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Baby Steps Forward For Bitcoin In Australia

This week the Australian Senate Economics References Committee released its report in to digital currency – ‘Digital currency—game changer or bit player’ (yes, I kid you not, that’s the name of the report).

Most media commentary regarding the report has centred around the committee’s recommendation to modify the Australian Goods and Services Tax (GST) Act to recognise digital currency as ‘money’. In effect, this would mean that bitcoin transactions would not attract GST in Australia – removing the current ‘double GST’ on a variety of bitcoin transactions.

Obviously, this recommendation has been welcomed by the Australian bitcoin community. However, it’s worth keeping in mind that to action these changes for Australian law purposes is not a trivial task. Practically, it requires agreement from every state and a Federal government to actually drive the amendment – given the current size of the industry this seems unlikely. So although this is a great basis for further conversations with government, there is no practical impact for bitcoin startups in Australia – just yet.

As with reports similar to this one (see for example the Canadian inquiry report), it shows that many within the highest ranks of government see the importance of innovation in the financial services sector. With ‘software eating the world’ banks are looking less and less likely to drive this change. This means that startups need to lead the way.

To allow this to happen in the digital currency space, a legal framework that provides a welcoming environment for innovation to thrive in is required. This report hopefully provides a step in this direction for the Australian Bitcoin industry.

 

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Chatting About All Things Bitcoin

A few weeks back I did a ‘blab’ with Suzanne Nguyen (@stringstory) about all things Bitcoin. Check it out HERE and let me know what you think.

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Banks Get Behind Blockchain Technology

It’s looking like 2015 will be a break out year for the application of blockchain technology in the banking and finance sector. Banks are starting to really embrace the technology with many trialing blockchain based applications and some are even investing directly in startups in the space.

Banks are getting behind blockchain technology in a big way. Many are starting to see the possibilities of running clearing, settlement and internal fund transactions through a blockchain.

Below is a list of financial institutions that are currently experimenting with blockchain technology. Some are further down the track than others – but all are keenly investigating the technology’s potential.

About The Table

In the table below I’ve included a list of financial institutions who’ve been mentioned in the media as experimenting with Blockchain technology. The list is a work in progress. As information changes and further banks begin experimenting with Bitcoin/blockchain technology I’ll add or amend entries in the table.

If there are any errors or omissions please feel free to flick me an email at me@alantsen.com

Bank Country Technology Stack / Activities
ANZ Australia Ripple
Commonwealth Bank Australia Ripple
Westpac Australia Ripple
Barclays Bank  UK Bitcoin (Safello)
Santander Bank UK Internal proof of concept
UBS UK Research lab
DBS Bank UK Hackathon
USAA US Internal research
Bank Of New York Mellon US Bitcoin (BK Coin)
LHV Bank Estonia Bitcoin (Coloured Coins)
BBVA Bank Spain Internal experiments
ABN Amro Netherlands Internal experiments
ING Bank Netherlands Internal experiments
Rabobank Netherlands Internal experiments
BNP Paribas France Internal Research
Société Générale France Internal research and experiments
Fidor Germany Ripple
CBW Bank US Ripple
Cross River Bank US Ripple
 Citibank  US Own Tech (Citicoin)
 NASDAQ  US Bitcoin (Chain)

 

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Is Bitcoin Still A Non-Obvious VC Investment?

This week Redpoint Ventures partner, Tom Tunguz penned a pieced titled “The Fastest Growing Areas Of Startup Investment In 2015”. The post examined trends in the major categories of startup investment from 2012 through to mid-2015.

Bitcoin Issue 27 copy

The piece generated a fair amount of interest in the Bitcoin community (for example seeHERE, HERE and HERE) as Bitcoin was the fastest growing sector (151% CAGR) according to the data. However, as a percentage of dollars invested, Bitcoin still only accounted for a minuscule piece of the overall pie (0.18% of total VC dollars invested).

A common thought in the world of venture capital is that non-obvious investments are the ones that yield the biggest returns and to generate 10x+ returns that’s where you should go. The data suggests that Bitcoin is becoming a more obvious vertical for VCs. If you’ve been keeping an eye on investment news this probably isn’t a big surprise – with many well known VCs (e.g. A16Z, USV) and corporate investors (e.g Goldman Sachs and NASDAQ) piling into the sector.

With most bets in the space still heavily weighted towards ‘on-ramp’ companies, the growth in infrastructure and ‘blockchain’ based startups is still to come. Further, the overall share of investment dollars still has a lot of growth left in it – which is probably unsurprising given that most companies are still raising seed rounds.

Regardless of how you see it, Bitcoin (and blockchain tech more generally) is still a hot category and it’s only going to get hotter. So if you’re an investor, it’s time to grab your chips and make some bets.

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Bitcoin Is Not A Movement. It’s An Application Stack

For some reason I tend to be a libertarian magnet. Every time I speak at a Bitcoin event I’m always approached by all the crazy libertarians in the room. In the main, they ask polite questions about where the world of Bitcoin is headed and what the legal landscape might look like in the coming years for Bitcoin. However, there always comes an uncomfortable moment where the question of the Bitcoin ‘movement’ is raised. You know the “Bitcoin is going to bring down governments” and “I use Bitcoin because the government can’t take it from me” comments – if you haven’t heard either of these you haven’t been to enough Bitcoin related events.

I can see why people think I might buy into this view of the world. I’m incredibly bullish on b/Bitcoin. On both fronts, I believe it’ll have a profound impact on the way a number of industries are organised – everything from the law to the way machines interact with each other. However, emphatically, I don’t believe in the ‘movement’.

I don’t think governments will topple (I think they’ll embrace it), I don’t think banks are at risk of being displaced (I think they’ll be the biggest adopters of Bitcoin/blockchain), I don’t think you’ll see it become the world’s reserve currency ( I think it’ll do for internet commerce what Paypal initially did – but at even larger scale).

Put simply, Bitcoin is not a movement. It’s an application stack. To use an oft quoted line (or in internet speak, a meme), it’s the “TCP/IP of value”.

Take solace my libertarian friends, Bitcoin is going to be massive – but just not in a ‘the global financial apocalypse is coming and I’m insulated by owning bitcoin’ kind of way. It’ll be a movement like the internet was a ‘movement’. It’ll functionally change the way we move value in the online age. However, no government will be brought down by the tidal wave of Bitcoin. It’ll simply ride the wave.

So if you see me at a conference or a meetup come over and chat. I love hearing views on where the hell Bitcoin is headed and how it’ll change the world. But just so you know, I don’t think bitcoin is going to bring down ‘our corrupt capitalist governments’ – I just think it’ll redefine how the world transfers value. Hopefully that’s enough of a ‘movement’.

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The State Of Bitcoin: A Summary

This week Coinbase released a great little summary of Bitcoin metrics as at July 2015. Overall, it’s an interesting overview of some of the more important Bitcoin metrics. Here’s a quick TL;DR of the piece.

  • Understanding bitcoin price movement is a function of the period taken. The year to date, bitcoin is down 9% – but is up 213% over a 2 year timeframe (as most bitcoiners will be only too happy to tell you).
  • Coinbase currently has 2.4M users and 3.1M wallets on their platform. This would definitely make them one of the biggest wallet providers in the world.
  • Over the last year there has been a 94% increase in monthly transactions on the Bitcoin network (worth noting that this stat controls for the recent spikes due to load testing and spam on the network).
  • Overall, 47% of Coinbase wallet holders are now from countries outside the US. With Hong Kong leading the adoption charge with 283% user growth.
  • Aligned with other reports, a large portion of users are actually over 30. More specifically, 34% of Coinbase users are over 35.
  • In what I think is one of the more interesting stats to come out of the report, Coinbase now has more than 7,000 applications built by developers on top of the Coinbase platform. This likely makes Coinbase one of the biggest Bitcoin application platforms out there.
  • What I personally think is the most important measure to keep an eye on with respect to Bitcoin growth; the Github repo reference count, is currently at 6,109. Interestingly, the article notes that by comparison, there were only 2,318 repositories referencing Paypal. Although, I don’t think this necessarily means too much, it is an interesting comparison.

Overall (unsurprisingly), the piece paints a positive picture of where Bitcoin is at. It’ll be interesting to see where the price (and general sentiment) heads in the next few months with Greece, China, BIP-66 and the ever looming hard fork… but these are all probably topics for another Friday 😉

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The Blockchain Has Friends

Last night at FinTech Melbourne we hosted Australia and New Zealand Bank’s CTO – Patrick Maes. Beyond being a fascinating discussion about the Australian FinTech landscape, one of the things that struck me about the conversation was how bullish his comments were regarding distributed ledger and blockchain technology. In fact, Maes noted that blockchain technology was one of the only true innovations in the payments space over the last 2,000 years – which is a significant comment given how nascent this technology actually is.

In recent days, with the issues the Bitcoin blockchain has faced with the introduction of BIP-66, it’s easy to forget the impact the technology has had in opening up the minds of many senior executives in the banking space as to how a new financial payment stack might actually look.

The reality is that still writing code in COBOL or FORTRAN and running your own server farms as a bank isn’t a sustainable technology model. Regardless of whether you’re a Bitcoin or a permissioned ledger maximalist, the banking world is moving rapidly towards a future where some form of distributed ledger becomes a major layer in the banking technology stack. Further, it really looks like this change may come from the upper management layers of banks – which is really exciting.

Viva la blockchain!

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Talking Bitcoin News On CryptoGoss

This week I sat down and had a chat with the team at CryptoGoss about what’s happening in the world of Bitcoin and Blockchain. Listen in and let me know what you think in the comments below.

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My New Project: The Week In Bitcoin

TL;DR – I’m starting a weekly curated email newsletter that covers the most important happenings in the world of Bitcoin – www.theweekinbitcoin.com. I’ll also be including some great articles from ‘cold storage’ for those new to Bitcoin. Best of all, it is totally FREE and you can sign-up HERE to get the first issue this Friday (23/01/2015).

I fundamentally believe that Bitcoin will change the way a whole array of industries are structured over the next decade. Basically, any industry that can take advantage of blockchain technology will be disrupted in a major way.

The future is exciting and I know many are hungry to learn about what’s happening in the world of Bitcoin (and cryptocurrency more generally).

For Bitcoin to have the impact that many of us believe it will, it is vital that great writing is dispersed evenly across the whole community – from those new to the space, to those wanting to keep up to date. I think that knowledge is crucially important for us to continue to have intelligent conversations about how to regulate, advocate and promote Bitcoin at scale.

However, one of the challenges many face when trying to learn about Bitcoin (and keep up to date, for that matter) is finding content that is well written that actually illuminates, not obscures, what is happening in the ecosystem. Anyone who has gone down the proverbial ‘Bitcoin rabbit hole’ will tell you that the quality of writing out there varies dramatically. What makes Bitcoin challenging to report on is the fact that it draws in so many disparate areas of knowledge – for example, cryptography, law, programming, security and economics.

Having said this, quality writing on Bitcoin does exist. In fact, this is one of the things that is often forgotten about when speaking of progress in the ecosystem. Bitcoin journalism is getting better – dramatically better. But, as with all things, the good stuff is damn hard to find. Unless you spend a disproportionate amount of time sifting through the noise, it can be really hard to get past the usual “Bitcoin is dead” articles.

This is specifically why I’ve started ‘The Week In Bitcoin’.

Continue reading “My New Project: The Week In Bitcoin”

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Some Thoughts On The ATO’s Bitcoin Guidance

Earlier today the Australian Taxation Office (ATO) released its much anticipated guidance on the taxation treatment of bitcoin. Along with the guidance paper they released a slew of draft rulings.

In their media release the ATO stated that:

“[We have] consulted extensively with bitcoin experts, businesses, industry bodies and other external stakeholders to develop this guidance and explain the obligations of bitcoin users.”

Reading the guidance (and more so the draft rulings) it is clear that they have invested a fair amount of time in understanding what bitcoin is and how it’s being used. In many ways the ATO has released a very complete picture of how they see bitcoin for tax purposes.

Although many have been quick to find fault with the guidance provided by the ATO, the truth is that they have provided a great deal of clarity to businesses and consumers. Further, the depth of analysis provided by the rulings released today gives a solid grounding to the ATO’s view – which is more than what’s been issued by other tax authorities.

Some Important Points To Note

The guidance paper that was released by the ATO contains very little ‘meat’ and should be taken for what it is – a general guidance paper. Much of the interesting content is actually contained in the draft rulings that accompanied the guidance paper. For the most part, this is where lawyers and accountants will be spending their time over the next few days.

Having said this, it should be noted that the rulings released by the ATO are all still in draft form and still under consultation. This means that those who wish to engage with ATO can still do so.

Continue reading “Some Thoughts On The ATO’s Bitcoin Guidance”