Bitcoin seeps into mainstream
By Jeanine Prezioso
June 13, 2014
Bitcoin – an illusion, a fad, a passing hobby. Not so much. This week, travel web site Expedia.com said it would begin accepting the virtual currency as payment for hotel accommodations and the owner of a Canadian gold mine offered its sale for $2 million in Bitcoin.
Replacing or even comparing gold with a so-called crypto-currency is still something of a reach, but more and more investors are turning their attention toward how Bitcoin can be used for monetary transactions and how they can profit from it.
“I had my first Bitcoin-related client in 2011. I didn’t really “get” it until earlier this year when I started attending Bitcoin conferences and really digging in,” Andrew Ittleman, a partner with Miami, Florida-based Fuerst Ittleman David & Joseph told the Global Markets Forum this week.
The web-based monetary unit remains shrouded in mystery and is often times associated with the spectacular fall of Bitcoin operator Mt. Gox. Skeptics also point to the Silk Road case, the website where illicit activities were being transacted in Bitcoin.
“I think the community at large views the Silk Road case as something that was unfortunate, but a lesson nonetheless. There are still many, many people using it for perfectly legitimate purposes,” Ittleman said.
The issues of how to track the currency, how to use it and how to regulate have been percolating among regulators and the legal community in the last year. The U.S. Internal Revenue Service in March said it would treat Bitcoins as “property” rather than currency. Any money made from the sale of the crypto-currency would be subject to capital gains tax. An investor is responsible for booking a gain or loss from the time they purchase the Bitcoin to the time they sell it.
To make it more user-friendly: “I’ve been arguing that it is now critical for Bitcoin wallet companies to start building “basis trackers” into their wallets,” Ittleman told the GMF.
In April, New York State regulator Benjamin Lawsky said he hopes to have regulations in place this summer so residents can begin using the currency to send money back to family members in other countries for a fraction of the transactional fees.
“If these systems become more efficient, potentially you could do those kinds of transmissions in a much more efficient way and the charges would go down to 1 percent,” Lawsky, superintendent of the New York State Department of Financial Services told the GMF on April 29.
Ittleman echoed those same notions.
“People in the U.S. send billions of dollars a year internationally…and the companies that process those transactions rake in billions in fees. For many people in the Bitcoin space, that is the greatest attribute. The ability to spend money between countries with no currency restrictions. That’s huge!” he said.