Post by Omar on Nov 14, 2013 8:42:12 GMT 4
Bitcoin's UK Future Looks Bleak
by Tom Gullen | 11th, November 2013
Bitcoins could be a technological revolution. Technological revolutions generally move fast. The countries that could benefit the most from these fast moving technologies are the ones that position themselves early on to benefit from the progression these technologies offer.
Germany has taken an admirable lead rethinking it's position on digital currencies and recognising them as "units of account". Canada seems to be an ideal place for launching new Bitcoin related technologies such as the Bitcoin ATM.
Governments moving towards regulation of Bitcoin seem to have a dichotomising effect on the Bitcoin community. One side wishing to see governments embrace Bitcoin, regulate and support it. The other side viewing Bitcoin as an opportunity to totally separate money from government.
Convincing one side to consider the other sides point of view is difficult, there isn't much middle ground to edge into and these opinions generally stem from deep rooted basal life philosophies. All each side can do is pursue their beliefs by doing what they think is right and progressive which is why I decided to attempt to encourage progressive government interest in Bitcoin.
The Worst Outcome
One outcome both sides can agree on is that a government that views Bitcoin negatively and takes steps to outlaw its usage or possession would hurt everyone (in the short term at least). Not just people who hold Bitcoins, but wider society. Putting the boot on Bitcoin and trying to drown it chokes development of exciting opportunities and keeps it penned in as a fringe and obscure technology, furthering its inaccessibility to the general public.
What exciting and revolutionary developments exactly would be choked is impossible to say. When the Internet was first developed I'm not sure anyone could have predicted the numerous monumental benefits it offers society today.
UK Banking
As anyone in the UK who has attempted to open a bank account to run a Bitcoin business knows, as it stands your chances are slim to none. My credit history was checked and passed (phew!), I had a decent size of starting capital, my business plan had no borrowing or lending requirements and I had evidence from HMRC to show that the business did not come under the scope of Money Laundering Regulations. All that was needed for me to operate my humble Bitcoin selling business in the UK was a simple bank account.
Their refusal for opening the account was shrouded in mystery. I spent a few hours with our current banking providers talking to various people trying to simply get an explanation, and no one would give me one. Eventually they wrote to me and told me they refuse to give me a reason as it would "divulge trade secrets". This secrecy is a defensive tactic to protect them from claims of anti-competitive behaviour. Resigning information you are not required to divulge can rarely work in your favour.
Banks have deeply entrenched themselves into society. We've reached a stage now where banks act as gatekeepers for new startups in the UK, without their authorisation good luck on running a business. There is a severe conflict of interest here especially when you consider Bitcoins potential to take large bites out of their most profitable operations; for example the remittance industry.
But more on the banks later...
Step in the OFT
The first thing I did was complain to the Office of Fair Trading. Their reply was:
"When considering which issues to examine further we take into account that the OFT has finite resources and must prioritise its work. We assess complaints we receive by reference to our published principles. The OFT considers a range of factors, including impact on consumers, strategic significance, risk and resources. In the case of your complaint, it appears that the benefit for consumers of investigating your complaint is likely to be limited in comparison with other markets that we could study."
It's a total catch-22. The banks are suppressing the UK Bitcoin economy keeps it small enough so that the OFT don't consider the market big enough to investigate.
It doesn't matter anyway
Even if you are able to obtain a bank account, the simple act of selling Bitcoins is an entirely unviable business in the UK. HMRC (the UK tax agency) have clumsily labelled Bitcoins as 'Single Purpose Vouchers'. This means that VAT is due on them.
If you're intending to sell Bitcoins past ~£77,000 revenue you'll need to register for VAT. Once registered for VAT, you'll need to add 10% - 20% (depending on if you qualify for "Flat VAT") to each sale. If you're selling Bitcoins with a modest 5% markup to make the operation worthwhile, you're now going to have to mark them up as much as 25%. No one will buy them, they will go elsewhere. Also with a modest 5% markup, after £77k turnover you would expect to earn ~£3,500 in fees. Nowhere near enough to justify the overheads of running a business if you did decide to turn down business once the VAT threshold had been reached.
Foreign exchange transactions are normally exempt supplies. If the UK wants to see more UK Bitcoin business Bitcoin needs to share the same tax benefits as other currency.
This is why the UK is lacking any decent gateways into the Bitcoin world.
But can't you just do it anyway?
There are perhaps ways to structure Bitcoin businesses more creatively to at least give yourself a reasonable defence if the government does come knocking. For example acting as a medium for people to exchange Bitcoins could perhaps remove the VAT burden. However this isn't solving the problem, the buck is simply being passed to the end users who probably are not aware that they might be using these systems with this unfair tax burden.
VAT is a show stopper for the UK Bitcoin industry.
see more at: www.scirra.com/blog/tom/4/bitcoins-uk-future-looks-bleak
by Tom Gullen | 11th, November 2013
Bitcoins could be a technological revolution. Technological revolutions generally move fast. The countries that could benefit the most from these fast moving technologies are the ones that position themselves early on to benefit from the progression these technologies offer.
Germany has taken an admirable lead rethinking it's position on digital currencies and recognising them as "units of account". Canada seems to be an ideal place for launching new Bitcoin related technologies such as the Bitcoin ATM.
Governments moving towards regulation of Bitcoin seem to have a dichotomising effect on the Bitcoin community. One side wishing to see governments embrace Bitcoin, regulate and support it. The other side viewing Bitcoin as an opportunity to totally separate money from government.
Convincing one side to consider the other sides point of view is difficult, there isn't much middle ground to edge into and these opinions generally stem from deep rooted basal life philosophies. All each side can do is pursue their beliefs by doing what they think is right and progressive which is why I decided to attempt to encourage progressive government interest in Bitcoin.
The Worst Outcome
One outcome both sides can agree on is that a government that views Bitcoin negatively and takes steps to outlaw its usage or possession would hurt everyone (in the short term at least). Not just people who hold Bitcoins, but wider society. Putting the boot on Bitcoin and trying to drown it chokes development of exciting opportunities and keeps it penned in as a fringe and obscure technology, furthering its inaccessibility to the general public.
What exciting and revolutionary developments exactly would be choked is impossible to say. When the Internet was first developed I'm not sure anyone could have predicted the numerous monumental benefits it offers society today.
UK Banking
As anyone in the UK who has attempted to open a bank account to run a Bitcoin business knows, as it stands your chances are slim to none. My credit history was checked and passed (phew!), I had a decent size of starting capital, my business plan had no borrowing or lending requirements and I had evidence from HMRC to show that the business did not come under the scope of Money Laundering Regulations. All that was needed for me to operate my humble Bitcoin selling business in the UK was a simple bank account.
Their refusal for opening the account was shrouded in mystery. I spent a few hours with our current banking providers talking to various people trying to simply get an explanation, and no one would give me one. Eventually they wrote to me and told me they refuse to give me a reason as it would "divulge trade secrets". This secrecy is a defensive tactic to protect them from claims of anti-competitive behaviour. Resigning information you are not required to divulge can rarely work in your favour.
Banks have deeply entrenched themselves into society. We've reached a stage now where banks act as gatekeepers for new startups in the UK, without their authorisation good luck on running a business. There is a severe conflict of interest here especially when you consider Bitcoins potential to take large bites out of their most profitable operations; for example the remittance industry.
But more on the banks later...
Step in the OFT
The first thing I did was complain to the Office of Fair Trading. Their reply was:
"When considering which issues to examine further we take into account that the OFT has finite resources and must prioritise its work. We assess complaints we receive by reference to our published principles. The OFT considers a range of factors, including impact on consumers, strategic significance, risk and resources. In the case of your complaint, it appears that the benefit for consumers of investigating your complaint is likely to be limited in comparison with other markets that we could study."
It's a total catch-22. The banks are suppressing the UK Bitcoin economy keeps it small enough so that the OFT don't consider the market big enough to investigate.
It doesn't matter anyway
Even if you are able to obtain a bank account, the simple act of selling Bitcoins is an entirely unviable business in the UK. HMRC (the UK tax agency) have clumsily labelled Bitcoins as 'Single Purpose Vouchers'. This means that VAT is due on them.
If you're intending to sell Bitcoins past ~£77,000 revenue you'll need to register for VAT. Once registered for VAT, you'll need to add 10% - 20% (depending on if you qualify for "Flat VAT") to each sale. If you're selling Bitcoins with a modest 5% markup to make the operation worthwhile, you're now going to have to mark them up as much as 25%. No one will buy them, they will go elsewhere. Also with a modest 5% markup, after £77k turnover you would expect to earn ~£3,500 in fees. Nowhere near enough to justify the overheads of running a business if you did decide to turn down business once the VAT threshold had been reached.
Foreign exchange transactions are normally exempt supplies. If the UK wants to see more UK Bitcoin business Bitcoin needs to share the same tax benefits as other currency.
This is why the UK is lacking any decent gateways into the Bitcoin world.
But can't you just do it anyway?
There are perhaps ways to structure Bitcoin businesses more creatively to at least give yourself a reasonable defence if the government does come knocking. For example acting as a medium for people to exchange Bitcoins could perhaps remove the VAT burden. However this isn't solving the problem, the buck is simply being passed to the end users who probably are not aware that they might be using these systems with this unfair tax burden.
VAT is a show stopper for the UK Bitcoin industry.
see more at: www.scirra.com/blog/tom/4/bitcoins-uk-future-looks-bleak
