Category Archives: Bitcoin
When CGAP published its Brief on Bitcoin versus Electronic Money in January of this year, we concluded: The current realities of Bitcoin mean it is still a long way off from reaching the unbanked. It seemed that digital currencies such as Bitcoin were primarily the domain of consumers in developed countries who were tech-savvy and enjoyed playing around with the latest hot item. Yet demonstrating just how quickly things move in this space, just a few months later a start-up called BitPesa launched a service using Bitcoin to provide cheap and fast remittance services to Kenya. CGAP decided to provide support to BitPesa for market research of potential customers, so that CGAP could understand what potential digital currencies have for financial inclusion as well as to understand the practical and regulatory barriers facing a start-up wanting to link Bitcoin with the formal banking and mobile money infrastructure in an emerging market.
Photo Credit: Antana, Flickr Creative Commons
BitPesa, based in Nairobi, is initially focusing on providing remittance services for the UK to Kenya corridor and charges a variable rate of 3% on transfers. Here is how it works.
CGAP was interested in BitPesa as a test case for the link between digital currencies and financial inclusion for two main reasons. First, not only are international remittances very significant (Kenyans working abroad sent home $1.3 billion in 2013) but they are a huge pain point in Africa. Tackling this expensive and inefficient system makes a lot of sense. The World Bank calculates that the average fee for a 300 transfer from the UK to Kenya is 9% – and thats excluding additional margin made off the exchange rate. BitPesas 3% fee is a significant reduction. Aside from cost, international bank transfers and even PayPal can take days or even a week to clear. There doesnt seem to be a lot of motivation from banks to increase efficiency in this space and extremely efficient peer-to-peer protocols like Bitcoin might provide some impetus for improvement.
Second, Kenya is an ideal country in which to test this out as the majority of the population regularly uses accounts of some sort bank accounts or, more commonly, M-PESA accounts which increasingly are linked to bank accounts such as CBAs M-Shwari account. Most remittance services do not send money to accounts; instead recipients must cash out the entire amount immediately at one of the remittance services locations in that country. This is a great opportunity to push remittances into accounts where recipients can store value to use as needed or send it on to pay school fees or buy goods.
So, just six months after its soft launch, what can we learn from BitPesa about the potential of digital currencies for enhanced financial inclusion?
1. So far, the strongest use case for BitPesa is Kenyan entrepreneurs who need to receive payments from abroad.Nicknamed the Silicon Savannah, Nairobi has plenty of tech start-ups, many of whom receive money from abroad. Before BitPesa, someone from the company would literally go to the ATM several times a day and withdraw the maximum amount in order to receive payments from customers abroad and then go into the bank branch to deposit into their shilling denominated account. BitPesa provides an alternative to this inconvenient method of accessing money. The video below shows some great examples of how start-ups are using BitPesa.
2. Getting to individual remittance recipients, including the unbanked, will be more of a challenge. Businesses need to receive bulk payments and so are highly motivated to figure out the cheapest and most efficient way to do this. Entrepreneurs by nature are tech-savvy. However, its going to take longer for the average Kenyan living in the diaspora to learn about BitPesa and be comfortable trying out a new and unknown technology for sending money abroad. BitPesa is conducting focus groups and outreach in Kenyan neighborhoods in the UK and is confident that this customer segment will grow, but it wont happen overnight.
3. Even if BitPesa succeeds in reaching mass market international remittance recipients, the inclusion effect will be limited to enhanced use cases for the funds received. Channeling remittance funds into a wallet with multiple functionalities is significantly better than the way most recipients access and use funds today. However, for an even bigger effect, consumers would need to be able to use digital currencies within Kenya to send funds or buy goods more cheaply and efficiently. Right now, the service still requires Kenyans to cash out from their BitPesa accounts into local currency. Therefore the most likely route to lasting inclusion would be expanding the availability and use of merchant payments through mobile money such as Kopo Kopo or Lipa na M-PESA.
It will be fascinating to watch the digital currency story unfold . There are many compelling reasons why digital currencies could significantly impact financial inclusion. Practically, despite the promising early beginning of BitPesa, there are many challenges to overcome before digital currencies reach the unbanked at scale in a significant way. In our next blog post, well unpack some of the most controversial elements of digital currencies and lay out which common arguments against them have merit and which we think can be disproved.
Bitcoin vs. Electronic Money: Digital But Different
Washington, D.C., 23 January 2014:A new CGAP report released today compares the main differences between Bitcoin and electronic money (e-money). The report shows that Bitcoin as a virtual currency is markedly different from e-money and cautions regulators and policy makers not to confuse the two.
There are few similarities between Bitcoin and e-money other than both being in digital format, according to the report. While e-money is a mechanism for interacting with government-issued and regulated currencies such as dollars and euros, Bitcoin is a virtual currency that has no fiat currency counterpart. Bitcoin is based on a decentralized peer-to-peer network that can be transferred somewhat anonymously and can be highly volatile in terms of value. These characteristics of Bitcoin, while having some potential benefits, can pose considerable risks to consumers and make it a challenge for regulators.
The full report is available at CGAP.org.
View the infographic comparing Bitcoin and e-money
On the other hand, e-money is digitally issued against equal value of fiat currency, and it can be centrally regulated, usually by a central bank. The report also points out that, unlike Bitcoin, there is growing evidence that e-money schemes have helped bring people into the formal financial system, especially in developing countries through mobile phone technology.
The current reality is that Bitcoin is still a long way off from reaching the unbanked, notes Sarah Rotman, Financial Sector Specialist at CGAP and author of the report. While we shouldnt completely rule out Bitcoins future potential in this market, its very difficult to predict where Bitcoin will be in five years and if it can have any impact for the poor.
With the current widespread attention surrounding Bitcoin, the report warns that regulatory concerns about the virtual currency could spill over to e-money and cause previously favorable regulatory progress to be retracted. It concludes that for e-money to continue to open access to the formal financial system for the worlds unbanked, continuing with proportional regulation is essential.
For more information:
Read the ReportView the Infographic
Media Contact: Kai Bucher +1 202 473 5995 [emailprotected]
Established in 1995, CGAP is a global think-tank which seeks to advance financial inclusion. Housed at the World Bank, CGAP is a collaboration of more than 30 member agencies that are united by the mission of improving the lives of poor people through better access to appropriate financial services. CGAP combines a pragmatic approach to market development with an evidence-based advocacy platform to advance poor peoples access to financial services. More at: http://www.cgap.org
How to report bitcoin transactions depends on how they are classified.
Here is some TurboTax guidance to help you decide where to report transactions:
It depends on how those currencies were held and used. Based on that, the IRS determines whether to treat the currency as income or property.
Bitcoin used to pay for goods and services is taxed as income:
Bitcoin held as capital assets is taxed as property:
If you hold Bitcoin as a capital asset, you must treat it as property for tax purposes. General tax principles applicable to property transactions apply. In other words, just like stocks or bonds, any gain or loss from the sale or exchange of the asset is taxed as a capital gain or loss. Otherwise, the investor realizes ordinary gain or loss on an exchange.
Bitcoin received as incomeand then held and sold for profitis taxed as both:
Yes. The IRS is taking cryptocurrency very seriously, to the extent that they took the digital currency exchange Coinbase to court to obtain user records and now have a contract with digital forensics company Chainalysis to help track cryptocurrency transactions.
Note: Many people have been unsure of how to treat Bitcoin, so you may have recorded earnings incorrectly on prior returns. If you need to amend a previous return, follow these steps. (We also have a video that shows you how.)
“In 2014, the IRS issued a noticeclarifying that it treats digital currencies such as Bitcoin as capital assets and are therefore subject to capital gains taxes. The notice provides that virtual currency is treated as property for U.S. federal tax purposes, it reads. General tax principles that apply to property transactions apply to transactions using virtual currency.
The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
Thus, not every transfer of funds is considered a sale. For the user, sending bitcoins from a Coinbase account to their Trezor hardware wallet, for example, is only a transfer and not a sale since the user is still in possession of the coins.
You should keep your own records for best results and update the report accordingly, Coinbase support explains. For example, if you transfer funds offsite to a desktop wallet, and then back again, you would not count this as a sale of digital currency.
Bitcoin is a digital currency, sometimes referred to as a cryptocurrency, best known as the world’s first truly decentralized digital currency. Bitcoin is traded on a peer-to-peer basis with a distributed ledger called the Blockchain, and the Bitcoin exchange rate to the US Dollar and other major currencies is determined by supply and demand as with other global exchange rates. The traded value of Bitcoin has proven volatile through various booms and busts in demand. Ultimately, however, many see Bitcoin as a store of value against government-backed fiat currencies.
Abbreviated as BTC, Bitcoin is actively traded against the world’s major currencies across decentralized markets. Bitcoins are kept in so-called Bitcoin wallets, which depend on private keys and cryptography to secure its Bitcoins to a specific entity or user.
By comparison to government-backed global currencies, Bitcoin remains fairly complex for the typical user to acquire and use in regular transactions. Growing interest and significant global investments in Bitcoin wallet and Blockchain technology have nonetheless made buying and selling Bitcoin far more accessible to the average user. And indeed growing acceptance by government entities have ameliorated the ambiguity of legal and regulatory status for Bitcoin and Bitcoin exchanges.
You can find historical price of Bitcoin on our chart and latest news and analysis on the Bitcoin exchange rate.
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Bitcoin (BTC) price: News & Live Chart – Trading Analysis …
Breaking Square earnings beat expectations, expected to top $1 billion in revenue in 2018
Square Inc. reported fourth-quarter earnings that beat expectations Tuesday, and projected that it will collect more than $1 billion in adjusted revenue in 2018 for the first time. The payments company reported a net loss of $16 million, or 4 cents a share, on net revenue of $616 million. After adjusting revenue for the costs of performing monetary transactions and earnings for stock-based compensation and other effects, Square claimed profit of 8 cents a share on revenue of $282.7 million. Analysts on average expected Square to report adjusted earnings of 7 cents a share on sales of $266.5 million, according to FactSet. In the same quarter a year ago, Square reported adjusted earnings of 5 cents a share on adjusted revenue of $191.9 million. Square also beat analysts’ expectations with its forecast, which called for the company’s first year topping $1 billion in adjusted revenue, after falling just short in 2017 with $984 million. The company expects adjusted profit of 43 cents to 47 cents a share on adjusted revenue of $1.3 billion to $1.33 billion in 2018; analysts were projecting adjusted earnings of 45 cents a share on adjusted revenue of $1.28 billion, according to FactSet. Despite the beat, Square shares bounced around in response to the report in after-hours trading Tuesday, trading between slight losses and gains.
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Buy Bitcoin IRA | Bitcoin IRA Investment & Retirement Account …
In 2013, one bitcoin cost $20. In 2017, it costs $20 to send one bitcoin. With record highs, thriving adoption, and media attention, this should be a celebratory time for bitcoin believers. And yet its hard to shake the feeling that something isnt quite right. How did we reach a point where the worlds bank killer and Western Union crippler has become incapable of taking on the institutions it once sneered at? Bitcoin is hot as hell right now. But its also a mess.
Also read:Bitpay Plans to Use Bitcoin Cash for Payment Invoices and Debit Loads
By any reckoning, 2017 has been a phenomenal year for bitcoin. Even the currencys most ardent supporters would have struggled, 12 months ago, to predict the current state of affairs. But neither could they have envisaged, in their worst nightmares, it costing upwards of $20 to transfer a fraction of a coin. To chalk this year up as an unfettered success story calls for moving the goalposts and performing mental gymnastics. Bitcoin has made great leaps alright. Its just unfortunate that not all of them have been forwards.
It can be debated whether Satoshis white paper envisioned bitcoin as a P2P settlement for micro-transactions. What cant be debated is that bitcoin is effectively now unsendable and undependable for anything under a couple of hundred dollars. From the clearnet to the darknet, the conversation is the same: fees have become untenable. Despite this, bitcoins most ardent defenders remain in denial.
On some corners of the internet, questioning the gospel of Satoshi and the infallibility of bitcoin is heresy. I cant send a friend five dollars without a $15 transaction fee and this is the currency of the future? raged one Redditor, to which the first three responses on r/bitcoin ran:
Theres a modicum of truth to these rejoinders, but in the here and now, muh segwit or just wait for LN isnt much help.
Everyone has their price, a dollar figure at which theyd be willing to sell bitcoin, and also a figure theyre willing to pay to send it. Paying $20 to transfer $10 million of bitcoin seems reasonable. Paying the same amount to send $100 worth seems ridiculous. Bitcoin has been unsuitable for micro-transactions for some time, but its now reaching a stage where its unsuitable for mid-sized transactions.
Is bitcoin a store of wealth because thats its best use case, or has it simply morphed into one because no one can afford to move it?
Many of bitcoins new investors are of humble means, setting aside $50 a week or whatever they can spare to put into digital currency. Always store your coins in a wallet you hold the private key for, they were urged. Now theyre discovering that their only option is to store their bitcoin on an exchange, at least until their holdings reach a level where its practical to withdraw to a hardware wallet.
If cryptocurrencies were to be likened to energy sources, bitcoin would be coal: expensive to move and impractical to transport in small quantities. Its impossible to order a handful of coal every time you want to light a fire: its a sackful or nothing. Ethereum (gas) and bitcoin cash (hydro) are the opposite: cheap and on tap.
Coal does have one thing in its favor though longevity. In cryptocurrency terms, bitcoin is a veritable fossil. Its been there from the start and, thanks to its market dominance, brand recognition, and capital locked in, will be extremely hard to destroy. Scaling solutions will probably arrive, and transaction fees will eventually drop, though quite when is anyones guess. The question is if those solutions will arrive in time. Until then, bitcoin will continue to serve as coal fueling the furnace on the runaway Cryptocurrency Express: an indispensable hot mess.
What do you think is the solution to high fees? And what measures have you been taking to mitigate rising fees? Let us know in the comments section below.
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Bitcoin Fees Have Become Infeasible – Bitcoin News
The virtual currency rocketed above $9,000 for the first time on Sunday and was trading above $9,500 by Monday morning in Asia.
Stock markets around the world have been on a tear this year, but their gains are paltry compared with bitcoin’s. The digital currency, which only rose above $8,000 about a week ago, has surged an incredible 860% since the start of the year.
Despite skepticism from some top finance executives about bitcoin’s rise, experts say the latest gains appear to have been fueled by expectations that big professional investors — such as hedge funds and asset managers — could soon pour money into the currency.
Even a small portion of the cash managed by major funds “would make a dramatic impact on the bitcoin market,” said Thomas Glucksmann, head of marketing at Hong Kong bitcoin exchange Gatecoin.
Related: What is bitcoin?
The cryptocurrency has been gaining more legitimacy in some parts of the financial industry.
From early next month, investors should be able to trade bitcoin futures via the Chicago Mercantile Exchange, which is likely to help bolster the currency’s reputation among mainstream investors. Futures allow traders to bet on the future price of assets like currencies, metals and agricultural commodities.
The backing of a major exchange is encouraging institutional investors “to dip their toes into the bitcoin market,” Glucksmann said. He expects more professional investors to put money into it if it breaches $10,000.
Related: Can anything stop bitcoin?
The virtual currency has famously attracted the derision of JPMorgan Chase (JPM) CEO Jamie Dimon, who called it a “fraud” that would “eventually blow up.” But other leading figures in finance, including Goldman Sachs (GS) CEO Lloyd Blankfein have defended it.
Shane Chanel, an adviser at investment firm ASR Wealth Advisers, predicts bitcoin will hit $12,000 within the next six months.
“Greed will continue to drive the price over the short term,” he said. But he warned that any setbacks in the introduction of bitcoin futures over the next few weeks could prompt a “dramatic short-term tumble.”
Bitcoin’s path toward $9,500 hasn’t been smooth. It’s suffered periods of major volatility along the way.
Related: Bitcoin splits in two, here’s what that means
In September, it plunged as much as 20% after the Chinese government cracked down on offerings in the digital currency, prompting bitcoin exchanges to close their doors.
Earlier this month, it plummeted by up to 30% within the space of a few days, before quickly bouncing back, after it appeared traders were switching to rival cryptocurrencies.
Cryptocurrencies are virtual “coins” that are “mined” by computers completing complex algorithms. Bitcoin is the most famous and widely used one.
CNNMoney (Hong Kong) First published November 27, 2017: 1:01 AM ET
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Bitcoin’s incredible surge takes it above $9,500 – Nov. 27 …
In the latest blow, on Tuesday, an alternative virtual currency that is owned and operated by the same people as Bitfinex, known as Tether, announced that it had been hacked and lost around $30 million worth of digital tokens.
None of that has been enough to stop customers from pumping billions of dollars worth of virtual currency trades through Bitfinex in recent weeks on some days, the exchange claimed to be doing more trades, by dollar value, than some stock exchanges in the United States.
Even many people who believe in virtual currencies worry that the mixture of loose controls and booming trading at the worlds largest exchange is likely to cause trouble for all the investors piling into virtual currencies, even those who dont go near Bitfinex.
Im worried about the systemic risk that this centralized company poses, and Im worried that if they go down, they will take down the space with them, said Emin Gn Sirer, an associate professor of computer science at Cornell University, who has a track record of successfully predicting problems in the growing virtual currency industry.
The chief executive of Bitfinex and Tether, Jan Ludovicus van der Velde, said in an email on Tuesday that the financial position of the company has never been stronger.
Concerns over virtual currency exchanges are nothing new. The first and largest Bitcoin exchange, Mt. Gox, collapsed in 2014 after losing $500 million of customer money to hackers.
This year, law enforcement took down another large Bitcoin exchange, BTC-E, which was accused of being a way station for many of the Bitcoin flowing through online black markets and ransomware attacks.
Regulators in the United States and a few other countries have tried to tame the business, and the largest exchanges in the United States and Japan are now under official oversight.
Those regulated exchanges, though, are dwarfed by unregulated ones like Bitfinex and several that have popped up in South Korea, where regulators have been slow to act.
The liquid nature of the Bitcoin markets, flowing around national borders and laws, is a product of the virtual currencys unusual structure. Bitcoin is stored and moved through a decentralized network of computers that are not under the control of any single company or government.
This structure means that the virtual currency continues to be an easy target for people who want to manipulate its price or use it to launder money.
Unregulated, unregistered exchanges are a very big concern for the industry and the community broadly, said Kathryn Haun, a former federal prosecutor who is on the board of the American virtual currency company Coinbase.
The most frequent face of Bitfinex is its chief strategy officer, Phil Potter. Mr. Potter worked for Morgan Stanley in New York in the 1990s but lost his job after bragging at length in The New York Times about his $3,500 Rolex, his opulent lifestyle and his aggressive tactics for making money.
Mr. Potter, 45, runs Bitfinex alongside Mr. Van der Velde, a Dutch-speaking man living in Hong Kong, and Giancarlo Devasini, an Italian man who lives on the French Riviera, according to company filings in Hong Kong.
The company lost 1,500 Bitcoin, worth around $400,000, to a hacker in 2015. But the most damaging incident happened in August 2016 when a thief got almost 120,000 Bitcoin, worth around $75 million at the time.
The company spread out the losses to all customers even those who were not holding Bitcoin at the time of the hacking by forcing customers to take a 36 percent haircut or loss on any money at the exchange.
The lack of detail that Bitfinex provided about the hacking drove away some large customers like Arthur Hayes, the founder of Bitmex, a Hong Kong-based virtual currency exchange.
There are so many questions about them, Mr. Hayes said. All of this could be easily rectified by just showing all the figures.
Mr. van der Velde said the company had been as public and transparent as possible about the security incident in August 2016 given the ongoing criminal investigations.
Banks have also been put off by Bitfinexs operations. Wells Fargo said this year that it would no longer move money from Bitfinex accounts. Shortly after, Bitfinex said its main banks in Taiwan were shutting it off. Since then, it has moved between a series of banks in other countries, without telling customers where the exchanges money is stored.
But nothing has drawn more criticism than the operation of Tether, a virtual currency that is supposed to be tied or tethered to the value of a dollar.
Customers can buy Tether coins on Bitfinex and then transfer them to other virtual currency exchanges, providing a way to move dollars between countries without going through banks. Tether has also become a very popular way to buy Bitcoin. In recent weeks, a few hundred millions dollars worth of Tether has changed hands on a daily basis across several exchanges, according to data on CoinMarketCap.com.
Tether and Bitfinex have insisted that the two operations are separate. But leaked documents known as the Paradise Papers, which were made public this month, show that Appleby, an offshore law firm, helped Mr. Potter and Mr. Devasini, the Bitfinex operators, set up Tether in the British Virgin Islands in late 2014.
One persistent online critic, going by the screen name Bitfinexed, has written several very detailed essays on Medium arguing that Bitfinex appears to be creating Tether coins out of thin air and then using them to buy Bitcoin and push the price up.
Tether and Bitfinex have countered this criticism in statements on the companies websites and promised that every Tether is backed up by a dollar sitting in a bank account. In September, the companies provided an accounting document intended to prove that Tether is financed with real money.
Lewis Cohen, a lawyer at the law firm Hogan Lovells who advises many virtual currency projects, said the document, because of the careful way it was phrased, did not prove that the Tether coins are backed by dollars.
Even if they are, he said, Tether and Bitfinex appear to be violating laws in the United States and Europe that govern investments like Tether, which has qualities very similar to a money market mutual fund.
There are a long list of reasons that you dont want to deal with them, Mr. Cohen said of Tether.
On Tuesday, Tether announced that an external attacker had taken $30 million worth of Tether from the companys online wallets. The company said it was working to recover the coins.
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Warning Signs About Another Giant Bitcoin Exchange