Follow Randy Linkedin Facebook
Email Randy Email
Financial
Sep 1, 2014

What Does The Future Hold For Virtual Currency?

Sponsored Content provided by Randy McIntyre - Partner, McIntyre, Paradis, Wood & Co.

Up until now, I have ignored all the commotion regarding something called “Bitcoin.” I guess I am a little old-fashioned in that I still use those green slips of paper with pictures of dead presidents to make purchases, although I will admit to using my debit card at the grocery store. After all, who carries enough cash in their pocket to buy a week or two weeks worth of groceries? In studying up for this article, I discovered that Bitcoin is not the only digital money. There are more than 300 digital currencies. Bitcoin, for whatever reason, appears to be the one most talked about.

It is a difficult subject to explain. One article on the subject commented that it is like “trying to explain the Internet to someone who lived in the ‘70’s. They might think they get it, but without actually experiencing it, they’d never truly understand.”

As I understand it, Bitcoins are stored in a computer or smart phone. This is referred to as a “Bitcoin wallet.” There is a “shared public ledger” on which the Bitcoin network relies. A transaction is a transfer of value between Bitcoin wallets. Another article I read said that Bitcoins don’t actually exist anywhere; not even on a hard drive. And so I am already confused. It’s not like you can look at a Bitcoin wallet the same way you can look at dollars held in a bank account. There are only records of transactions between different Bitcoin addresses, with balances that increase or decrease. If party A wants to send party B six Bitcoins, then the computer will look at all the transactions involving Bitcoins that Party A has received and combine enough of those individual transactions to add up to six Bitcoins. For example, if party A had received 3 Bitcoins from Party C, 2 Bitcoins from Party D, and 1 Bitcoin from Party E, then her Bitcoin wallet will try to use all these transaction records to come up with the 6 Bitcoins that Party A wants to send. Don’t ask how change is handled.

I was surprised to learn how many businesses are already accepting Bitcoins. Some of these include: Dell, Overstock, Dish Network, Tiger Direct and even Reeds Jewelers, which is based in Wilmington.

Bitcoins can be purchased as an investment, which theoretically would only grow in value since there is presumably a finite number of Bitcoins. This differs from the dollar, which can change in value simply by the Treasury printing more money. If there is supposedly a finite number of Bitcoins, why can’t the computer simply create more of these electronic things? In fact, the supply of Bitcoins does grow through a computerized system called “mining.” But trying to explain that would take at least another whole article. Just trust me when I say it’s complex and probably more than you want to know.

Bitcoins have now attracted the interest of law enforcement agencies, tax authorities, and legal regulators. They are all trying to understand how all this digital currency fits in with the existing frameworks. Law enforcement agencies are concerned that offshore services could be a place where criminals could operate since it would be unregulated. Taxing authorities are concerned with – well, you know what they are concerned with. The same with regulators. They are always looking for something to regulate. But I think I understand why this is an important issue since criminal elements could emerge, et cetera.

The IRS is concerned that virtual currency may be used to hide unreported income. The IRS is studying the issue. It has yet to provide any specific guidance, although this past March it did say that it considers Bitcoin like owning shares of stock, but for tax purposes it is not money.

In terms of value, Bitcoin is something like a stock, in that its value can fluctuate wildly. As of mid-August, for example, one Bitcoin was just about $500, well under its all-time high of more than $1,000 at the end of November 2013.

It is hard to say how digital currency will evolve. Is it just a one-hit wonder? My guess is that it will continue to grow in use particularly when we are already seeing its acceptance by major retailers.

Randy McIntyre is a Certified Public Accountant and a partner in McIntyre, Paradis, Wood & Company, CPAs. He has worked in public accounting since 1977, in Wilmington since 1992. His firm is built on a history of service, technical expertise, and innovative to provide the expertise of larger firms with a personal, one-on-one approach. To learn more about McIntyre, Paradis, Wood & Company, see www.mpwcpas.com. He can be reached at [email protected]or 910-793-1181.
 



 

 

Ico insights

INSIGHTS

SPONSORS' CONTENT
Atromitos micheallegady headshot

Recognizing Women-Owned Small Businesses

Michealle Gady - Atromitos
Cd

Don't Forget the "B"

Hoop Morgan - The Forté Institute, LLC
Dane

A Simple Approach To Difficult Conversations

Dane Scalise - GriffinEstep Benefit Group

Trending News

Affordable Housing Investors Buy Lakeside Villas In $29M Deal

Staff Reports - Jan 26, 2023

Work Continues On Covey, Envisioned As Midtown’s Neighborhood Nest

Miriah Hamrick - Jan 25, 2023

The Half Takes A Bite Out Of New Markets With Second Location

Miriah Hamrick - Jan 25, 2023

City To Begin Due Diligence On Potential Thermo Fisher Building Purchase

Johanna F. Still - Jan 25, 2023

Novant NHRMC Unveils Its Neurosciences Institute

Staff Reports - Jan 25, 2023

In The Current Issue

Preserving Wealth, For Family And History

Plans for major improvements fell by the wayside, delayed by life and the home’s overwhelming degree of deterioration, which placed the prop...


New App Hooks Seafood Connections

Landon Hill is the founder and owner of the mobile app that seeks to promote local fishers and make it easier for buyers to find fresh seafo...


Local, State Efforts Target Service Sector

Many industries have started to recover from the roiling effect the pandemic had on the labor market, but nearly three years after the first...

Book On Business

The 2023 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2022 Power Breakfast: Wilmington's Most Intriguing People - Spence Broadhurst & Hannah Gage
2022 Power Breakfast: Wilmington's Most Intriguing People - George Taylor
2022 Power Breakfast: Wilmington's Most Intriguing People - Mike Ford
2022 Power Breakfast: Wilmington's Most Intriguing People - Meaghan Dennison
2022 Power Breakfast: Wilmington's Most Intriguing People - Rhonda Bellamy