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Treasurer in the U.S. state of Ohio Robert Sprague has revealed that at least two companies have paid their taxes using bitcoin since the state launched its cryptocurrency payment platform in December. Sprague did not disclose details pertaining to the amount or companies involved, citing confidentiality.
State to Review BTC Tax Payments
Speaking at a forum organised by the Ohio State Associated Press on Feb. 19, Republican politician Robert Sprague said: “We’re reviewing how [the program] might be either curtailed or might be expanded, and what our counter-party risk is with that vendor.”
Ohio became the first U.S. state to accept cryptocurrency as a means of payment for taxes late last year. Sprague told journalists about his experiences with the BTC payment option on the state platform ohiocrypto.com, established in December by Josh Mandel whom he succeeded in January.
According to the new treasurer, Ohio doesn’t actually receive or hold bitcoin, but Bitpay, the company hired by the state to process the bitcoin payments, converts the virtual currency into fiat money before it is sent to the Ohio treasury.
Bitpay takes 1 percent commission on the transaction as payment. Companies intending to pay taxes in crypto will typically have to register and create accounts on the state’s tax payment platform and submit details about their tax obligations, including tax period and the outstanding amount.
When the project was launched three months ago, Sprague indicated that the move would help to improve the ease of doing business in Ohio and attract new business. “We applaud the pilot that makes Ohio more business-friendly and sets us up as a leader in cryptocurrency. We will evaluate both currency and counter-party risk once we enter the office to see about the future,” Sprague was quoted as saying on cleverland.com. Lawmakers in Ohio are looking to turn the state into a major centre for cryptocurrency and the blockchain industry.
British Lawmaker Lobbies for Payment of Bills in Crypto
In the United Kingdom, member of parliament Eddie Hughes proposed in December that taxpayers should have the option to pay council tax and utility bills in cryptocurrencies such as BTC. The 50 year-old conservative legislator for the Walsall North constituency said the move would place the country at the forefront of digital currency adoption in Europe.
“You’re either ahead of the curve or you’re behind the curve, and our country is in an interesting position right now – we need to be seen as a progressive country,” Hughes said at the time. “We are at a crossroads and we’re about to determine our future – one in which taking the lead in this field could prove very beneficial.”
Regulators throughout the world have complained that cryptocurrencies are risky, and repeatedly alleged that they help to fuel money laundering and terrorism while placing investor funds at the mercy of fraudsters. Their alarmist entreaties have ramped up pressure on governments to act, with many promulgating a series of regulations ostensibly designed to safeguard the public and prevent the risk of financial instability.
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A new report published this week shines a light on the stablecoin ecosystem. Authored by George Samman and Andrew Masanto in conjunction with Amazix, the report traces the rise of digital currencies against a backdrop of high inflation in 16 countries. The report claims these conditions will create a need for fiat-pegged digital currencies that aren’t beholden to the volatility of local currency in inflation-hit nations.
Making the Case for Stablecoins
“Sixteen countries today face annual inflation rates of more than 20%, whereas other economies face hyperinflation – like Venezuela, where inflation hit 80,000% in 2018,” begins the report by Samman and Masanto. It continues: “The high volatility of today’s cryptocurrencies hinders their usefulness. Average citizens need a way to protect their money, a way to send money to/receive money from their families in other countries, and merchants need a stable means of exchange in which to do business. The stablecoin market emerged to fulfill those needs.”
40 cryptocurrency and stablecoin companies were surveyed during the creation of “The State of Stablecoins 2019.” The wide-ranging report makes a number of conclusions regarding the nascent stablecoin economy:
- Developed nations with “stable” fiat currencies will not be early adopters of stablecoins – instead developing nations with high inflation will drive adoption.
- While most stablecoins are currently tethered to the USD, in the future it is expected that a diversified basket of tokenized assets will become the norm.
- The next step in stablecoin evolution is for them to be integrated into decentralized banks that will serve the needs of people in emerging markets, especially authoritarian regimes .
Ethereum Dominates the Stablecoin Trade
The 82-page report reveals the extent to which the Ethereum network dominates for stablecoin issuance and trade volume. 68.4 percent of the stablecoin projects surveyed are built on Ethereum, although some expressed a desire to migrate to another blockchain or to their own native network. Ethereum-based coins include DAI and USDC. Stellar ranked a distant second in the survey, with just 7.9 percent of projects built on its chain.
Demonstrating the extent to which most stablecoins are highly centralized, more than one third of the projects surveyed viewed regulations favorably. Just 13.2 percent of projects did not view regulations favorably, insisting that self-governance and complete decentralization were more important.
Amazix, the community management firm that co-sponsored the report, quotes Reserve CEO Nevin Freeman as saying: “The stablecoin market has made significant strides in the past year, but there is still much work to be done. What’s needed is greater coordination amongst projects, and greater focus on the application of stablecoins to solving real-world problems in the places where they are needed the most.”
While focused on digital currencies, “The State of Stablecoins” also highlights the dangers of reliance on fiat currency, listing dozens of countries that have experienced a currency crisis since the 1980s. The report signs off with no less than 24 findings, including the assertion that “The holy grail of stablecoins is to become the decentralized central bank for the internet. However, in order for this to be achieved and for a global reserve currency to emerge the internet needs to be truly decentralized.”
Do you think citizens of inflation-hit nations might turn to stablecoins? Let us know in the comments section below.
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