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Blockchain Bitcoin & Crypto Weekly CXO Briefing for week starting 8th January 2018


By Bernard Lunn.






Bernard Lunn
Bernard Lunn
Editor'sNote: I am filling in for Ilias, who will be back in action next week.

The Blockchain Bitcoin & Crypto Weekly CXO Briefing is all you need to know, each week, jargon free for CXO level business leaders and investors who will use this technology to change the world. Each week we select the 3 news items that matter and explain why and link to one expert opinion.

News Item 1: Bitcoin card providers cancel services with zero notice, users left trapped-without funds.

News: “Major bitcoin debit card providers such as Wirex, TenX and Bitwala have informed users that all VISA card operations have been cancelled effective immediately following sudden communication from card issuer WaveCrest. With zero notice, this leaves thousands of debit card users around the world trapped with no access to funds.”

Decrypted: Even long term investors need some Fiat cash. Without dividends, Bitcoin holders do need to occasionally “take some cash off the table”. The easiest way to do this has been by using “ye olde plastic card” as a Debit Card. This has worked well for all parties - consumer, merchant and service provider.

Our Take: Actually one type service provider does not like it. The credit card companies maybe signalling that Bitcoin is now important enough to get to the “and then they fight you” phase. Like the author of the news piece we see entrepreneurial opportunity here:

“This sudden and unexpected attack on bitcoin debit card providers could signal increased efforts on a global regulatory crackdown. However, in line with the rugged individualism mentality that bitcoin adopters push, this shutdown opens an opportunity for a more innovative card issuing service to take WaveCrest’s place.”

News Item 2: Overstock gets 100 million investment from Soros fund.

Decrypted: This is huge news for the "bits of destruction hits Wall Street” story. George Soros knows a bit about seizing the day on historical turning points.

Our Take: The story has one very simple “what did NOT happen” story. TZero will NOT be spun off into a separate company. As per Patrick Byrne:

"Maybe it’s about time we stop seeing Overstock as two separate businesses," he said. "Our retail platform had 40 million unique people come to it last month. So as we’re developing these blockchain applications, these blockchain companies, the retail business is an extremely valuable retail business to have in terms of bringing awareness and traffic to the blockchain properties that we anticipate developing."

Byrne continued, telling CoinDesk:

"By having the retail business involved, what we can really create is the wormhole between the two universes, the universe of conventional and the universe of crypto."

The news also shows the power of a smart rich man on a mission to change the world. Of the $100 million Overstock received, Byrne said he anticipates $20 million will fund DeSoto Inc., the blockchain property rights joint venture he is working on in partnership with economist Hernando DeSoto.” One of those massive change the world use cases for Blockchain - immutable property rights for the unbanked - just got a big shot of funding and a massive amount of credibility.

News Item 3: New US Tax Law Closes Bitcoin Loophole

Decrypted: The tax reform that recently passed in Congress this week eliminated an exemption for many “like kind exchanges,” which lets people swap an asset for a similar one without triggering a tax obligation.

“For instance, someone who owned Bitcoin could diversify their holdings into Ethereum or Litecoin, and plausibly tell the IRS it created no tax obligations.

Murtha Cullina, explained to Fortune, this is no longer the case because of a tweak to definition of property eligible for the exemption:

The tax act in Sec. 13303 amends IRC Section 1031 (a)(1) to delete “property” and replace it with “real property” … So, you can see that now I can no longer take the position that my Bitcoin to Litecoin exchange was a like kind one under Sec. 1031, and I have to recognize the gain when I do it.

Walsh added that the “in kind” exemption can now only apply to real estate transactions, effectively closing a loophole that has been open to other sort of property transaction such as those involving Bitcoin.

Digital currency owners are currently obliged to pay taxes when they exchange it for dollars or physical goods, but the new rule now effectively means all crypto transactions are a taxable event.

Our Take: One could view this as a “then they fight you” story, but it maybe simply the result of horse trading among politicians who who don’t read Daily Fintech to educate themselves and who don’t stand to lose from this. My old history professor at Oxford always said that the “cock-up” explanation was usually closer to the truth than the conspiracy theory. Expect this to get changed in some IRS circular - sub paragraph xxx.aaa.yyy.bbb - as that monstrosity of complexity known as the US tax code reaches even greater heights of complexity.

Opinion: One Mainstream investor who thinks Bitcoin's price will rise

Why we chose this opinion: This is not pumping on a crypto site. Nor is it dumping on Bitcoin in a publication designed to make bankers feel more comfortable. This is a regular investor trying to figure it out.

Our Take: Bitcoin has been in a trading range since CME Futures started (I know, correlation does not equal causation). Compared to conventional assets, it is still highly volatile, but nor is this the rollercoaster of the past. This trading range is great for traders who like Technical Analysis. Investors who have learned to buy the dips during 2017 will be more cautious. Our take is still that “they ain’t making any more of it” and the future looks bright for Bitcoin.

Bernard Lunn
Founding Partner, Daily Fintech Advisers
www.dailyfintech.com

Bernard Lunn is a serial entrepreneur, senior executive, adviser and a strategic dealmaker. He worked in Fintech before it was called that with startups, growth stage and turnaround ventures (incl. Misys, Temenos, IMS, ITRS). He has lived and worked in America, India, UK & Switzerland and is adept at cross border deals.

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Mardi 9 Janvier 2018
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