Bitcoin 20 february 1989

Bitcoin, the first electronic payment system, is becoming a popular currency. We provide a statistical analysis of the log-returns of the exchange rate of Bitcoin versus the United States Dollar. Fifteen of the most popular parametric distributions in finance are fitted to the log-returns. The generalized hyperbolic distribution is shown to give the best fit. Predictions are given for future values of the exchange rate. Editor: Eduardo G.

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Content:

• Is Bitcoin the Only Problem? A Scenario Model for the Power Demand of Blockchains
• Bitcoin transactions, information asymmetry and trading volume
• Recent Additions (England and Wales)
• Bitcoin plummets $20 billion in second bizarre price crash
• Charlie Shrem
• Up and Up? The Stock Market vs. Bitcoin
• Cryptocurrency volatility markets

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Is Bitcoin the Only Problem? A Scenario Model for the Power Demand of Blockchains

An investigation into the output tax consequences of bitcoin transactions for a South African value-added tax vendor. The South African Revenue Service has released a media statement regarding the normal tax treatment of cryptocurrencies such as bitcoin , but policy regarding the value-added tax VAT treatment of cryptocurrencies is still pending.

AIM : The objective of the study is to determine the output tax consequences for a South African VAT vendor who receives bitcoins in exchange for the supply of goods or services that are subject to VAT, and when the same South African VAT vendor exchanges the bitcoins for South African rand at a local exchange platform.

Introduction and background. Bitcoin is a virtual cryptocurrency that exists in electronic form Berger Bitcoin is defined as a 'digital representation of value that is neither issued by a central bank or a public authority, not necessarily attached to a Fiat currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically' European Banking Authority [EBA] Bitcoin can be held as an investment or can be exchanged for goods and services, such as buying physical goods and services using online stores Berger Bitcoin as a means of payment for goods and services has grown substantially over the past few years, and merchants are more prone to accept bitcoin due to fees being lower than the typical credit card processors.

More than South African merchandisers are accepting bitcoin as a method of payment Visser Luno, founded in February , is South Africa's first rand-to-bitcoin exchange platform with its headquarters in Singapore and a development team in Cape Town Berger The number of bitcoins traded in South Africa on Luno has increased from bitcoins per week in to between and bitcoins per week as of 09 November BusinessTech n. Figure 1 C. De Kock [Data request response] pers.

What is of further interest is bitcoin's value since its inception in From to early , 1 bitcoin was worth between 10 and 20 dollars. The value of bitcoin is based upon the demand for or the willingness of members of the virtual community to accept the currency in exchange for other items of distinct value Wicht The user alert issued by National Treasury on 18 September explains that virtual currencies such as bitcoin cannot be classified as legal tender as any merchant may refuse them as a payment instrument without being in breach of the law National Treasury The South African Revenue Service SARS issued a media statement on 06 April regarding the normal tax treatment of cryptocurrencies such as bitcoin, but there is no published ruling, tax court decision or publication by government of interpretation notes on the VAT considerations of bitcoin SARS b; Wicht However, during October National Treasury proposed to include 'the issue, acquisition, collection, buying or selling or transfer of ownership of any cryptocurrency' as a financial service, which is an exempt supply for VAT, in the Taxation Laws Amendment Bill of The VAT consequences of bitcoin transactions therefore require investigation in an attempt to provide guidance on the consequences in terms of the current Value-Added Tax Act No.

For a transaction to attract VAT consequences, the requirements of 'supply' of 'goods' or 'services' in 'the furtherance of any enterprise' must be met. Section 1 of the Act defines 'goods' as any corporeal movable thing, fixed property or any right in any such thing. According to section 1 of the Act the definition of 'services' would apply in instances where 'goods' are not supplied. The 'furtherance of an enterprise' requires that goods or services must be supplied for 'consideration' - thus payment in any form.

Given the proposed treatment in the Taxation Laws Amendment Bill of National Treasury , the uncertainty of interest highlighted in this article is the possible exemption of the exchange of bitcoin by a South African VAT vendor for South African rand in terms of section 12 1 of the Act, which exempt any financial service from VAT. Research objectives, scope and value of research.

In its first interim report on Base Erosion and Profit Shifting, the Davis Tax Committee states that the use of bitcoin and other virtual currencies is increasing Davis Tax Committee Their working paper highlighted two issues: 1 the tax treatment of capital gain and losses in the cryptocurrency world, and 2 anonymity to avoid taxes with the use of virtual currencies OECD It is therefore evident that there is a need to address the VAT consequences of bitcoin transactions in a South African context as virtual currencies are becoming increasingly popular among South Africans to purchase goods and services National Treasury The objective of this research is to investigate the output tax consequences of bitcoin transactions in South Africa from the perspective of a South African VAT vendor based on a detailed understanding of what bitcoins are, how bitcoins work, a review of current VAT or goods and services tax [GST] as it is known in other countries legislation of other countries, as well as an analysis of the current Act.

Findings of this research could assist the South African regulator to evaluate the proposed treatment contained in the Taxation Laws Amendment Bill of National Treasury in terms of the output tax treatment of bitcoin transactions incurred by a South African VAT vendor.

Consequently, the following two research questions provide context regarding the uncertainty of output tax compliance of bitcoin transactions as set out in Figure 2 with examples :. Research question 2: What are the output tax consequences for the same South African VAT vendor, if the vendor exchanges the bitcoin on a local exchange presumably to another South African VAT vendor for South African rand ignoring any fees or commission payable? A non-empirical study of existing literature was performed.

Gathering all the relevant facts. Identifying the legal issue. Analysing the legal issue from a legal perspective. Collecting and studying research sources such as statutory laws, case law, interpretations and guides from SARS, academic articles, dissertations, academic books and non-academic articles. Analysing primary research sources such as legislation. Combining all issues within the context. Drawing up a conclusion. The article is structured as follows in order to address the two research questions:.

A discussion of the functioning of bitcoin. A review of the output tax implication of bitcoin transactions in five other countries. A discussion of the requirements for a transaction in South Africa to be subject to output tax. Results, conclusion and recommendations for further research. The study can potentially highlight areas for improvement or, at least, for consideration by the South African regulator to clarify the output tax treatment of bitcoin transactions for a South African VAT vendor.

The study can potentially also assist taxpayers to be aware of the potential output tax consequences of relevant new transactions and to correctly apply the Act in their VAT returns in relation to bitcoin transactions. Bitcoin was invented by an anonymous user 'Sathoshi Nakamoto' in Nakamoto and released as open source software in Franco It is therefore a virtual currency which cannot be redeemed for gold or other commodity Berger , but is traded electronically and functions as a unit of account or a store of value Wiseman The European Banking Authority EBA defines bitcoin as 'a digital representation of value that is neither issued by a central bank or a public authority, not necessarily attached to a Fiat currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically' EBA There are several methods available to acquire bitcoins, which includes the following Wiseman :.

Receiving bitcoins as payment when selling goods or rendering services. Buying bitcoins at a bitcoin exchange. Bitcoin is created digitally, by a community of people that anyone can join, through a computer process known as bitcoin mining. Bitcoin mining uses computing power software programs that follow a mathematical formula and specialised hardware in a distributed network Franco ; Wiseman The bitcoin system makes use of a shared and public database or ledger known as a block chain to keep record of the number of bitcoins a person owns at a certain point in time Seforo New bitcoins are created when a new block, comprising several transactions, is attached to the block chain once a complex algorithm is solved by a miner for a reward of Solving the algorithm confirms the validity of the block's transactions by providing mathematically that the transaction occurred, and does not constitute double spending of bitcoins.

Therefore, once a transaction is committed to the block chain, it is irreversible Wiseman When paying for goods or services using bitcoin, the transaction is added to the block chain, and will result in a decrease in the payer's quantity of bitcoins and a corresponding increase in the quantity of the payee's bitcoins Seforo Bitcoins are stored online in a digital wallet which is installed as an application on a computer, laptop or smartphone Franco , but one could also exchange ordinary money such as South African rand for bitcoin at bitcoin exchanges all over the world Seforo ; Wiseman Since there have been bitcoin transactions up until 30 June and 16 bitcoins in circulation on 30 June Blockchain n.

However, these bitcoins can be divided into smaller parts the smallest divisible amount is one hundred millionth of a bitcoin and is called 'Satoshi' Bitcoin ZAR n. Comparison of the value-added tax treatment of bitcoin transactions across countries. Due to the recent development of digital currencies including bitcoin , there is no global consensus on the VAT treatment of bitcoin transactions Ram Different tax jurisdictions treat it in different ways, depending on the objectives of the local authorities and on the way that their tax system operates Australian Government The VAT consequences relating to bitcoin transactions in the five countries are outlined below.

This will ensure that consumers are no longer 'double taxed' when using bitcoin to buy goods and services already subject to GST Suberg The Australian Treasury changed its regulations and taxation policies on bitcoin after seeing a sharp decline in interest in bitcoin in the country Suberg ; Young b.

From 01 July bitcoin is treated as money in Australia, but GST still applies when exchanging those digital currencies for other goods and services that are themselves subject to GST Young a. When purchasing and selling bitcoin through regulated exchanges and trading platforms, the transactions are not subject to GST Young a. This resulted in the exchange of bitcoin for money to be subject to GST; where bitcoin is exchanged for other taxable goods or services the transaction is also subject to GST as it is the exchange of property for property Australian Government The Revenue and Customs Brief 9 HMRC , published on 03 March , sets out the position on the tax treatment of income received from and charges made in connection with activities involving bitcoin and other similar cryptocurrencies.

In March , HMRC outlined that when bitcoin is exchanged for foreign currencies, such as euro or dollar, no VAT is due on the value of the bitcoins themselves, as they are recognised as 'other negotiable instruments' Australian Government ; HMRC ; Saunders When bitcoin is received in return for the provision of goods or services, the value of bitcoin in sterling at the point the transaction takes place is subject to VAT in the normal way HMRC ; Saunders Bitcoins are classified as financial transactions and it also clarifies that bitcoin transactions undertaken by businesses should be considered to be VAT exempt services EY The Tax Authorities of Italy consider that bitcoin transactions should be included in the definition of 'transactions related to foreign currency with an official exchange rate and credits in foreign currency', regulated by Article 10, paragraph 3 of the Italian VAT Law.

On 22 October the CJEU ruled that in this case it was evident that the taxpayer, Mr Hedqvist, wished to deliver the service of an exchange of traditional currencies for bitcoin and vice versa , which constituted a supply of services that should be exempt from VAT EY This was based on the grounds that the bitcoins had no other purpose other than to be a means of payment. On 01 April Japan officially declared bitcoin's exemption from consumption tax similar to VAT and eliminated the possibility of double taxation on trading Young b.

Therefore, if the seller of the bitcoins is a GST-registered person, they would have to account for output tax on the sale of the bitcoins in the furtherance of their business Moskowitz Where bitcoins are accepted as payment for goods or services, the transactions are treated as barter transactions.

GST should be accounted for on the individual supply made, thus the supply of the goods or services and the supply of the bitcoins, if the parties are registered for GST.

This would mean potential double taxation of GST, as the seller of the goods or services will be liable for GST as well as the customer. But, if the bitcoins are used in exchange for virtual goods or services such as virtual gaming , the supply of bitcoins will not be a taxable supply Moskowitz According to IRAS the supply of bitcoins is not a supply of money as bitcoins do not meet the requirements of the definition of 'money' or 'currency' under the GST Act Moskowitz Therefore, the supply of bitcoins is treated as a supply of services or goods as it involves the granting of the interest in or right over the bitcoins Pasick It will thus attract GST.

Table 1 summarises the different output tax consequences of bitcoin transactions in Australia, the United Kingdom, Italy, Japan and Singapore in terms of the two research questions. Based on data retrieved from Luno Exchange the average price per bitcoin for the period 01 March to 28 February was R86 By multiplying the average price per bitcoin by the number of bitcoins that were exchanged for South African rand as in Figure 1 for the same period, the result is an amount of R18 To evaluate the above, the South African requirements for a transaction to be subject to output tax are analysed in the next section to assist formulation of the potential output tax treatment of bitcoin transactions as set out in the two research questions for South African VAT vendors.

This is done after understanding the functioning of bitcoins as well as reviewing the output tax implication of bitcoin transactions in five other countries that have already issued guidelines for the VAT treatment of bitcoin transactions discussed in the previous section.

Analysis of South African output tax treatment. In South Africa, output tax is the tax charged by the vendor on the selling price of goods or services according to section 7 1 a of the Act. The selling price of the goods or services is normally VAT inclusive. Section 7 1 a of the Act reads verbatim as follows:.

Subject to the exemptions, exceptions, deductions and adjustments provided for in this Act, there shall be levied and paid for the benefit of the National Revenue Fund a tax, to be known as the value-added tax -.

Bitcoin transactions, information asymmetry and trading volume

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Recent Additions (England and Wales)

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Bitcoin plummets $20 billion in second bizarre price crash

Citation: Lennart Ante. Bitcoin transactions, information asymmetry and trading volume[J]. Quantitative Finance and Economics, , 4 3 : Article views PDF downloads Cited by 4. Tables 4.

Charlie Shrem

Abstract: This paper examines historical Bitcoin price data together with the price data of a well-known and generally accepted historical asset price bubble the South Sea Bubble with the aim of identifying possible similarities. In order to find empirical evidence of speculative bubble tendencies, the article analyses distribution moments and autoregressive models of time series of both assets. Results show that historical daily prices of both assets-taking into account one year before and one year after the maximum price level-clearly show the two phases of bubble expansion and subsequent crash. Furthermore, various similarities between the South Sea Bubble and Bitcoin can be found in descriptive statistics, such as mean of return, standard deviation, and skewness. Statistical tests also show several explosive moments in the time series of the South Sea Company and Bitcoin returns, which implies that both assets exhibit more than one financial bubble.

Up and Up? The Stock Market vs. Bitcoin

Email: michael. Email: afernand uach. This paper examines historical Bitcoin price data together with the price data of a well-known and generally accepted historical asset price bubble the South Sea Bubble with the aim of identifying possible similarities. In order to find empirical evidence of speculative bubble tendencies, the article analyses distribution moments and autoregressive models of time series of both assets. Results show that historical daily prices of both assets-taking into account one year before and one year after the maximum price level-clearly show the two phases of bubble expansion and subsequent crash. Furthermore, various similarities between the South Sea Bubble and Bitcoin can be found in descriptive statistics, such as mean of return, standard deviation, and skewness.

Cryptocurrency volatility markets

An investigation into the output tax consequences of bitcoin transactions for a South African value-added tax vendor. The South African Revenue Service has released a media statement regarding the normal tax treatment of cryptocurrencies such as bitcoin , but policy regarding the value-added tax VAT treatment of cryptocurrencies is still pending. AIM : The objective of the study is to determine the output tax consequences for a South African VAT vendor who receives bitcoins in exchange for the supply of goods or services that are subject to VAT, and when the same South African VAT vendor exchanges the bitcoins for South African rand at a local exchange platform.

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The technology underpinning Bitcoin—the blockchain—is acknowledged to offer security, stability and efficiency to online transactions. After a brief introduction to Bitcoin system, I touch upon the most innovative implementation of blockchain technology: the so-called smart contracts, ie programmable computer protocols that are able to self-enforce the terms therein encoded upon certain triggering conditions. First, I sketch their core functioning and benefits for digital relationships. Secondly, I stress their structural constraints and the issues of regulability fully decentralized blockchains pose. The elements underlined highlight the reasons why the financial and banking sectors represent smart contracts most immediate testing ground. Access to restricted content on Oxford Academic is often provided through institutional subscriptions and purchases.

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