Cryptocurrency Tax Update March 2019

Cryptocurrency Tax Update March 2019

Cryptocurrency Tax Update March 2019


Cryptocurrency tax is currently being reviewed by IRD and different tax interpretations, such as financial arrangements are being applied and discussed. Financial arrangement tax treatment may apply to some cryptocurrency tokens and will depend on the specific characteristic of each individual token.

We have summarised cryptocurrency tokens into four distinct categories and discussed how financial arrangement tax treatment would apply to each category of token. Each tax payer’s wider cryptocurrency activity also needs to be considered when interpreting their overall position. Individualised specific advice is recommended.

IRD have maintained the position that cryptocurrencies have no special tax rules and existing legislation will apply. They do concede the technology is both novel and rapidly evolving and the application can be difficult.

We do not expect any material changes to our calculation methods provided that the taxpayers are cash basis holders and their cryptocurrency portfolio has a market value of less than $1m throughout the entire year and the unrealised gains or losses are less than $40k pa.

There could be changes to those who hold cryptocurrency on capital account. Financial arrangements make no distinction between capital and revenue, and the increase in the value of capital tokens could be taxable income.

These guidelines have not been published by IRD yet. This is only our interpretation and opinion. We will also be providing feedback to IRD on the proposed changes.


Cryptocurrency Tax update march 2019


Four categories of cryptocurrency tokens:

1. Intrinsic tokens

These tokens are not backed by anything and do not provide the holder with any rights; they are used as an exchange for money, goods, services and other cryptocurrencies. They can also be held as a speculative investment. Examples include Bitcoin, Litecoin, Dash and Bitcoin Cash.

We have previously discussed the tax treatment of intrinsic tokens and how taxable profits or losses are calculated.

2. Utility tokens

Utility tokens provide rights to access, operate, use or control a platform or other property or service. The token holder involves an agreement between the token issuer and the token holder that the token may be used as payment or provide access rights to services in the future. It is arguable that this could meet the requirements of a financial arrangement. Examples of utility coins are filecoin, NEO, or EOS.

Under financial arrangement rules both the trading income and unrealised gains or losses would be included as taxable income for the taxpayer. Unrealised gains and losses can be calculated using different methods but must be applied consistently across all financial arrangements. The calculation methods are beyond the scope of this article, however, there is a market valuation method where the closing market value can be accurately measured at the end of the financial period.

For example, John buys 2 ABC token for $100 each ($200 total), then sells 1 for $150. At the end of the financial year, the remaining ABC token is worth $175. John’s trading profit is $50, and unrealised profit is $75 resulting in combined taxable income of $125 for the year. Trading losses and unrealised losses are allowed as deductible expenditure.

3. Asset tokens

Asset tokens are like utility tokens, except they are backed by an underlying external, tradeable asset such as fiat currency, precious metals or real estate. An example is Goldmint. If an asset token gives rights to an underlying commodity in the future it may be a financial arrangement.

Asset tokens that derive value from an underlying asset but are not redeemable for the asset are not financial arrangements, (such as a stable intrinsic token).

If asset tokens are financial arrangements, they would be taxed like the utility token example outlined above.

4. Security tokens

Security tokens represent ownership or control of a financial asset. These can be viewed as owning a share or debt owed. They give rights to income (interest or dividends). An example is tZERO. Because they provide a future right or payment, they are likely to be considered financial arrangements. This is because there is an agreement between the issuer and the holder that the holder will provide “money” to acquire the token and will receive rights to “money” in the future.

Security tokens are financial assets and we calculate the profits and losses under financial arrangement rules.


Why are cryptocurrency tokens considered financial arrangements?

  • There is an agreement or understanding between the holder and token issuer;
  • The holder provides money (fiat currency or cryptocurrency) to the token issuer (or another seller) to acquire the token; and
  • The token provides the holder with rights to acquire services in the future from the token issuer.
  • The holder is paying money now to receive the token that can be used in the future to acquire services.


How are financial arrangements taxed?

  • They require taxpayers to account for unrealised gains or losses over the term of the arrangement.
  • Financial arrangements disregard any distinction between capital and revenue, and
  • There is a wash-up calculation (base price adjustment) when the rights and the obligations cease or when the tokens are disposed of.


Cash basis person

A cash basis person is not required to apply a spreading method to a financial arrangement unless an election is made to do so.

There are two aspects to the criteria to be a cash basis person:


  • Income and expenditure under all financial arrangements for the income year does not exceed $100,000 or
  • The value of all financial arrangements on every day of the income year does not exceed $1m.

Secondly, in addition to satisfying one of the above prescribe values threshold,

  • The difference between the accrual (unrealised basis) and cash basis cannot exceed $40k for the income year.

With large fluctuations in cryptocurrency prices, some taxpayers will become subject to financial arrangement tax rules if their unrealised gain or loss is more than $40k pa.


Practical recommendations:

  1. Classify your cryptocurrency into the four categories
  2. Understand the type of token you are purchasing.
  3. Be consistent in applying the same tax treatment to each classification of cryptocurrency
  4. Get advice early based on your individual circumstances
  5. If you are holding coins on capital account, consider that if cryptocurrency is taxed under the financial arrangement rules all increase in value will be taxable income.
  6. Calculate your 2019 tax obligation early, so you are aware of your tax position and upcoming tax obligations.


Contact Tim Doyle, of AgBiz Accountants, today for a no obligation phone call or meeting on 07 823 4980 or email Tim. Our office is in Cambridge, NZ, but distance is no problem. We have many international and national clients.


This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

How the NavCoin Community Fund Helps Boost Innovation

NavCoin Community Fund

How the NavCoin Community Fund Helps Boost Innovation


NavCoin Community Fund

Introducing NavCoin & the NavCoin Community Fund

NavCoin is a community-run, self-sustaining blockchain network which began in 2014 as a cheaper, faster, eco-friendlier alternative to Bitcoin. It is a truly decentralised and open-source payments protocol that actively encourages users to contribute to its development. NavCoin aims to give freedom, privacy and financial power back to the individual and is designed to be fast, energy efficient and low cost. The NavCoin Community Fund provides a six-figure boost to innovative ideas – and there’s no restriction on what poses as a good idea!

“In a project where freedom of the individual is paramount, it’s important for any contributing collective to align their objectives so everyone works to shared goals.”

NavCoin Community Fund

The NavCoin Community Fund is the world’s first fully autonomous, dual consensus protected crypto fund. While other blockchain funds have a single group or individual overseeing and managing funds, the NavCoin Community fund is fully decentralised. The fund utilises a unique two-step voting process ensuring that funding is only paid out on the delivery of the promised results.

This dual consensus ensures project accountability and that the direction NavCoin takes is always in the interest of the entire network. The fund aims to strengthen the network by incentivising users to get involved.

“Privacy is a fundamental human right and is the foundation of individual autonomy.”


NavCoin Community Fund

How the NavCoin Community Fund Works

Each new block mines 0.5 NAV into existence as well as the staking reward. (approx. 500k NAV per year). The created coins aren’t sent to a wallet but burned on the chain, so no one (not even the core team) has access to them. Anyone can then submit a proposal to the blockchain which gets voted on by stakers.

Stakers are network participants who hold coins in their wallet and take part in the process of minting new blocks. Active Stakers are involved in the process of voting for proposals, as well as securing the network. Passive Stakers are those who only participate in securing the network. Both Active and Passive Stakers collect staking rewards of 4% per annum.

Once a proposal passes the vote, the coins become escrowed. The proposal creator then does the work outlined in their plan, shows proof to the community the task is completed and submits a payment request. When the payment request passes the vote, the coins are mined into existence and sent to the requestor.

This happens entirely autonomously with no intervention.

There is no restriction on the type of project that can be submitted. Proposals can be for development projects, marketing campaigns, or whatever the submitter can convince the network is worth voting for. It could be utterly unrelated to NavCoin, e.g. to dig wells for villages in Africa and if the network agrees that’s a good use of the NAV, then it will happen.

Proposals received range from, buying carbon credits to make the NavCoin network carbon neutral, to distributing NAV stickers, to server hosting costs and software development.

Current proposals:

NavCoin Blockchain

The NavCoin blockchain uses Proof of Stake (PoS) to validate transactions on the network. Initially, NavCoin used Proof-of-Work (PoW) but soon made the switch to PoS as it is eco-friendlier using less electricity. The entire NavCoin network consumes ~NZD$10,000 worth of power per annum, a mere blip on the radar compared to Bitcoin’s NZD$3b+.



There are a series of Manifestos outlining the guidelines and core values for NavCoin’s direction which are intended to resonate with all community members. These Manifestos cover what, why and how contributors can operate in the best interests of the entire network. The community is described as “one of the world’s first functioning anarcho-syndicalist societies”. In other words, decentralised and egalitarian because centralisation and hierarchy corrupt and can’t be ethically justified.

“NavCoin’s thriving community is living proof that when people are trusted to do good, they will contribute for the good of all.”

NavCoin Contributors

Anyone is welcome and encouraged to contribute to NavCoin with the skills they have. Developers are dedicated to maintaining the security, stability and continuous improvement of the network. They work to protect against hacking and unauthorised changes to the protocol and keep it neutral, inclusive and decentralised. Others are encouraged to provide help and support to other community members and to raise awareness of the network.

Craig MacGregor
Craig MacGregor, the Kiwi co-founder of NavCoin, says they’re striving for a decentralised cryptocurrency that’s easy enough for anyone to use.


What Can You Use NavCoin for?

Store of Value

Be your own bank and remain in full control of your money as well as having a say in how the NavCoin network is run.

Merchant Gateway

Merchants can accept NavCoin for payment in both brick-and-mortar and online stores now. They are part of the CoinPayments integrated payment gateway which accepts over 1,000 cryptos.

Digital Tip Jar

By adding a QR code to your website, posters, stickers etc, you can accept tips or donations of NAV.


Wallet Info

The NavCoin network has a range of wallets including both “full” and “light” versions which are maintained by the community. NavCoin Core is a full wallet giving you complete control and the ability to participate in staking. On the other hand, NavPay is a light wallet available on desktop and mobile allowing you to store NAV securely. Additionally, there are paper wallet, Raspberry-Pi and multi-asset options to choose from.

It is important to note that BitPrime is unable to provide support for these wallets. However, the NavCoin community have a Discord channel where knowledgeable members are more than happy to assist. Remember, it’s your responsibility to choose your wallet carefully and adopt good practices to protect your crypto assets.


How to Buy NAV in New Zealand

To easily buy NavCoin (NAV) in New Zealand you can do so right here, at BitPrime. First, if you haven’t already done so, please register an account with us and have your ID verified. Finally, visit our NavCoin page to order your NAV. If you require any further assistance, please contact us, and we will be happy to help.



New Zealand Women in Blockchain: Part 2 – Janine Grainger

New Zealand Women in Blockchain - Janine Grainger

New Zealand Women in Blockchain:
Part 2 – Janine Grainger, Co-Founder of Easy Crypto

Welcome to the second part of a series covering New Zealand women in blockchain. This time, we talk to Janine Grainger, co-founder of Easy Crypto.

Janine, tell me about your career path. How did you end up where you are today, regarding blockchain?

Like many others, I came to blockchain through bitcoin. I first heard of bitcoin in 2013 and found the concept fascinating. A true digital currency seemed like a natural next evolution for an internet-connected world, and something that could solve many real-world problems with exchanging value.

Fast forward four years and bitcoin had still not become mainstream, but it was gaining a lot more traction. A lot of my friends and family were wanting to get involved. But, they found the technology daunting and were unsure how to get started with cryptocurrencies. This was how Easy Crypto was born – developed by my brother Alan and I to help make it easy for people to gain access to digital assets.


Which blockchain application excites you the most?

While finance is the most obvious use case for blockchain (as demonstrated by digital currency being the instigator of this new technology), governance is what I find most interesting. Democracy is a wonderful thing in concept. However, current voting systems that give us one vote every three years are clunky, to say the least! There’s a lot of experiments going on with blockchain-based voting systems and how these can be used to enable more truly representative democracy. So, I think that’s pretty exciting.


What do you feel are the biggest challenges facing blockchain adoption worldwide? In NZ? How do we overcome these?

The massive surge in cryptocurrency prices we saw at the end of 2017 hampered development and adoption of blockchain technology. However, we’ve been in a much more stable period for a while now. We’re moving towards a decoupling of “cryptocurrency” and “blockchain”. Of which I think is very helpful for the advancement of blockchain itself.

In New Zealand, we have some key challenges around regulation and banking access for blockchain companies. Being a small country far away from trading partners, we have a lot to gain from leveraging blockchain technologies and helping New Zealand to be a front-runner in this new economy.

I’d like to see the government take a clear stance in supporting and promoting innovation in the [blockchain] sector. – Janine Grainger


What publications/blogs/podcasts do you use to keep up with blockchain news?

I actually find meetups are the best way for me to learn about new developments in the space and find out what’s happening right here in New Zealand as well. This week Blockchain New Zealand hosted an event in Auckland about Decentralised Autonomous Organisations (DAOs) – another fascinating application of blockchain technology. This event was a great chance to catch up with others working and learning in this space.


What is the best book (or other resource) for blockchain beginners?

If you’re just starting out, Blockgeeks has some great free resources, as well as paid courses on more advanced topics. If you’re interested in the cryptocurrency and digital asset applications of blockchain, check out Cryptolab run by a couple of guys here in New Zealand.


When it comes to transparency (while maintaining privacy and the security of data), how is blockchain going to change our current systems?

Being decentralised, transparent and immutable blockchain has amazing potential to improve many aspects of our society. This includes healthcare, supply chain and finance. Most importantly, blockchain has the ability to shift the balance of power back to individuals. It will give us control over our data, our identity and our interactions with others.

However, I think we need to make sure we learn from history here too. When the internet first launched, people saw it as an incredible tool for levelling the playing field. Connecting millions of people around the world would enable us to transact directly, peer-to-peer, and the power of the firm would be reduced. Obviously, we’ve seen the opposite happen. Corporations have grown phenomenally in size and power, and the “peer-to-peer” economy is mediated through platforms such as Airbnb and Uber. Which, of course, take a massive cut along the way.

Blockchain does have the potential to truly transform this, but only if we consciously choose to adopt blockchain applications and protocols that support this.

I think the onus is on all of us to ensure we help support and build toward the type of world we want to live in in the future. – Janine Grainger


Disclaimer: The above references an opinion and is for informational purposes only. Do not take this as personalised financial or investment advice. The opinions expressed by the author do not represent the opinion of BitPrime.

Last updated: 19/03/2019


[INFOGRAPHIC] 3 Notorious Fintech Challenges and the Epic Growth of the Industry

Fintech Challenges

3 Notorious Fintech Challenges and the Epic Growth of the Industry

Financial technology (fintech) continues to play a significant role in many positive changes we experience in the sector. With the growth of the financial industry, many existing and new businesses have not been left behind. Most of them use one or more fintech forms in their daily commercial operations. But, even as adoption of the tech continues to widen, users still face some fintech challenges. According to the infographic below by Carsurance, some of its popular disruptions include internet banking, mobile banking, digital money, blockchain and cryptocurrencies, to name a few.

In this post, we’ll analyse three of the most notorious challenges in the fintech space and take a look at the evolution of the fintech industry.


Insecurity has always been a big challenge when it comes to technology. Fintech-based businesses have been some of the worst affected in recent times.

Every day, cybercriminals find more sophisticated ways of perpetrating their acts, sometimes rendering the affected businesses total failures.

Take, for instance, various cryptocurrency exchanges that have been hacked in the past, leading to the loss of millions of dollars in investor funds. Such cases are reasons that hinder the cryptocurrency sector from realising its full potential.

Firms need to put in place adequate control measures, educate users, and invest heavily in their teams to build skills in accordance with the current market safety practices.


Overwhelming Regulations

Smaller businesses find it challenging to implement the ever-changing regulations in the technology sector. But what is even more challenging is complying with varied global standards, especially for the multinational companies. While their larger counterparts may get through easily, smaller firms have minimal resources that may bring about serious compliance issues.

To that effect, firms must involve themselves in the activities of the regulators to set achievable and mutually beneficial rules and regulations. Also, fintech firms should consider teaming up with other firms to enjoy economies of scale.


Not Maintaining the Human Touch

Fintech has been described by many as the ultimate disruptive force in the finance sector. Hence, adding a human touch in its development and implementation will undoubtedly make the technology more acceptable to consumers.

Financial businesses need to invest more in AIs and machine learning if these systems are to resonate better with humans. Moreover, companies that don’t have human touch in their technology are prone to IT meltdowns, pretty much like the one that occurred with TSB (UK bank, not NZ’s Taranaki Savings Bank) leaving hundreds of customers without access to their accounts.

To avoid these and more issues, fintech companies need to put in place more consumer-focused systems. This will improve the consumer experience, which should be the ultimate goal of every business.


Final Thoughts

In conclusion, each and every form of technology has its own challenges. While they may sometimes result in more significant problems, fintech companies need to invest heavily in research and development to devise better techs geared towards consumer needs.


fintech challenges
Infographic made by our friends at Carsurance.

Tethered To What?

tether USDT USD audit terms of service

Tethered To What?

The internet has been awash with talk of the recent update to Tether‘s terms of service. It was quietly updated on the 26th of February and announced via a recent Reddit post.


tether USDT terms of service reddit


Not only is it in the statement in their terms of service but also on their homepage.


” 1.1.32 “Reserves” means traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities;” -

Dodgy Loans

So what exactly do they mean by ”may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities”? It sounds like they are admitting to the fact they‘ve been loaning US dollars to related parties for some time. I think there‘s a good chance that one of those related parties is Bitfinex.

I‘ll be honest with you, I‘m not a fan of USDT. There have too many red flags and questions gone unanswered. Tether sacked their auditor back in early 2018, citing ”excruciatingly detailed procedures” as the reason for the decision. Bitfinexéd published a superb analysis of the decision.


tether USDT audit bitfinex


What did Tether say about the recent update to their terms?

In a statement to The Block:

”Our most recent revisions were intended to update our disclosures to reflect Tether’s growth and operations and to be consistent with the types of disclosures used by other institutions… The only change is that the composition of the assets that provide that backing includes a combination of cash, cash equivalents, and may also include other assets or receivables from loans issued by Tether.” -Tether (abridged)

Having confidence in an asset-backed token requires:

1. The issuer holds the amount of assets they say they do

2. The assets are in the form they say they are


tether USDT terms of service tos tweet


Loans to affiliated parties, or any party, will be far less secure than having the cash in the bank. Tether should not be making money on the side with dodgy loans to their friends or other investments. It is to provide a secure stable coin, and that should be the only thing they focus their activities on.

Tether should restore faith in USDT by stating what those loans and investments are. An audit is urgently needed too. There are so many new stablecoins on the market now that provide far greater transparency and assurances than Tether does.

Your move, Tether.

Ross Carter-Brown

Read moreTethered To What?

New Zealand Women in Blockchain: Part 1 – Alex Sims

New Zealand Women in Blockchain

New Zealand Women in Blockchain:
Part 1 – Alex Sims, Associate Professor at The University of Auckland

Welcome to the first part of a series covering some of the amazing New Zealand women in blockchain. The first person to be showcased is the incredible Alex Sims.

Alex Sims primary areas of research (in relation to blockchain and crypto) include DAOs (decentralised autonomous organisations), smart contracts, and the regulation of cryptocurrencies. Teaching in the Department of Commercial Law, she’s squeezing blockchain into her courses although many of her students haven’t previously heard of blockchain.

Additionally, Sims supervises graduate students’ dissertations and theses on blockchain and DLT (distributed ledger technology). Her students are looking at the opportunities in New Zealand for putting land titles on the blockchain and also custodial arrangements for cryptocurrencies and crypto assets.

Currently, Sims is part of a research project which is exploring the use of blockchain in the construction industry. This research, dubbed “Chip of the new block”, is funded by the BRANZ Building Research Levy. The main areas of focus involve how blockchain can change the way building assets, distribution, and supply is managed.

An industry must first understand a new technology before it can make informed decisions about where it can add value. This is the first challenge of Blockchain—understanding what it is and what it can do for the industry. – Alex Sims

Despite her keen enthusiasm for blockchain technology, it isn’t shared by her family and she isn’t allowed to talk about it at home!

New Zealand Women in Blockchain Alex Sims
Alex Sims – Associate Professor at The University of Auckland


My brain literally exploded as I realised that blockchain would change everything. – Alex Sims

Alex, tell me about your career path. How did you end up where you are today, in regard to blockchain?

I’ve been an academic at the University of Auckland since 2000. My main areas of research were intellectual property and consumer law. I’ve always been interested in tech, and have taught law and technology etc. I listen to lots of podcasts/audiobooks. In May 2016 I heard two podcasts back to back about blockchain and smart contracts (one from a Canadian tech and culture podcast and the other one was on Radio NZ). The NZ one was an interview with Mark Pascall – he was organizing a blockchain conference taking place a few days later. While I had heard about Bitcoin, I hadn’t thought much about it, it was just some weird internet money. But when I heard the podcasts my brain literally exploded as I realised that blockchain would change everything. So, I fell down the rabbit hole, went to the conference and then basically changed all my research to blockchain.


What does your typical day look like?

It depends on what I’m doing but normally starts with biking to CrossFit, then biking to work. I tend to spend a bit too much time on admin and don’t actually spend as much time reading as I should. When I was talking to someone the other day about books to read (I read a lot of economics and other books) and she said that I was lucky as she couldn’t read books during the day. I never read books at work during the day! Instead, almost all the books I read are actually audio books as I listen to them when I’m doing other things. (I must admit that I don’t watch television/Netflix etc – so my choice is between Netflix and books…)


What publications/blogs/podcasts do you use to keep up with blockchain news?

I listen to a lot of podcasts, just some of them are:

Anything written by Vitalik Butterin is a must read and I use LinkedIn to find articles.


What is the best book (or other resource) for blockchain beginners?

There are so many! It is getting a bit old now, but “The Age of Cryptocurrency” by Paul Vigna and Michael Casey was good. Also, I’ve got some links to good resources on my University profile page.


Which blockchain application excites you the most?

The blockchain application that excites me the most at the moment is Dfinity.


What do you feel are the biggest challenges facing blockchain adoption worldwide? In NZ?

The biggest challenge facing blockchain adoption worldwide is the entrenched thinking of many people. It doesn’t help that bitcoin (and therefore cryptocurrencies) have been equated with criminal activity by many people. Sure, some criminal activity has occurred, but the traditional banking system (especially the UK banking system) is used far more for criminal activity – and it’s not just the banking system. Professionals such as lawyers and accountants have often unwittingly facilitated large money laundering.

Most people do not like change, and even though they grumble about systems that don’t work properly, they are comfortable with those systems. Also, I think that a number of people are unable to understand that different ways are possible. Plus, the incumbents and their advisors don’t want change and they have an outsized influence on the government!


How do we overcome these challenges?

A lot of people have attempted to get the Government in New Zealand to understand blockchain and its advantages and opportunities for New Zealand with limited success. While there are some people in certain government departments who are doing great work, they’re the exception. There is too much fragmentation in government.

Some people say that cryptocurrencies are slow and expensive to use, and conventional payment systems, e.g. VISA are superior. Well yes, currently VISA has some advantages, but that is the same as when the first motor cars started to be driven. Car owners were mocked and ridiculed because horse-drawn transport at the time was much more dependable – where are the horses now? This post is excellent as it shows that cryptocurrencies are trying to replicate existing payment systems, rather than create new ones, with the effect of transforming society.


When it comes to transparency (while maintaining privacy and the security of data), how is blockchain going to change our current systems?

It all depends on the application; at times we will want radical transparency, but at other times you won’t. One way that blockchains can change our current systems is that if you own assets or money and get someone to look after them, i.e. a custodian, that custodian becomes the owner of those assets/money and you become a creditor. Sure, there are laws that are meant to protect you from the custodian making off with your assets/money, but laws do not actually stop the custodian acting illegally. With blockchain, we can tokenize assets so that not only do you retain the ownership of the assets, the technology is such that with using multi signatures etc the custodian cannot engage in any wrongdoing. That will dramatically change financial markets.

Then there is the argument over permissioned vs public blockchains. I think a parallel can be drawn between the early internet and blockchain. With the early internet people and businesses were scared, so they had their walled gardens (think AOL, Compuserve etc) but the utility of what were in effect intranets was limited. Yes, nice and safe, but couldn’t do very much = permissioned blockchains. When the walled gardens came down, that was when the power of the internet was unleashed = public blockchains.

So, at the moment I can understand why people and organisations want the comfort of permissioned blockchains but, over time, public blockchains will win.


Is there anything else you’d like to share?

There is a saying that we have Palaeolithic brains, medieval organisations and god-like technology. Blockchain potentially allows us to create new forms of organisations called decentralised autonomous organisations (DAOs). I’m particularly interested in DAOs. Instead of Uber with its management and shareholders, you could have an Uber-like DAO.

The users of the DAO would pay in DAO tokens, drivers would be paid in the DAO tokens. The token holders would make decisions about how the DAO would run, so they would govern the DAO. There are all sorts of governance systems possible (that is one reason why I like Dfinity as it has a very interesting proposed governance system). This would mean that the split between shareholders/management/employees (independent contractors) would be torn down. If the DAO did well then, those drivers (and others) who had held onto their tokens would benefit.


Disclaimer: The above references an opinion and is for informational purposes only. Do not take this as personalised financial or investment advice. The opinions expressed by the author do not represent the opinion of BitPrime.

Last updated: 14/03/2019

Private Digital Currencies Will Lead To Cryptocurrency Mass Adoption

Private Digital Currencies Will Lead To Cryptocurrency Mass Adoption Facebook JPM Coin

Private Digital Currencies Will Lead To Cryptocurrency Mass Adoption

I know lots of you rolled your eyes when you read my headline. Bear with me while I play devil’s advocate for a while. JP Morgan Chase and Facebook are both working on private digital currency projects. Private digital currencies are permissioned blockchains, meaning they’re governed by a central entity. JP Morgan announced on February 14th the launch of their own cryptocurrency, JPM Coin.  While Facebook had signaled its’ entry into the market as early as 2018.


Cryptocurrencies or Digital Assets?

These corporate coins have been widely termed as cryptocurrencies. But calling a private digital currency a cryptocurrency is an oxymoron. Many people don’t know what a private digital currency or a permissioned blockchain is, so cryptocurrency is the terminology being used.

A cryptocurrency is defined as “a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies use decentralized control as opposed to centralized digital currency and central banking systems”.

So these new corporate coins are really digital assets and not cryptocurrencies. But does this really matter?  


JPM Coin

JPM Coin will be a stable coin pegged to the US dollar. Stable coins are digital assets that have their value derived from another underlying like, in this case, the US dollar. JPM Coin will be used by JP Morgan internally and for international payments for their institutional customers. However, household consumers could one day be using the coin. Jamie Dimon recently stated that “JP Morgan Coin could be internal, could be commercial, it could one day be consumer.”

It’s not clear if or when JPM Coin might be available to the public, but if it were it would be a boon for the crypto industry. JPM Coin isn’t the only private digital currency being launched.


Facebook Coin

Facebook is working on private digital currency to be used on it’s messaging service WhatsApp to facilitate mobile payments. WhatsApp has more than 1.5 billion users in 180 countries and has more users than Facebook Messenger and WeChat. Facebook Coin might also be used in Facebook Messenger which has another 2.32 billion monthly users. The potential market for Facebook Coin is massive.  


Mobile Payments Industry

The mobile payments industry was worth $601 billion in 2016 and is growing at 33.5% per year. Mobile payments are projected to reach $4574 billion by 2023. The biggest players include Google Wallet and Apple Pay. Significant growth in mobile payments is occurring in the Asia Pacific region, mainly due to the relatively young populations.

While the SMS segment is currently the largest in the market, that would rapidly change if payments could be made quickly in messaging apps. SMS payments involve sending an SMS to a merchant for a purchase, then the cost of the purchase is charged to the phone bill or debited from a prepaid balance by the mobile phone company.


Mass Adoption

Cryptocurrencies have struggled to achieve mainstream adoption. The cryptocurrency industry has grown in leaps and bounds since the advent of Bitcoin but it isn’t in widespread use yet. Cryptocurrencies are plagued by user experience issues, custody (lost keys), exchanges hacks, and scam ICO’s. No wonder the average person doesn’t want a bar of it.


“Until my 92 year old Grandfather is using crypto, then we haven’t reached mass adoption”


Most of us don’t understand what money is let alone a cryptocurrency. Explaining what money is, is a subject for another whole series of articles… But that’s just the point. We don’t need to understand how an engine works to drive a car, only that it’s useful and makes our lives easier. That is the only way digital currencies, and cryptocurrencies will be widely adopted – when they make our lives better.

The Cambridge University Global Cryptoasset Benchmarking Study  has shown that the crypto sector is growing strongly. The number of cryptocurrency users grew from 18 million in 2017 to 35 million users in 2018. While this amounts to growth of 94% in a year, it is only 4.73% of the global population.  But until my 92 year old Grandfather is using crypto, then we haven’t reached mass adoption.


The Answer Lies With Private Digital Currencies

The digital currencies proposed by JP Morgan Chase and Facebook could be the solution to mass adoption. Billions of people already have their apps installed on their devices. It doesn’t require a leap of faith to think that people might then take the extra step – to send value with one of those centralised coins. It could be things so simple as sending that friend who moved to Japan that $100 that you owe them, or buying credits for your favourite console game. Once you’re used to using forms of value other than your local fiat currency, using true cryptocurrencies doesn’t seem so foreign.


A Wolf In Sheep’s Clothing?

Centralised digital currencies do have inherent risks, risks that cryptocurrencies were built to circumvent. JPM Coin will likely be pegged to the value of the USD while Facebook Coin is rumoured to have its value tied to a basket of three fiat currencies. In the next global financial crisis, these assets (or credit notes) will be subject to the same risks as the fiat currencies that prop them up. Facebook could freeze your assets because of a politically unpopular post you made. Could your JPM Coin be seized by the US Federal Government like gold was in 1933? Facebook’s ban on sponsored cryptocurrency related posts could be a signal of anticompetitive behavior from the internet giant, given that they’ve been working on Facebook Coin for some time.  Facebook has since relaxed the ban, allowing ‘preapproved’ adverts, but they still have a blanket ban on ICO’s. Lawsuit anyone? 



Centralized Digital Currencies Are No Substitute True Cryptocurrencies

Cryptocurrencies will always have a place in the global monetary system. There are just too many geopolitical risks for us to store all of our value in fiat or fiat-pegged assets. Precious metals have existed since before the creation of currency, and are still widely held now for the exact same reasons. Central banks tend to have vast gold reserves because they don’t trust the value of currencies printed by other central banks. You only have to look at countries like Venezuela and Zimbabwe, for example.


“The future is uncertain which is why I’m certain cryptocurrencies are here to stay”


While cryptocurrencies are still not user-friendly they have numerous characteristics which make them an excellent way to diversify away from the inherent risks of traditional asset classes:


  • Permissionless. Anyone with an internet connection can access them. Even with no internet connection, you can transact with NFC (near field communication) from mobile to mobile.


  • Immutable and irreversible. A transaction can’t be reversed once it’s included in the blockchain. If the transaction contains information, that information can’t be suppressed.


  • Privacy. Some cryptocurrencies allow for complete anonymity which makes it hard for someone else to know how much you have, or to take it from you.


  • Fast, low-cost transactions. Cryptocurrency transactions are much faster than bank transfers. Ethereum has an average block time of fourteen seconds.


  • Known supply. Cryptocurrencies are programmable money, and those characteristics are predetermined. We know there will only ever be 21 million Bitcoins. We have no idea how many US dollars will be printed over the next decade. While the parameters of cryptocurrencies can be changed, it only happens by consensus within the community.


  • No charge-back risk. Merchants can take solace knowing that transactions can’t be reversed like they easily are with credit cards. Paypal has similar charge-back issues.


Blazing A Trail

The advent of JPM Coin and Facebook Coin will be positive for the cryptocurrency industry. Value can exist and be transferred in many forms which users will be introduced to via these everyday apps. Some of these users might then migrate to ’true’ cryptocurrencies at a later date. It could be because they’re curious, or it could be due to the next global financial crisis. The future is uncertain which is why I’m certain cryptocurrencies are here to stay.


Ross Carter-Brown

About the author:

CEO of BitPrime. A devotee of blockchain, crypto, entrepreneurship, life, and literature. A proud father, perennial student, and dreamer. “Question everything”.


Disclaimer:  The above references an opinion and is for informational purposes only. BitPrime does not provide financial or investment advice. The opinions expressed by the author do not represent the opinion of BitPrime.


Last updated: 10/03/2019

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