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
   

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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
   

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3. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE
   A Quick Update
   02
   

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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
   

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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
   

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6. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE
   Opportunity 1
   Audit of Exchanges
   05
   

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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.
   

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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.
   

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9. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE
   Opportunity 2
   Semi-automated
   Tax Compliance
   08
   

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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
    

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11. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE
    Tomorrow’s
    Opportunities?
    10
    

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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
    

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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’
    

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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
    

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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
    

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16. BITCOIN OPPORTUNITIES IN THE CURRENT REGULATORY CLIMATE
    Thanks for listening!
    Feel free to reach out
    @alantsen
    15
    

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