For the last year or so, we’ve all been waiting with anticipation to see if the world will find the idea of a global, online currency controlled by their peers appealing or appalling. While the jury is still out on how far Bitcoin will go, it’s probably safe to say that we may be on the cusp of the most groundbreaking currency concept of our time.
According to media sources including Coindesk.com, to date, investors have plowed $280 million into Bitcoin startups, technology, infrastructure and products, which happens to be the same amount invested into the Internet one year before it took off in the mid-90s. Who knows where the next year will take Bitcoin, but here are some thoughts on where it is today.
THE BITCOIN BUMP
By some estimates, there are well over 60,000 retailers around the globe who currently accept Bitcoin, and that number continues to grow.
Some of Bitcoin’s early adopters benefitted from the free public relations by association, as they were mentioned in a plethora of news stories and articles when people first started wondering what Bitcoin was and how it could be used. Early adopters saw other benefits as well.
The CEO of Overstock.com (NASDAQ: OSTK), told Coindesk.com in August he attributes a four-cent per share increase to shareholder value from adopting Bitcoin as a payment method.
Overstock.com.com averages more than $15,000 each day in Bitcoin sales. This could be because Bitcoin charges a 0.004% transaction fee, compared to the 2 or 3% transaction fee common with credit card companies. Overstock.com is projecting that in 2015, $6 to $8 million of their sales will be transacted with Bitcoin. That number is expected to climb, as more people embrace this online currency.
Jeff Klee, CEO of CheapAir.com, has gone on record to say they’ve attracted a new audience by accepting Bitcoin as a payment method. CheapAir caters to people looking for inexpensive airline tickets. But soon after the startup began accepting Bitcoin, something unprecedented happened: a customer purchased a $34,000 trip to Australia, including first-class air travel. Klee believes this is partly because early adopters are passionate about the platform and willing to work with vendors that accept Bitcoin, in an organic effort to keep it viable and afloat.
THE INVESTING COMMUNITY GETS INTO THE MIX
A new form of currency unlocks the possibility of a whole new world of investable assets. It was only a matter of time before Nasdaq, a company built on innovation, got into the mix.
One way that Nasdaq may be getting involved with Bitcoin will be the highly-anticipated Winkelvoss Index and ETF, which is expected to launch, pending SEC approval.
Further, our reputation as the world leader in exchange technology has brought many Bitcoin exchanges to our doorstep, to work with us and explore ways to supply our resilient, innovative technology to them, in an effort to maintain resilient, secure and robust platforms.
We are also are researching how to effectively provide Bitcoin pricing on some of our existing products, for media outlets and data vendors. Someday – maybe soon – member firms, investors, and online portals will be able to receive Bitcoin pricing data through the Nasdaq Global Index Data Service (GIDS). Stay tuned for an update later this year.
INCREASED OVERSIGHT IS BEING INTRODUCED
Depending on whom you talk with, the lack of government controls and regulations is either a draw, or a drawback. While it is still unclear what role governments and central banks may play, there are ways that governments are beginning to get involved in a regulatory capacity.
Internal Revenue Service - While the IRS has explicitly noted they do not categorize Bitcoin as a currency, they have determined it is a commodity, and therefore all holdings must be reported on tax forms. It is treated as property for U.S. federal tax purposes. Wages paid in Bitcoin are subject to federal tax withholding.
Bit Licenses – New York State’s Financial Services Superintendent is proposing licenses on Bitcoin exchanges that would require them to disclose to customers the risks of Bitcoin; namely that transactions are irreversible, pricing can be volatile and people need to safeguard their digital wallets the way they do their physical wallets.
Collecting Customer Information – The Financial Crimes Enforcement Network, a subset of the U.S. Treasury Department, may soon require Bitcoin exchanges to collect information about customers and report suspicious activity to law enforcement, just as other financial institutions and markets are required.
Commodities Futures Trading Commission – The CFTC’s Global Markets Advisory Committee has scheduled a meeting this month to discuss the CFTC’s jurisdiction with respect to derivatives contracts that reference the digital currency Bitcoin.
It is yet to be determined if these regulations will be the limit or just the beginning for Bitcoin. Either way, we can guarantee you’ll be hearing a lot more about Bitcoin in 2015.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.