IN the Sydney Sun-Herald on Sunday 24 August this article described a cafe, a pub, a restaurant, a beauty salon and a carpet cleaning business that accept bitcoin for payment. High level data from the article, provided by Tank Stream Ventures, are:
- $US509 – the current value of a bitcoin (approx AUD$542)
- $US2000 – average worth of a bitcoin transaction worldwide
- 70,000 – the number of bitcoin transactions per day
- $US250 million – the value of daily bitcoin transactions
I predict this is the tip of a very big iceberg that will ‘hit’ the world’s financial system in the next 10-15 years. It’s exciting to witness the birth of a new currency system and payment method that will be as disruptive as the introduction of legal tender was tens of thousands of years ago.
Government regulators, especially tax collection agencies, are grappling with the implications and usage of this new currency. Just this past week the Australian Tax Office announced that bitcoin was NOT a currency at all:
The ATO’s view is that Bitcoin is neither money nor a foreign currency, and the supply of bitcoin is not a financial supply for goods and services tax (GST) purposes. Bitcoin is, however, an asset for capital gains tax (CGT) purposes.
Interesting to see how long this view holds.
Since bitcoin is being used to buy goods and services, I wondered if there are people being paid in bitcoin. It turns out there are, although unsurprisingly most work for virtual currency companies. Searching “bitcoin as salary” on Google turns up an astonishing 1,190,000 results!!
One article, by an employee of CoinDesk, describes what it’s like to be paid in bitcoin. Carrie Kirby sells a portion of her bitcoin pay to have cash for everyday ‘normal’ transactions, and keeps the remainder as an investment. As she says:
Still, it’s interesting to learn how little inconvenience and uncertainty is being reported by the select few who collect their pay in bitcoins.
What I found really interesting in this article is this statement:
When workers get paid in bitcoins, sometimes businesses in the neighborhood start accepting the currency.
This suggests to me that what is happening now is a classic case of ‘The Power of Context’ – as described by Malcolm Gladwell in The Tipping Point. Gladwell explains that this type of change agent occurs when “human behaviour is sensitive to and strongly influenced by its environment.” The article comment above indicates that as more people hold/receive bitcoins, the greater will be the demand for goods and service providers to accept them as payment. (See also my blog post on lessons from The Tipping Point.)
What is required now is for Gladwell’s ‘Mavens’ to demonstrate how bitcoin can become a legitimate currency. And ‘Salesmen’ to convince those of us who are bitcoin neophytes that it’s a practical alternative to traditional legal tender.
The question is, how long till we start seeing this sign at our local shops?
If anyone has used bitcoin to pay for goods or services I’m very interested to hear your feedback about the experience.
- Buy bitcoins at Coinjar.com (Note: you can lose real money as they are highly speculative and the exchange rate fluctuates significantly)
- Exchange bitcoin for cash at btradeaustralia.com
- Find out the latest conversion rate of bitcoin (XBT) to normal currencies at XE.com
- Check out latest news and exchange rate charts at Bitcoin Charts
- The U.S. Internal Revenue Service published its ruling about bitcoin in March 2014 (same as the Australian Tax Office; bitcoin is not a currency).
- ZDNet article about Aussie startup CoinJar that is trialling a bitcoin Eftpos card