell, the goal was to find another way to reach customers, according to David Frink. The decision involved a combination of people within the company, he said, including Mr. Dell himself, who was “very interested in moving this along quickly.”
That said, the company understands bitcoin is still in an early stage, and isn’t expecting too much from this. “This is a pilot, and we’ll see how it goes,” Mr. Frink said.
Of Dell’s $57 billion in 2013 sales, $44.7 billion came from hardware, with the rest from the company’s services unit. While the company doesn’t break out exactly how much of its sales come from the website, Mr. Frink said “it’s very considerable,” and say both retail and enterprise products are sold on the portal.
Bitcoin prices have seen a minor increase at midday. While it isn’t completely clear if it’s in reaction to the Dell news, this is exactly the kind of news for which bitcoiners have been waiting: A big, mainstream company announcing it will take the currency as payment.
Bitcoin prices, which traded as low as $616.48 on Friday, were lately around $623.33.
UPDATE: Overstock started accepting bitcoin in January. An earlier version of this post incorrectly stated it was November. Additionally, Expedia had $4.8 billion in 2013 sales, not $4.8 million.
Okcoin and Huobi, two leading Chinese cryptocurrcency exchanges, have unveiled their Bitcoin wealth management schemes recently. Right now both only take deposits from invited users, but at least in the case of Huobi, such restriction will be lifted at the end of the month. Apparently the two exchanges have put a great amount of effort in preparation for the services, for instance, both registered their investment subsidiaries in Hong Kong. Given that neither sites are charging fees from regular trading, this new investment scheme can be their hope to turn a profit.
This, however, can be a cause of concern for anyone who cares about the future of Bitcoin and here is why:
The revolutionariness of Bitcoin is that it removes the necessity of a banking system by offering owners safe way to store and transfer value. Such arrangement by design reduces systemic risks – in a scenario of financial crisis, the closure of one bank can often lead to massive bank runs, which is something that we don’t expect to happen in the Bitcoin world, at least theoretically. While the idea of a Bitcoin bank that take in deposits and pay fixed interest may sound appealing for those who don’t want their coins to sleep in their wallets, it carries the peril that may prevent Bitcoin from living up to its name as a decentralized currency.
Bitcoin Banking In China
In China, the first Bitcoin banking service is Bitcoinsand. Its founder Li Xiaolai is an early Bitcoin investor, Bitcoin evangelist and venture capitalist. Despite Li’s renown, considerable suspicion was cast on the “first online bank for bitcoins” in the wake of the site’s launch in August 2013.
The suspicion has to do with Li’s rumored wealth. Although it remains a mystery how many Bitcoins Li actually owns, the number is widely believed in excess of 100,000 btc – such claim, though quite impossible to verify, was never denied by Li in public. In multiple occasions, Li said that he had converted his wealth into paper wallets, which were kept in overseas banks. Such a statement leaves one to wonder: If some one has that such a large wealth sleeping in the vaults, why would he bother to borrow a relatively small amount? Moreover, since Bitcoinsand claims to be a “bank”, assumedly the coins were lent to people who were willing to pay higher interest rates – but who would borrow a highly volatile currency whose real world use is still limited and pay more than 5 percent a year? Naturally, fingers were pointed to the short-sellers. Actually, there had been sporadic rumors that the founder himself was involved in shorting – Li was one of the first who posted on social media about the central bank ban last year.
Despite the controversy, Bitcoinsand has been running for nearly a year with no serious complaints and suspicion gradually subsided.
But this year, Bitcoin banking services seem to grow into a trend. Aside from the above-mentioned three, there is another similar service called Kipcoin.com. Kipcoin, which went online this May, sets its fundraising cap at 10,000 btc and pays an interest of 0.0137% daily. Media coverage indicates that the site makes money in two ways: 1. Arbitrage – buying from exchanges where prices are lower and sell at others where prices are higher. 2. Lend the coins to miners.
While I personally doubts that arbitrage can be long-term sustainable as market efficiency keeps increasing; the later seems to be relatively legitimate given that China had one of the most stringent laws regarding pirate fundraising, a crime punishable by death and building Bitcoin farms requires increasing amount of resources. Bitcoins offers a way to work around the law; moreover, many overseas mining equipment vendors see Bitcoin as the currency of choice.
Why I Won’t Trust My Coins To The “Banks”
I was attracted by Bitcoin much due to my disappointed experience dealing with banks. For the same token, I don’t quite like Bitcoin exchanges. Even though I bought my coins through these exchanges and traded occasionally, I never leave more than a couple in my trading accounts, especially after the Mt. Gox debacle, when hundreds of thousands of coins just vanished into thin air. Will 5% or higher annual return enough incentive for me to change my policy? I don’t think so. After experiencing several boom-bust cycles, seeing my coin’s value rising and falling is something that I can live with, but losing them for over-trusting is something that I just can’t forgive myself doing.
It is hard to resist a mystery man handing out no-strings Hidden Cash. It now appears that the benefactor is Jason Buzi, whole role as Mr. Hidden Cash was revealed by Inside Edition. Tweets from handle @HiddenCash give clues. The feel-good story started in San Francisco.
And whether it is the same benefactor branching out to other locales or copycats, it is a nice trend. He has spawned emulators in the US and the UK. Yes, @HiddenCash_UK has left envelopes filled with £50 or more in London, Sheffield, Manchester and other cities. The money-driven scavenger hunts should make everyone happy, especially if you dig up some green
But it’s worth considering whether you should post that photo or tell your friends all about your big find. After all, the IRS may be watching. These aren’t charitable contributions, not in the traditional sense. They are a kind of grassroots giveback but probably aren’t gifts either. After a small start, Hidden Cash, sparked a multi-city frenzy. The cash man has attracted more than 441,000 followers on his Twitter account where he gives clues to the location of the hidden money.
What if plain old cash isn’t hip enough for you? Then you can check out @SFHiddenBitcoin. The idea is similar, though it’s so far appropriately only in San Francisco, where Bitcoin might aspire to be a kind of local currency. And just like the Hidden Cash, the mystery Bitcoins are, well, mystery.
Clues at @SFHiddenBitcoin provide tips where to find Bitcoin wallets looking like small sheets of aluminum. There’s a QR code, a Bitcoin address and the @SFHiddenBitcoin Twitter handle. If you figure out the clues, you might find a wallet containing 0.0333 bitcoin, about $20.
California Gov. Jerry Brown signed legislation legalizing Bitcoin, although Bitcoin probably didn’t lead California’s official stamp of approval. The IRS, on the other hand, isn’t so sure. In fact, in March of 2014, the IRS issued Notice 2014-21 ruling that Bitcoin is property (not currency) for tax purposes. That means:
- Bitcoin payments to independent contractors are taxable and payers must issue Form 1099.
- Gain or loss from the sale or exchange of Bitcoin depends on whether it is a capital asset in your hands.
- Bitcoin payments are subject to Form 1099 reporting just like any other payment made in property.
If you find hidden cash, must you pay tax on it? Yes, it’s income, just like anything else. The same is true for Bitcoin, although there’s an extra wrinkle given that the Bitcoin has be valued. Although the IRS might not find you, remember, you file taxes under penalties of perjury. Explaining away congratulatory pictures with your winnings could be awkward or worse.
Isn’t there an exception that could make finding cash tax-free? Unless the cash or Bitcoin qualifies as a gift, not really. The IRS calls whatever you find “treasure trove.” When an anonymous couple found $10 million in rare gold coins buried on their California property, it was the biggest coin discovery in U.S. history. The face value of the coins was more than $28,000.
Their market value? Over $10 million. Most tax experts agreed that the IRS was entitled to tax the full $10 million, not the $28,000 face value. In fact, treasure trove is just one example of the astounding breadth of what is income for U.S. tax purposes.
Cash and valuables you find are taxed. So says Cesarini v. United States, involving cash found in a piano. Mr. Cesarini bought an old piano for $15 and found about $5,000 in cash inside. When the IRS said it was taxable income, Mr. Cesarini went to court.
But the IRS won at trial and won appeal. Of course, the IRS likes this case. It is often cited for the rule that the IRS gets a piece of just about everything. In fact, about the only way you can find something and not have to pay tax on it is if you’re recovering your own property.
In that case, your recovery generally shouldn’t be income. Stolen art later recovered? If you can prove it’s yours, it’s not taxed. You’re just getting it back. But even then, exceptions can trigger taxes.
Under the “tax benefit rule,” if you claimed a tax deduction for theft or loss of the property, you have to include the value of the recovered property in your income when you recover it. And if the property has gone up in value in the interim, you get stuck with tax on the increased value.
So if you find cash or Bitcoin, congratulations! Don’t let the inevitable tax bite rain on the excitement. The IRS gets a piece of almost everything.
Things may be more incremental in terms of acceptance, but the bitcoin revolution continues apace.
Bad regulation involves hacking babies in two before considering the consequences. Good regulation appreciates that the world changes.
The last year/century was appreciably different to the current one, let alone the future age of whose technological marvels we are barely worthy to evaluate, as nanotechnology reshapes our world. Wise regulators act accordingly.
In the world of bitcoin, the first reaction of the government sector was largely one of fear and confusion. Then again it was ever thus with innovation. Early underground trains were mandated with frosted windows lest ladies fainted at the sight of tunnel walls speeding by. On both sides of the Atlantic, governments demanded somebody must wander with a red flag ahead of any self-propelled automobile.
The arrival of a popular electronic currency in the form of bitcoin was a huge step. With a paucity of private sector folks pondering electronic money a decade or more ago, the government nexus had not considered just what would happen when the kindling of alt money finally caught light. Thanks to the block chain, bitcoin has not merely lit the fuse, it has blazed a trail, creating a whole new currency infrastructure which is already being used for all manner of exciting processes.
Bitpesa, to name but one, threatens to transform payments to the emerging world – creating a vast saving for those who have until recently been slaves to the somewhat Dickensian western systems. Every dollar saved on transfers means more money reaching the relatives of migrant laborers in the emerging world, delivering a palpable boost to living standards where every cent counts.
Governments and central banks in Japan and Russia have been amongst those reappraising the crypto currency revolution in recent days. Their incremental opening up to alt money is a healthy sign that the future of money involves the fiat financing of government co-existing alongside their crypto currency cousins. Indeed a recent auction of bitcoin from the bankrupt Silk Road was bought entirely by a Silicon Valley VC Tim Draper, who intends to use the crypto currency to provide an alternative to smaller emerging market currencies.
Yes, there are still agents of reaction everywhere, with the mainstream Western media endlessly obsessed by silly scare stories of drugs and crime at the epicenter of bitcoin trade, when of course the entire value of all bitcoins ever mined is equivalent to a bare few days of the dollar-funded drugs trade.
Nobody ever seriously suggests closing the Fed and switching off the US dollar (well apart from one Paul family in the USA). Naturally as the likes of the Russian Central Bank points out, money laundering is something we all must remain vigilant about. Nevertheless, as the Japanese government has also made clear, the future of money involves digital stores of value and transaction agents. Moreover, while the US may have sent out mixed messages about digital money, the fact that citizens can now donate bitcoin to political campaigns tells us all we need to know about how the political classes value crypto currency.
Nobody accepts gummy bears as electoral currency, but in bitcoin Washington trusts for its own self-sustenance at the ballot box.
The bitcoin revolution is now approaching a fascinating post nerd point in its development. Competing currencies are at different stages of development but all have similar issues going forward. The nerd era needs to give way to the broader acceptance by the public and that means better interfaces and more popular means to access, store and use cryptocurrency.
The Fascinating AuroraCoin has stalled as the purchasing infrastructure is not yet properly advanced. Likewise with bitcoin, while small entrepreneurs like myself are in the vanguard of accepting its usage, new payment providers have borrowed too much from the old era of infrastructure when micropayments – wafer-thin charges and instant access to the proceeds – are the way forward for all intermediaries. However these are mere ‘teething troubles’ as the revolution continues and bitcoin becomes an established instrument of global commerce.
The competition for our wallets is developing incrementally as the revolution is building pace. Competition is good for every citizen and consumer. Governments are no longer at the center of the money chain via their Central Banker cousins and that means better government, as opposed to willful devaluation of citizens’ savings as practiced by the political classes of all hues for decades. In that sense, the Copernican revolution in cash is gaining pace as never before.
Seen as “absolutely the best remaining, and available name” for this new market; selling in Heritage Auctions’ July 24 Domains & Intellectual Property auction
DALLAS — The URL Bitcoins.com will hit the auction block on July 24, 2014, as Part of Heritage Auctions’ Domain Names & Intellectual Property Auction, sold by Mark Karpeles, the controversial founder of the failed Bitcoin exchange Mt. Gox, and is expected to bring more than $750,000.
“We are hoping, with the sale of Bitcoins.com, to provide some relief to the people impacted by the Mt. Gox bankruptcy,” said Karpeles, “and will be putting at least half of the sale amount toward that purpose.”
“Bitcoins.com is absolutely the best remaining, and available name for this new market,” said Aron Meystedt, Founder and Director of the Domain Names & Intellectual Property category at Heritage Auctions. “Bitcoin.com, the singular version, is owned and used by Blockchain.info, the world’s most popular bitcoin wallet, and Bitcoinwallet.com itself is also already tied up. For the right investor this is a golden opportunity.”
The bitcoin payment system, an open payment network aimed at eliminating currency exchange fees and removing the need for intermediary banks, was created in 2009. It is mostly in the last 12 months, however, that it has gained mainstream notoriety, largely with the failure of Mt.Gox.com and the seizure of the nebulous Silk Road website, along with the subsequent liquidation of its Bitcoin assets. Bitcoins (plural) are the actual unit of exchange that has monetary value.
“The current market capitalization of all bitcoins in circulation is between $7 billion and $8 billion,” said Meystedt. “Daily, there are millions of dollars in transactions in Bitcoins. This auction offers the opportunity to capitalize on one of the most significant developments since the inception of the Internet.”
Bitcoins.com is being offered in the July 24, 2014 auction alongside more than 90 other premium domain names, including OklahomaCity.com, DEC.com (the fifth oldest domain name on the Internet, circa 1985), Rides.com, SEM.com, Digital.com, Cute.com and SouthernCalifornia.com.