Anthony Pompliano, or Pomp,
is at it again. Some of you may recall his odd claims about bitcoin adoption
in Argentina, which I took apart here.
Well, the following tweet wandered onto my twitter stream a couple of days
ago.
For more, here
is the Wall Street Journal.
So let's get this straight. The Ohio state government is not accepting
bitcoin as payment for taxes. Rather, it is sponsoring a gateway that allows
business owners to offload their bitcoins on the market in the moments prior
to tax settlement. The actual tax obligation will be settled in actual
dollars. Take a look at the FAQ at ohiocrypto.com.
"At no point will the Treasurer’s office hold
cryptocurrency. Payments made on OhioCrypto.com, through our third party
cryptocurrency payment processor partner BitPay, are immediately converted to
USD before being deposited into a state account."
Here's an example of how this might work. Let's say an Ohio business owner
owes $10,000 in taxes. By logging into ohiocrypto.com, she can sell $10,000
worth of bitcoins to a payments processor called BitPay to meet her tax bill.
BitPay in turn sells those bitcoins for the requisite amount of dollars on a
bitcoin exchange like Coinbase, and then forwards the $10,000 (in fiat) to
the State of Ohio. Dollars, not bitcoins, are being accepted for taxes.
Ohio's announcement not a big deal, certainly not deserving of a WHOA. In
addition to bitcoin, there are all sorts of assets we taxpayers can offload
in the moments before settling our tax bill. After we've computed our tax
bill, we can sell an appropriate amount of Tesla shares, then forward the
dollar proceeds to the state. That's exactly what is happening with
ohiocrypto.com, except an intermediary--BitPay--is being hired to expedite
the last minute. We can do the same with gold, or silver, or property. Heck,
using Pomp's definition we can even "pay our taxes" with an old
IKEA sofa. Quickly sell the sofa at a low price on kijiji, deposit the cash,
then settle the tax bill with an ACH payment to the government. The whole
process won't take longer than 45 minutes.We don't even need to pay an
intermediary like BitPay to expedite it.
Unfortunately, ohiocrypto.com is a big waste of taxpayer funds. Only a
handful of businesses are ever going to use it. Say that our Ohio business
owner has some dollars in her bank account as well as some bitcoin. She owes
the state $10,000. According to ohiocrypto.com, the fee for going the Bitcoin
route is 1%, in her case $100. But the cost of an ACH payment is free. Unless
she has some sort of soft spot for paying with bitcoin, a quick and simple
calculation means the she will never opt to use ohiocrypto.com.
I'm being generous with my example. I've assumed that our business owner
already happens to have enough bitcoin on hand to send her payment to
ohiocrypto.com. But if she doesn't, which is likely to be the case, then that
only multiplies the unlikelihood of her ever going via Ohio's new bitcoin
route. To fund her $10,000 payment to ohiocrypto.com, she'll first have to
endure the hassle and expense of acquiring enough bitcoins ahead of time.
Given that she must still endure BitPay's 1% fee to settle her taxes, why
would she ever bother embark on such a costly chain of transactions?
Don't blame BitPay for the high fee. It charges a 1% fee because dealing in
bitcoin is a nuisance. Not only must BitPay recoup the trading costs that it
incurs by selling our business women's $10,000 worth of bitcoins (both
commission and slippage), but in the time between accepting her submission
and making the trade it must cope with bitcoin's volatility. BitPay is just
trying to get by.
Why is Ohio going through with this project? Ohio Treasurer Josh Mandel, who
is behind the effort, has this
to say: "Around 2014, I developed an interest in crypto and now I
consider myself a crypto enthusiast." Right. This project smells of
fanboy-proving-devotion-to-bitcoin, not how-do-we-save-the-taxpayers-money.
Perhaps Mandel is angling for a cushy job in the crypto sector when his term
expires in January?
Back to Pomp. To end his tweet, Pomp proclaims that the "virus is
spreading." Not at all. A well-designed payment option will literally drag
people in because it is so incredibly useful. This ain't it, Pomp. Not only
is Ohio not accepting bitcoins (no doubt they are too volatile), but
it is unlikely that Ohio businesses will adopt ohiocrypto.com. Ten years into
Satoshi Nakamoto's payments experiment, it still hasn't succeeded in pulling
in mainstream payees and payors. Let's face it. Bitcoin is just not that
great of a payments system.
...which isn't to say it hasn't been successful. What Nakamoto didn't realize
at the time is that he wasn't creating decentralized cash. He was creating
what would come to be one of the world's most
popular decentralized financial
games.
