The Bitcoin phenomena experiences both record highs and lows this week, but…uhh, what the heck is it again?
Ohio car dealer Bernie Moreno, 51, works with Ohio Treasurer Josh Mandel, left, to pay some state business taxes with Bitcoin in November.(Photo: Mercedes-Benz of North Olmsted)
Car dealer Bernie Moreno took a small step outside of the tax payment comfort zone to show that Bitcoin one day could be much more than a buzzword.
Moreno, 51, converted U.S. dollars into Bitcoin in late November and paid off some use taxes relating to car leases to the state of Ohio — gaining the Facebook bragging rights that he was the first ever to use Bitcoin to pay some type of state taxes in the country.
“Digital currency and blockchain are really the next tech revolution,” said Moreno, a University of Michigan alum and president of The Bernie Moreno Cos. in North Olmsted, near Cleveland.
Ohio is the first state in the United States to accept cryptocurrency. The state allows payment of 23 different business taxes via the portal, including the state sales tax, cigarette taxes, the public utilities tax, withholding tax, and assorted other taxes.
“From mom and pop coffee shops to Fortune 100 companies, businesses now have the ability to pay their taxes with OhioCrypto.com,” according to the Ohio Treasurer’s web site.
For security purposes, a business must have a profile on file with the state in Treasurer’s office so the state knows the business and what taxes it is registered to pay.
There’s an initial three-month window where no fees will be charged. After the introductory period, the transaction fee will be 1 percent. The added cost would be lower than charges for using a credit card, the state said.
Is Ohio for real?
Sure, this tax thing is a gimmick — and most people can see right through it.
“The Ohio announcement is mainly a PR stunt,” said Kevin Werbach, professor of legal studies and business ethics at the Wharton School at the University of Pennsylvania.
“There is not a particular advantage in paying your taxes with Bitcoin today,” Werbach said via email.
“The state just wants to signal that it’s ‘cryptocurrency-friendly.’ ”
On top of that, we’re talking about one incredibly speculative form of electronic cash. Imagine trying to pay any bill with something like highly-volatile tech stocks or Beanie Babies in the 1990s.
Bitcoin isn’t for paying bills
Andrew Wu, assistant professor of technology and operations and finance at the University of Michigan’s Ross School of Business, said the volatility of Bitcoin itself makes it unsuitable for things like paying one’s taxes.
What’s it really worth today?
Bitcoin made headlines a year ago with an incredible run up in its price.
Just a year ago, Bitcoin was a speculative sensation and hit a all-time record of $19,870 on Dec. 17, 2017. That’s after kicking off 2017 at nearly $1,000.
Yet after that incredible run up in 2017, we saw one miserable fallout in 2018.
Now, we’re talking about an 82 percent drop in just 12 months.
Bitcoin was trading around $3,548 on Dec. 17 after suffering startling losses in just one month. The world’s largest cryptocurrency had kicked off November at an average price around $6,341, according to CoinDesk.
“The extreme volatility makes it pretty unattractive from a payment prospective,” Wu said.
After all, the value of a dollar is that it holds its value from day to day. Bitcoin can’t even hold the same value hour to hour.
To deal with that fluctuation, the Bitcoin tax-process in Ohio involves partnering with a third-party called BitPay, an Atlanta-based payment service. The state is not holding any cryptocurrency assets.
Michigan does not accept Bitcoin for tax payments at this time, according to Ron Lexi, a spokesperson for the Michigan Department of Treasury.
One word: Blockchain
Bitcoin payments, though, aren’t the end game for Ohio.
Ohio’s state treasurer Josh Mandel told CNBC that the Buckeye State is looking to attract blockchain start-ups with its new acceptance of Bitcoin for taxes. Blockchain has the potential to revolutionize the financial services industry by making payments faster, more secure, and less expensive on a global scale, according to industry backers.
Wu said the blockchain story is one that Ohio — and frankly Michigan — could benefit from one day.
“It makes sense for the states to be friendly to these blockchain start ups,” Wu said. “The blockchain technology itself is very, very different than cryptocurrency.”
While Bitcoin is mainly a speculative asset now, he said, blockchain…