Bitcoin: Opportunities In The Current Regulatory Climate

A presentation made at the 'Bitcoin Professionals Of Melbourne' meet -up on 27/10/2014. The presentation was aimed at highlighting potential opportunities in the Bitcoin space for those in professional services.

All references from my talk can be found at http://alantsen.com/presentation-references/

Transcript

1. Bitcoin Opportunities In The Current Regulatory Climate @alantsen
2. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE Bitcoin - Opportunities In The Current Regulatory Climate Talking Points 01 A quick regulatory update 1. 2. Current Opportunities 3. Future Opportunities
3. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE A Quick Update 02
4. ATO Rulings On Bitcoin Released ATO guidance has created clarity - but has been a disappointing outcome for many in the Australian bitcoin community. August 2014 ATO guidance on taxation treatment of bitcoin is released. ATO’s View: •For tax law purposes, bitcoin is property. Therefore, CGT asset for income tax. •Personal use exemption applies. Meaning, if used for personal use or enjoyment and cost base is $10,000 or less gains/losses from disposal will be disregarded. •Supply of bitcoin is a taxable supply. Therefore, GST may apply to transactions. 03
5. MARCH 2015 Australian senate inquiry into regulation of cryptocurrencies (Maybe) Early 2015 N.Y Bitlicence Finalisation of bitlicense framework 2015 May Provide Further Clarity …And Hopefully Good News Too. •Australian senate inquiry into regulation of digital currency. •Amongst other things the inquiry will look at ‘…the most appropriate definition of digital currencies under Australian tax law’ •Bitlicense framework to be finalised in early 2015. •Will be an interesting case study in bitcoin regulation - specifically impact on ecosystem. 04
6. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE Opportunity 1 Audit of Exchanges 05
7. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE 06 Opportunity 1 Audit of Exchanges What do I mean when I say ‘audit’? • I’m really referring to proof of reserves. That is, do third parties holding bitcoins actually hold what they say they hold? • I’m not referring to financial statement audit, regulatory audit etc. What do I mean when I say ‘exchanges’? • The term ‘exchange’ covers anyone holding, and with sufficient ability to spend coins on your behalf without your involvement. • Could includes many web wallets, betting sites, escrow-based trading sites etc.
8. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE 07 Opportunity 1 Audit of Exchanges Why is it an opportunity? • After the implosion of Mt Gox concerns about exchange solvency arose. • A number of exchanges moved quickly to show proof of reserves (e.g. Kraken, Coinbase). • All turned to industry insiders to conduct proof of reserves. • Still no trusted ‘brand’ in the market offering proof of reserves as a service.
9. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE Opportunity 2 Semi-automated Tax Compliance 08
10. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE 09 Opportunity 2 Semi-automated Tax Compliance A glimpse of what the blockchain can do • IRS released guidance on bitcoin in March. • Many were required to account for gains and loses. • Can be incredibly challenging to account for - especially if bitcoin is used transactionally. • However, as all transactions are openly available on the blockchain software can do much of the heavy lifting. Software automatically picks up transactions Classifications made and tax recognised accordingly All data is pulled from the blockchain Simple Process
11. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE Tomorrow’s Opportunities? 10
12. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE 11 What we talk about Today Discussion mainly surrounds bitcoin as a currency. Bitcoin’s impact is still largely hidden The real impact of Bitcoin (as a protocol) is yet to be seen. Just The Tip Of The Iceberg Innovation beyond the currency
13. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE 12 Just The Tip Of The Iceberg ‘Smart’ Law Automated law Examples Remittance, inter-company transactions, SWIFT competitor 1Cross- boarder Payments Remittance & SWIFT 2 Automated Resource Allocation ’Realtime’ Payments 3 Examples Smart contracting, escrow, smart wills, notary services Examples Automated purchasing of power at the best price in the market, Automatically connecting to wi-fi and using bitcoin to pay for it, wages paid in realtime Innovation beyond the currency The notion of bitcoin as a currency is the ‘tip of the iceberg’
14. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE Bitcoin Opportunities In the Future The New Financial Rails •Bitcoin offers a way for value and ownership to be transferred more quickly and with lower cost. •All this can be done without a trusted third party. Bitcoin will have the biggest impact when we don’t know it’s Bitcoin that is being used 13
15. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run." - Roy Amara 14
16. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE Thanks for listening! Feel free to reach out @alantsen 15