Cryptocurrency News Now!: The World Can't Decide How to Classify Cryptocurrencies

Sunday, August 5, 2018

The World Can't Decide How to Classify Cryptocurrencies

QUOTE OF THE DAY

“Even today, what to study and how to study it are more important than where to study it and for how long. The best teachers are on the Internet. The best books are on the Internet. The best peers are on the Internet. The tools for learning are abundant. It’s the desire to learn that’s scarce.”

- Naval

Happy Sunday! Today we are thankful to present an exclusive Q&A with Ethfinex, a platform offering trading and discussion for the Ethereum community. And as always, have a relaxing rest of the weekend!

Cheers,
Blockchain Brew Team

MARKET

COIN	PRICE	24H

BTC	$7,008.82074	-3.71%

ETH	$407.388193	-0.69%

XRP	$0.430609	-0.79%

BCH	$694.83945	-1.95%

EOS	$7.000457	-0.17%

*Information as of 9:30 AM EST

ANALYSIS

The World Can't Decide How to Classify Cryptocurrencies

Since cryptocurrencies are a relatively new concept, they have been categorized as everything under the sun from digital gold to securities. With many different governments classifying cryptocurrencies in their own way, it can get confusing. Thanks to Simon Chandler, we now have a quick breakdown:

UNITED STATES - SECURITIES, COMMODITIES, PROPERTY, MONEY

Securities
- To start, the Securities and Exchange Commission (SEC) categorizes securities as assets in which someone invests in with the expectation of making a return on investment
- Since some ICOs and cryptocurrencies follow closely to this definition, SEC regulators will likely find them to be securities
- However, so far, the SEC has declared that Bitcoin and Ethereum are not securities
Commodities
- In contrast, a New York Federal judge claimed that the Commodities and Futures Trading Commission (CFTC) can regulate Bitcoin and other currencies as commodities
- This makes Bitcoin comparable to other commodities such as gold and silver
Property
- As for the view of the Internal Revenue Service (IRS), "For federal tax purposes, virtual currency is treated as property"
- This makes cryptocurrencies subject to capital gains tax
Money
- Finally a handful of agencies in the United States believe that cryptocurrencies are money including the OFAC, FinCEN, and more
- Under this classification, cryptocurrencies are regarded in the same light as fiat currency which means that cryptocurrencies can be covered by economic sanctions

EUROPE - PRIVATE MONEY, UNIT OF ACCOUNT, TRANSFERABLE VALUE

Private Money
- In Germany, Europe's largest economy, Bitcoin has been recognized as "private money" since April 2014
- Under this classification, when crypto is used as a means of payment it is exempt from tax
Unit of Account
- France, Britain and a handful of other countries have categorized crypto as a "unit of account" to make sure that crypto holders are subject to paying taxes on capital gains
Transferable Value
- In the Netherlands, a court ruled that Bitcoin is "transferable value" which makes it equivalent to property

ASIA - NOT RECOGNIZED, PROPERTY VALUE, ASSET

Not Recognized
- After China's crackdown on crypto exchanges in 2017, crypto has not been recognized with any official status
Property Value
- For Japan, cryptocurrencies are recognized as money with unique attributes similar to property value according to the Payment Services Act
Asset
- In many other countries in Asia, including South Korea and Singapore, cryptocurrencies are classified as assets
- These countries, like the United States, seem to be classifying cryptocurrencies as securities on a case by case basis

Though this is a condensed list of classifications, it is easy to see how confusing it can get. To view the entire analysis, click here.

BIG IDEA

A Value Investor's Case for Bitcoin

DIGITAL GOLD

It is estimated that all of the gold ever mined is worth $7.5 trillion
If Bitcoin were to achieve the market capitalization of gold, a single Bitcoin would be value at $357,142 or almost 45x Bitcoin's current price

PAYMENT PROCESSING

The Bitcoin network has the ability to replace payment processors like Visa, MasterCard, and American Express which have a combined market cap of ~$600 billion
If Bitcoin were to achieve the market capitalization of the biggest payment processors, a single Bitcoin would be value at $28,571.43 or about 3.5x Bitcoin's current price

COMPARABLE CURRENCY

At a market capitalization of $140 billion, Bitcoin can be compared to Russian ruble that has approximately $140 billion in circulation
Which currency can be trusted more, which is more valuable?
If you compare Bitcoin to the global reserve currency, the US dollar which has $1.5 trillion in circulation, a single Bitcoin would be valued at $71,428 or about 9x Bitcoin's current price

SO WHAT IS BITCOIN REALLY WORTH?

It is extremely difficult to value Bitcoin, especially because it has no intrinsic value
The above valuations assume that Bitcoin completely takes over these use cases, realistically these scenarios will not happen
To come up with your valuation, assign a probability to each of these valuations or a percentage market share that Bitcoin could capture, multiply your percentage for each category with the total achievable market cap of each category, add them together

This post is a revisit of and inspired by a 2015 blog post by Miller Value Partners.

Q&A

Q&A with Ethfinex

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Thank you to Ethfinex Marketing Lead Christopher DeLuca and the rest of the Ethfinex team in helping us put together today's Q&A. We hope you like it!

What is the main mission of Ethfinex and why is Ethfinex a needed service?

Our mission is to build a community-run exchange where our most loyal users get to vote on token listings, fee structure, and benefits. It’s ownership earned through trading. Down the road we envision implementing on-chain governance, which would make decisions voted on by the community binding. We see a need to extend the ethos of decentralisation to the way exchanges operate and make decisions.

With many decentralized exchanges launching, what will make Ethfinex stand out among competitors?

Our model makes us unique. We’re a hybrid order book, allowing orders from centralised exchanges to be matched with users of a decentralised exchange interface. The result is a much cheaper and faster experience for the trader, whilst gaining all the benefits of full control over your funds.

That model also involves a decentralised governance layer. We use our Nectar token to incentivize trading on the exchange. You trade, you get a portion of the fees earned and a voting stake in how we operate.

There is a decentralized exchange liquidity issue, how is Ethfinex looking to bring liquidity to the platform and solve these issues?

By design, all trades on our platform, both on the centralised side and the trustless side, are executed on Bitfinex’s order book, one of the most liquid in the industry. While we are always looking at ways of collaborating with market makers to add volume, our ability to access Bitfinex’s order book gives us a distinct strategic advantage when it comes to the issue of liquidity.

What are the significant upcoming milestones that users should be aware of?

We’ll be launching the Ethfinex Trustless Portal very soon, where anyone will be able to trade without creating an account or making a deposit. Traders will earn Nectar tokens on both the custodial and trustless portals. Those interested in getting on the waitlist to the access the portal can drop their email in this form.

In addition, we’ll be hosting our first Governance Summit at the end of September, in Lugano, Switzerland. It will be an opportunity to bring together our community to discuss a range of topics related to decentralised governance.

MORE BREWING

Data Shows US Dollar, Not Japanese Yen, Is Dominating Bitcoin Trade
First Crypto Firm IPO on London Stock Exchange Raises $32.5 Million
Bank of Thailand Allows Banks to Open Subsidiaries for Crypto Dealings

COIN OF THE DAY

Vertcoin (VTC)
Vertcoin is a cryptocurrency like Bitcoin and Litecoin with an added focus on keeping the ecosystem as decentralized as possible. Vertcoin is a zero frills development coin that solves real cryptocurrecy problems rather than fluff that crowds the space.
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