Barry Silbert on Bitcoin’s Future: “The Bitcoin Price Will be Higher”

Bitcoin Magazine
Barry Silbert on Bitcoin’s Future: “The Bitcoin Price Will be Higher”

The Digital Currency Group (DCG), a company founded and led by Barry Silbert, held an investor day in Palo Alto, California, where companies could demo their products to investors in the Bitcoin and blockchain space.

DCG is the firm responsible for the Bitcoin Investment Trust, which started trading on the OTCQX back in May under the ticker “GBTC.”

During the event, Silbert gave a presentation where he laid out his predictions for bitcoin in 2016, which P. Bart Stephens, another investor in the Bitcoin space, shared:

TOP TEN PREDICTIONS FOR 2016

Bitcoin as a currency/store of value re-emerges as themeWhen price starts to increase, flywheel effect begins…Wall Street begins to trade bitcoinCross border payments/remittance using bitcoin becomes competitiveGrowth in Brazil, China & Middle EastSlow progress around private blockchains for financial marketsIndustry consolidation and shake out continuesNon-financial use cases of blockchain ledger explodeBanks begin to service digital currency companiesBitcoin price on 12/31/16 = higher

Silbert expressed significant optimism related to the price of bitcoin.

“Bitcoin price will be higher,” Silbert said.

At the Inside Bitcoin’s conference in New York City in April, he made a similar claim when he offered one of two outcomes: Either the price would be $0 or it would be significantly more than it was at the time. “It won’t be $230,” he said in April.

His predictions were focused around three main points. First, as the currency/store of value theme re-emerged, the price would start to increase, which would result in the flywheel effect. As a wheel turns, it can easily gain more momentum, resulting in further turning. The fear of missing out propagates an ever-increasing price, which partially contributed to the previous bubble.

Tyler Durden, the pseudonymous Zero Hedge author, has offered a belief that the fear of capital controls in China could push bitcoin into a bubble like never seen before.

“If a few hundred million Chinese decide that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decide to invest even a tiny fraction of the $22 trillion in Chinese deposits … in bitcoin (whose total market cap at last check was just over $3 billion), sit back and watch as we witness of the second coming of bitcoin, one which could make the previous all-time highs in the digital currency, seems [sic] like a low print.”

Despite many in the “rebittance” business believing bitcoin doesn’t make remittance cheaper, Silbert predicted that 2016 would give rise to competitive cross border payments/remittance businesses that use bitcoin. However, while remittance might not be ready for disruption, international B2B transactions might be a use case that bitcoin is ripe to change.

Diving deeper into the finance of bitcoin, Silbert said that bitcoin was a noncorrelated asset. According to InvestorWords.com, noncorrelated assets are, “assets that tend to change in value independent of the core financial markets such as stocks and bonds.”

Fundamentally, Silbert remains significantly bullish on the potential for bitcoin as an investment. With the recent rise in price, there is a growing optimism that the price of bitcoin might finally begin an ascent back to previous-bubble levels. For now, bitcoin entrepreneurs and investors continue to focus on building more products and services that will better utilize the blockchain ledger over time. As Silbert predicts, 2016 should bring many nonfinancial use cases.

Jacob Donnelly is a full-time product manager and freelance journalist covering stocks, business and bitcoin. He runs a weekly digital currency and blockchain newsletter called Crypto Brief.

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College Crypto Hackathon Invites Students to Create Unique Bitcoin and Blockchain Applications

The College Cryptocurrency Network (CCN), a leading cryptocurrency organization supported by established financial institutions and bitcoin startups including Barclays, Augur, BitGo, Blockchain, Ethereum and Factom, has officially announced the launch of theBorderless Block Party,” a month-long hackathon designed for high school and undergraduate university students to create innovative financial solutions and technologies through the implementation of bitcoin and the blockchain technology.

The participants of the Hackathon will be mentored by financial experts and bitcoin gurus from its supporting companies and organizations, and will be granted free access to APIs that could be integrated to create unique applications.

All projects will be judged by three panelists: Ethereum founder and lead developer Vitalik Buterin, Provable chief scientist Piotr Piasecki and Whit Jackson, based on four criteria. The three panelists will look into its uniqueness, execution and whether the product truly solves fundamental problems that have not yet been solved.

The winner will be granted a three-month membership to Barclay’s rise hub, mentoring from ThinkRise.com, $1,000 and a weeklong stay in Ibiza, an island in the Mediterranean Sea.

“The last decade has seen the rise of remarkable new decentralized technologies that both can both empower individuals and eradicate barriers. The Borderless Block Party aims to help passionate students explore these amazing technologies and show to the world what the new paradigm of collaboration and production looks like,” says the CCN team.

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Six Questions to Make Sense of the European Court of Justice Decision on Bitcoin VAT

In what can only be regarded as good news for Bitcoin, the European Court of Justice (ECJ) Thursday ruled that exchanging bitcoin should not be subject to VAT (Value Added Tax). The verdict, which is the climax of an Swedish court dispute that started back in 2012, applies to all 28 E.U. member states. VAT-law is complicated, however, and some reports on the verdict have been confusing so far.

Hopefully, the answers to the six questions below will help make sense of this ruling.

Does the ECJ decision mean that exchanging bitcoin falls outside of the scope of VAT?

Actually, no. Any dealing that consists of exchanging traditional (“fiat”) currencies for bitcoin (or the other way round), is regarded as a service that is within the scope of VAT. More specifically, this refers to the exchangers’ margin; the price difference between buying and selling from which an exchanger makes its profits.

Then why is everyone saying that exchanging bitcoin is free from VAT?

Because the ECJ has ruled that exchanging bitcoin is exempt from VAT. So while the European Court did decide that exchanging bitcoin falls within the category of services that is within the framework of VAT, it also ruled that, within this category, exchanging bitcoin deserves an exemption.

The end result is mostly the same, however: no VAT is due on exchanging bitcoin.

So does this VAT exemption apply to bitcoin itself as well then?

Well, no. But that’s good, too.

As opposed to exchanging bitcoin, the ECJ ruled that bitcoin itself does completely fall outside of the scope of VAT if it is used as a means of payment.

According to the ECJ, bitcoin has no other purpose than to be a means of payment… if it is used as such. Therefore, as long as bitcoin is used as money, it is set on equal footing with other types of money. As such, like other types of money, bitcoin doesn’t need an exemption; it’s not subject to VAT in the first place.

So, the end result is the same, again. No VAT is due on spending, paying and receiving of bitcoin.

Why did the ECJ decide to make exchanging bitcoin exempt from VAT?

Simple: Regular money exchange services are exempt from VAT. And since the ECJ considers bitcoin to be on equal footing as other means of payment, the ECJ believes this exemption should apply to bitcoin exchanges as well.

What does this mean for bitcoin in the EU?

For one, bitcoin exchanges, startups and users finally know where they stand from a VAT perspective.

Exchanges know they do not need to pay VAT over their services. Startups have a better sense of the legal domain they are in. And, perhaps most importantly, casual users don’t need to worry about all sorts of complicated tax laws. Buying, selling, sending, receiving, accepting and spending bitcoin will not be taxed, which allows people to deal with bitcoin as they would with other types of money.

The only group that might not yet have all its questions answered are miners. While their selling of bitcoin will (probably) be VAT exempt, it’s not completely cartain whether their production of bitcoin will.

What happens to all the VAT that has been paid by bitcoin exchangers over the past years?

In theory, that VAT should be reimbursed.

In practice, however, this will be complicated. In order to reimburse the VAT, the money must be returned to the original buyer of the bitcoin – not the seller. As such, exchangers will need to show their national tax authorities that the reimbursed VAT will be forwarded to their customers somehow. This is no easy feat, of course.

On top of that, most European tax authorities did not charge VAT up until now in the first place. Rather, they waited for the ECJ to present its judgment.

Thanks to fiscalist for law firm Baker & McKenzie and VAT-expert Roger van de Berg.

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Rebittance Startups Agree: Bitcoin Does Not Make Remittance Cheaper (But Does Allow for Innovation)

Rebit.ph co-founder Luis Buenaventure recently published a blog post on Medium claiming that Bitcoin does little to help cheapen remittances.

While the math-based currency does lower the bar of entry for startups, and local technological innovation could further improve the competitive advantage of so-called “rebittance” companies, Buenaventure argued that most of the cost is currently made in “the first and last mile.”

While Bitcoin does a great job realizing cross-boarder transfers of money, the distribution of physical cash was the expensive part of remittances all along – a problem Bitcoin hasn’t solved.

To find out if Buenaventure is right, Bitcoin Magazine took the pulse of four other rebittance startups: Bitex, HelloBit, SatoshiTango and Volabit.

The first and the last mile

Most rebittance startups agree with the main premise as presented by Buenaventure. Bitcoin does not make rebittance cheaper – at least not yet. All four companies acknowledged that the bulk of the cost is made in the first and the last mile, the part of the remittance process that doesn’t really involve bitcoin. As such, rebittance startups are not particularly well positioned to compete with existing giants Western Union and MoneyGram as far as costs go.

HelloBit co-founder and CEO Ali Goss explained:

“These companies have very large foreign exchange (FX) departments, and they’re basically able to bring the cost of sending money across boarders down to zero. We’re talking about big movements of money, which they do when prices are favorable. They might even make money doing that, as opposed to it being a major cost.”

As such, Goss continued, bitcoin doesn’t actually remove that much friction. Rather, it can make it worse.

“With bitcoin, you’re adding a third currency,” Goss said. “You go from U.S. dollar to bitcoin, and then from bitcoin to whatever the local currency is. You’re adding an extra FX move right there alone. That increases friction. On top of that, small startups don’t have a big FX department, and they don’t have the big abilities that come with such a department … they’re generating more costs for themselves, not less.”

Hannah Kim, COO and Head of Product at Volabit, added:

“In addition to costs, perhaps a bigger problem is that Bitcoin companies in many countries – most notably the U.S. – cannot develop sustainable partnerships with cash-collecting and distributing networks due to unclear regulatory implications.”

SatoshiTango co-founder and CEO Matias Bari agreed, but emphasized that he is quite hopeful for the future, saying:

“I agree that rebittance is currently not cheaper than existing alternatives, but I do think that costs will lower as long as companies in the space grow and are able to charge less for the same service. That is a path we need to walk. But it is going to happen in a couple of years when the industry gets bigger and healthier and some mechanisms used today probably change for better ones, allowing us to improve our processes and lower fees.”

The only company that disagreed with Buenaventure’s assessment was Bitex, the Latin Americawide bitcoin exchange that offers remittance services within the region as well.

Bitex co-founder and Chief Marketing Officer Manuel Beaudroit stated:

“In this region there’s a significant reduction in cost when using bitcoin, from 15, 20, or 30 percent to 6 or 10 percent in most cases. Though it is true, though, that the main added costs are in the first and last mile, where the branch offices usually charge 2.5 percent to 3 percent.”

Innovation

The rebittance companies generally agreed with Buenaventure’s conclusion that Bitcoin does help smaller startups get a foot on the ground in the remittance industry, while they also acknowledged that adoption of local virtual currencies or other fintech solutions could severely cut costs.

But the rebittance companies pointed out that one other aspect is even more important: innovation. The open nature of Bitcoin allows for startups to use this technology in new and innovative ways, and this is where they believe the rebittance industry should really get its edge.

“I would not say that the remittance industry is stagnating,” Volabit’s Kim explained. “Rather, the industry is being forced to evolve quickly by learning what works and what doesn’t. The remittance population is as diverse as its use case, and looking at success cases like Transferwise it’s clear to see that there are opportunities to reach people that are more open to online, tech-forward solutions.”

This was seconded by Goss, who’s HelloBit transformed its remittance company into a sort ofUber for cash,” where users act as “human ATMs.”

“Smart people need to come up with smarter things, and we will ultimately see the innovation occur that will make using Bitcoin for remittance cheaper.” Goss said.

“But that wasn’t our goal. We knew early on that it wasn’t going to be cheaper right off the bat, therefore what we asked ourselves: What could we do that’s different? So, with HelloBit, you might pay more sometimes, but then you’d pay more for an additional service. You get the money delivered to you. Though it may be more expensive than picking it up at Western Union, or maybe the same price, you have the added benefit of delivery, which is a completely new distribution model. And out users are able to settle right there with their phone, rather than having to need a bank account.”

Bitex’s Beaudroit agreed that rebittance companies should focus on alternative markets rather than the markets that are already served by the existing rebittance industry.

“I see bitcoin playing a fundamental role for remittance company when needing to move funds crossborderly, more focused on B2B (business to business) than B2C (business to customer), at least for the following couple of years,” Beaudroit told Bitcoin Magazine.

SatoshiTango’s Bari acknowledged that rebittance companies will need some time to find the best way to utilize Bitcoin, too. He believes this will be a long process, with many failures on the way, but that this is healthy for the market as a whole.

“It is normal that we see a stagnation after some two years of absolutely excitement,” Bari said. “It is common; it’s a Darwinian process of selection among companies.”

And, drawing a comparison to the automobile industry, Bari said:

“You know Ford and Chrysler. Find out how many car companies were funded 70, 80 years ago, at the same time those two were funded. Hundreds. They couldn’t make it. It took many years until they became these amazingly huge companies. But when they first started they were startups, not knowing where to aim.”

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