There’s been lots of questions around how the government should deal with taxing cryptocurrency income and assets — are they a commodity? A security? Can you be unknowingly convicted of tax evasion?
But as of this week, one U.S. state has begun using cryptocurrency to help facilitate tax collection, rather than complicating it.
BitPay is one of the first and the largest cryptocurrency payment processor worldwide. Their technologies allow consumers to spend and save cryptocurrency, and businesses to accept it as payment in real-time.
Similarly, on OhioCrypto.com, any tax payments made through the site will be immediately converted by BitPay into USD, and then deposited into the state’s coffers. The Ohio Treasury therefore never has to actually touch the digital currency.
Though Ohio is the first state government offering this option, BitPay has worked in this capacity with public officials before. This past May, they helped Seminole County, Florida, become the first-ever government entity to accept bitcoin payment.
Unlike Seminole County, where residents can pay property taxes, driver license and ID card fees, and tag and title fees with bitcoin, the Ohio program is limited to businesses paying taxes. The state Treasury has indicated they would like to expand the program to consumers at a later date.
BitPay representatives lay out the benefits of paying by cryptocurrency. Credit and debit card processing often initiates a heavy fee burden, whereas BitPay will charge a mere 1 percent transaction fee (after a three-month introductory period of zero fees). The payer is also responsible for a miner and network fee, but that goes through their own bitcoin wallet.
BitPay also says blockchain can reduce payment fraud while improving transparency. All transactions on the blockchain can be viewed by anyone.
“BitPay was started because we recognized the potential for blockchain to revolutionize the financial industry, making payments faster, more secure, and less expensive on a global scale,” said Jeremie Beaudry, Head of Compliance at BitPay, in a statement earlier this year.
Though bitcoin can itself be volatile (in less than a year the price has seen fluctuations from a peak $19,500 in December 2017 to less than $4,000 now), that won’t affect Ohio’s tax revenue, since BitPay converts the cryptocurrency immediately upon receipt. Without disclosing any exact figures, Beaudry indicates that the company has not been adversely affected by the price drops.
“We can share that as a payment processor, when the price of bitcoin goes up people tend to spend them and likewise when the prices goes down they spend as well. BitPay’s transaction volumes have continued to rise in 2018, despite the drop in price,” he tells Hypepotamus.
Indeed, the company is currently hiring for several positions in Atlanta, as well as a director of compliance for their European office and a general manager in Asia.
Beaudry says that BitPay is “open to working with other states,” and “is always in discussions with customers looking to accept bitcoin for a variety of projects.”