Category Archives: Cryptocurrency

Cryptocurrency investors should be prepared to lose all their money, Bank of England governor says – CNBC

Bank of England Governor Andrew Bailey.

Simon Dawson | Bloomberg via Getty Images

LONDON Cryptocurrencies "have no intrinsic value" and people who invest in them should be prepared to lose all their money, Bank of England Governor Andrew Bailey said.

Digital currencies like bitcoin, ether and even dogecoin have been on a tear this year, reminding some investors of the 2017 crypto bubble in which bitcoin blasted toward $20,000, only to sink as low as $3,122 a year later.

Asked at a press conference Thursday about the rising value of cryptocurrencies, Bailey said: "They have no intrinsic value. That doesn't mean to say people don't put value on them, because they can have extrinsic value. But they have no intrinsic value."

"I'm going to say this very bluntly again," he added. "Buy them only if you're prepared to lose all your money."

Bailey's comments echoed a similar warning from the U.K.'s Financial Conduct Authority.

"Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors' money," the financial services watchdog said in January.

"If consumers invest in these types of product, they should be prepared to lose all their money."

Bailey, who was formerly the chief executive of the FCA, has long been a skeptic of crypto. In 2017, he warned: "If you want to invest in bitcoin, be prepared to lose all your money."

Bitcoin is up over 90% this year, thanks in part to rising interest from institutional investors and corporate buyers such as Tesla. The electric car firm bought $1.5 billion worth of bitcoin earlier this year, and the value of its holdings have since risen to nearly $2.5 billion.

Proponents of bitcoin see it as a store of value akin to gold because of its scarce supply only 21 million bitcoins can ever be minted arguing that the cryptocurrency can act as a hedge against inflation as central banks around the world print money to relieve coronavirus-battered economies.

However, skeptics view bitcoin as a market bubble waiting to burst. Michael Hartnett, chief investment strategist at Bank of America Securities, said bitcoin's rally looks like the "mother of all bubbles," while Alvine Capital's Stephen Isaacs said there are "no fundamentals with this product, period."

Alternative digital currencies have made even larger gains than bitcoin. Ether, the native token of the Ethereum blockchain, has seen returns of more than 360% year to date, while meme-inspired crypto dogecoin is up a whopping 12,500%.

Analysts have attributed dogecoin's rise to tweets from celebrities like Tesla's Elon Musk and Mark Cuban, as well as retail investors buying the token on the free-trading app Robinhood. David Kimberley, an analyst at U.K. investing app Freetrade, described the dogecoin rally as "a classic example of greater fool theory at play," referring to the practice of selling overvalued assets to investors who are willing to pay a higher price.

At the same time, central banks are considering whether to issue their own digital currencies. Last month, the Bank of England launched a joint taskforce with the Treasury aimed at exploring central bank digital currencies, or CBDCs. Such a currency would exist alongside cash and bank deposits rather than replacing them, the bank said.

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Cryptocurrency investors should be prepared to lose all their money, Bank of England governor says - CNBC

Cryptocurrency ether rises to new record high over $3600 – Reuters

A representation of virtual currency Ethereum are seen in front of a stock graph in this illustration taken February 19, 2021. REUTERS/Dado Ruvic/Illustration

Ether , the world's second-largest cryptocurrency after bitcoin , on Thursday extended a breakaway rally to a new record high of $3,616.10, gathering momentum as investors diverted focus from its main rival.

On the Bitstamp Exchange ether was last up about 4.0% at $3,568.92. Bitcoin was down 0.3% at $57,353.03 and about 11% below its record intraday high at $64,895.22 set on April 14.

Ether, the token traded over the ethereum blockchain, topped $3,000 for the first time on Monday. It is up more than 385% this year, compared with 96% for bitcoin.

The rise is in part a spillover from flows into bitcoin, which has grown in stature as big-name investors from Elon Musk's carmaker Tesla Inc (TSLA.O) to Wall Street investor Stanley Druckenmiller bought in.

"Ethereum has been able to maintain its positive momentum, a crushing series of all-time highs in the past week," said Konstantin Anissimov, executive director at cryptocurrency exchange CEX.IO.

"The current all-time high has reignited the ambitious sentiment that ethereum may eventually flippen (supplant) bitcoin by market capitalization in the near future."

Also, a technical adjustment called EIP (ethereum improvement proposal) 1559, expected to reduce the supply of ethereum and go live in July, has provided a lift for the digital currency.

Still, there is a speculative frenzy going on in the asset class. Joke cryptocurrency dogecoin is up by 24,000% over the last 12 months and is now the fourth-largest cryptocurrency by market capitalization. read more

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Cryptocurrency ether rises to new record high over $3600 - Reuters

Cramer says he owns ‘a lot’ of red-hot cryptocurrency ether that’s tripled bitcoin’s 2021 gain – CNBC

CNBC's Jim Cramer said Tuesday he owns ether, the world's second-largest cryptocurrency by market value.

"I've got a lot of ether," Cramer said on "Squawk Box," explaining he initially acquired it in order to bid on nonfungible tokens, or NFTs, being auctioned in March by Time magazine. "I didn't get it, so I just kept the ether."

While Cramer did not specify exactly when he bought ether, the digital currency entered March at about $1,400 and rose to around $1,900 by the end of the month. The Time NFT auction closed March 24.

Cramer's comments Tuesday came as ether extended its massive rally so far in 2021, setting an all-time high just above $3,500. Ether, which runs on the Ethereum blockchain, has soared more than 370% year to date, with a total market value now above $400 billion, according to CoinMarketCap.

Cramer said perhaps he will eventually "buy a house" with his ether, a reference to his recent revelation that he sold some of his bitcoin holdings in order to pay off a mortgage. "I now own a house lock, stock and barrel because I bought this currency," bitcoin, the "Mad Money" host said April 15 on CNBC.

In a video for his financial news website The Street, Cramer said Monday, "My Ethereum has gone up tremendously in value, and I'm not selling it." He added, "I sold a lot of bitcoin because I had my eye on a place."

Bitcoin, which has the biggest market cap of any digital coin, traded above $55,000 per token Tuesday, about 15% lower than last month's all-time high but it's still nearly doubled in 2021. The current price level put bitcoin's total market value at just over $1 trillion, nearly half of the entire crypto market.

Cryptocurrencies broadly speaking have moved further into the mainstream throughout 2021. Crypto exchange Coinbase's direct listing last month on the Nasdaq was heralded as a major milestone for the burgeoning digital asset industry.

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Cramer says he owns 'a lot' of red-hot cryptocurrency ether that's tripled bitcoin's 2021 gain - CNBC

Bitcoin is no longer the cryptocurrency king – TechRadar

The world's first cryptocurrency has some competition on its hands as Ethereum has finally reached the $3,000 milestone as its token Ether has quadrupled in price since the beginning of this year.

While Bitcoin has been the world's go-to cryptocurrency for some time now, Ethereum's recent rise suggests that there is still room for competition as the crypto market evolves.

One thing that sets Ethereum apart from Bitcoin is the fact that it provides the infrastructure for both the NFT (non-fungible token) and decentralized finance (DeFi) industries which have both seen tremendous growth over the last six months.

However, Bitcoin still has a much larger market cap at $1.1tn compared to Ethereum's $390bn but this could certainly change with more investors and projects buying into the Ethereum blockchain. In fact, just last week, the European Investment Bank (EIB) announced its plans to launch a digital bond sale on the network at the price of $100m.

At the time of writing, one Ether is currently valued at $3,291 and Ethereum has seen its value rise by 10 percent on Monday alone.

Other factors that have contributed to Ethereum's recent rally include the fact that next generation of the Ethereum blockchain, known as Ethereum 2.0, went live at the end of last year and the cyrptocurrency exchange Coinbase was listed on the NASDAQ exchange under the ticker COIN last month.

At the end of last year Ethereum was trading at less than $1000 per coin before it shot up in January 2021 and hasn't slowed down since. Now that Ethereum has hit $3,000, some investors are wondering if the cryptocurrency will continue its rally to reach $5,000. Bitcoin on the other hand has failed to recover since it fell from a mid-April record of almost $64,870.

Only time will tell if Ethereum continues to gain ground or if we'll see another market correction similar to the one which took place in 2017.

TechRadar is supported by its audience.TechRadar does not endorse any specific cryptocurrencies or blockchain-based services and readers should not interpret TechRadar content as investment advice. Our reporters hold only small quantities of cryptocurrency (under $100 in value), as is necessary to perform wallet and exchange reviews, and do not hold shares in any publicly listed cryptocurrency companies.

Via Bloomberg

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Bitcoin is no longer the cryptocurrency king - TechRadar

EBay says open to accepting to cryptocurrencies in future, exploring NFTs – Reuters

An eBay sign at an office building in San Jose, California, May 28, 2014. REUTERS/Beck Diefenbach

EBay Inc (EBAY.O) is open to the possibility of accepting cryptocurrency as a form of payment in the future and is looking at ways to get non-fungible tokens (NFTs) on its platform, the company said on Monday.

A growing number of companies have begun to accept virtual currencies as a form of payment, taking an asset class that had been shunned by major financial institutions a few years ago, a step closer to becoming mainstream.

Tesla Inc (TSLA.O) is already accepting bitcoin as payment for its electric cars, while payments giant PayPal (PYPL.O) last year started allowing customers to buy, sell and hold cryptocurrencies using its online wallets. read more

"We are always looking at the most relevant forms of payment and will continue to assess that going forward. We have no immediate plans, but it (cryptocurrency) is something we are keeping an eye on," eBay said in a statement to Reuters.

In an interview with CNBC, Chief Executive Officer Jamie Iannone said that accepting virtual currency was an option the company was looking at.

EBay, which disappointed investors with a weak second-quarter profit forecast last week, said it was looking at a "number of ways" to get into the NFT space. read more

NFTs, a type of digital asset that exists on a blockchain, have exploded in popularity this year, with NFT artworks selling for millions of dollars and musicians such as the Kings of Leon rock group embracing them for their latest album. read more

"We're exploring opportunities on how we can enable it (NFTs) on eBay in an easy way," Iannone said on CNBC.

Everything thats collectible has been on eBay for decades and will continue to be for the next few decades.

(This story refiles to correct CEO name in paragraphs 5 and 8 to Iannone; Corrects typographical errors in paragraphs 1, 3 and 4.)

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EBay says open to accepting to cryptocurrencies in future, exploring NFTs - Reuters

Major Ethereum upgrades could boost the price further. Here’s a roadmap. – Markets Insider

Major changes are coming to the Ethereum network.

Alessandro Bianchi/Reuters

Ether - the world's second-biggest cryptocurrency - soared to record highs above $3,600 in the week to Friday and had outstripped bitcoin with year-to-date returns of around 370%.

Analysts said a key catalyst has been growing interest from big players such as the European Investment Bank in the Ethereum blockchain network, on which ether runs.

Investors have been drawn in by the possibility of building decentralized financial contracts on the system and other applications such as non-fungible tokens, or NFTs.

But upcoming changes to Ethereum that aim to make the network bigger and more sustainable are also exciting investors, as they could send the ether price soaring even further.

Insider spoke to Ben Edgington, who is working on the upgrades for development company ConsenSys. He laid out the roadmap for the changes.

The 'London' upgrade will start to destroy ether coins

After tweaking how transaction payments work in April, Ethereum developers are preparing for a major overhaul to the fees system. The changes are due in mid-July, according to Edgington.

Under the current system, users send what's known as a gas fee to miners as payment for transactions to be verified, in a kind of auction. Miners complete transactions, and create cryptocurrencies, by using computing power to solve puzzles on the network.

But when the network is busy - as it increasingly is - the auction system means users have to bid larger amounts and estimate the appropriate fee, leading to volatility and sharp price rises.

To address the problem, Ethereum's developers have agreed to a major change, known as EIP-1559 in crypto jargon and set to take place during an event called the "London hard fork."

Under the new system, gas fees will be replaced by a mandatory and automatically determined base fee, which would fluctuate according to network congestion. Users will be given the option of paying miners tips if they need transactions completing quickly.

Read more: Fundstrat's head of digital assets research walks us through his $100,000 and $10,500 year-end price targets for bitcoin and ether - and shares the 8 tokens he's bullish on

But the most exciting part for many investors is that the network will start to destroy or "burn" some of the gas fee.

Edgington says: "Potentially, more ether will be burned that will be generated for miners." He added that this could make the supply of ether decline over time, "which actually trumps bitcoin monetary policy, which is fixed."

One analyst said earlier this year the burning of fees might lay the groundwork for "explosive growth" in the ether price.

Ethereum 2.0 aims to boost the network's size and sustainability

Developers are most excited about the momentous changes collectively known as Ethereum 2.0, which aim to make the network bigger and more sustainable.

First up on the road to Ethereum 2.0 is what developers are calling The Merge: a complete change in the underlying mechanics of the network, which Edgington says will hopefully be completed by the end of 2021, or in early 2022.

Currently, computers compete against each other to solve complex puzzles to verify the network and mine ether in what's called a "proof of work" system.

This makes the network secure, because it would take huge and costly amounts of computing power and energy to hack into - but is very bad for the environment.

Ethereum will instead be moving to a "proof of stake" system. This means people can validate transactions and mine according to the number of coins they hold and are willing to offer as a sort of down payment, Edgington said.

Each user that wants to verify transactions - and thereby earn themselves rewards - has to put up a sizable stake, for example 32 ether worth over $120,000.

The idea is that anyone wanting to attack the network would have to earn enough ether to pay more than the collective value of all the stakes to start altering the blockchain in a damaging way.

Edgington says there is already around $10 billion staked the proof-of-stake network, known as the beacon chain, which developers launched in December.

Ethereum developers are working hard to shift across the network onto the new system - The Merge - but it's not without risks.

One developer has described the process as "replacing the engine of an airplane while it is still flying." But they added: "The code in use will have been exhaustively checked, battle-tested, and checked again."

'Sharding' aims to expand the network

Yet Edgington stresses that "moving to proof of stake is not a scalability solution."

To try to expand Ethereum so that more applications such as NFTs, or decentralized finance contracts, can be built on it, developers will create new networks in a process known as sharding.

"This is like running 64 blockchains in parallel with the beacon chain to increase the capacity," Edgington says.

Simply put, creating more blockchain systems and tying them together by linking them to the main beacon chain should expand the overall network and make it more efficient, as opposed to the current system where everything is done on one big network.

"I expect within a year of delivering the proof of stake we'll have delivered the sharding solution," Edgington says. "But nobody's making a strict project plan, or deadline about this. It's ready when it's ready."

Read more: Ex-Ark analyst James Wang breaks down his bull case for Ethereum as its token breaches an all-time high of $3,300 - and explains why it could eventually reach $40,000

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Major Ethereum upgrades could boost the price further. Here's a roadmap. - Markets Insider

Heres a Bitcoin Timeline for Everything You Need To Know About the Cryptocurrency – Yahoo Finance

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You might not have even heard of Bitcoin until a few years ago or maybe even more recently than that. Believe it or not, the worlds biggest cryptocurrency is more than a dozen years old. But its roots go all the way back to the time of the analog world when the concept of private, anonymous, computerized money first emerged in the closing decades of the 20th century. Heres how one of the greatest stories in the history of both technology and money has played out so far.

Read: 10 Best Cryptocurrencies To Invest In for 2021

For most people, Bitcoin just came out of nowhere one day when everyone started talking about it on Twitter. The truth is that Bitcoin stands on the shoulders of visionary cryptographers and computer scientists who were way ahead of their time at the dawn of the era of personal computers.

1976: Inspired by the work of computer scientist Ralph C. Merkle, cryptographers Whitfield Diffie and Martin Hellman publish the white paper New Directions in Cryptography. It outlines the concept of public-key cryptography, which Bitcoin would use more than 30 years later to specify ownership.

1983: Computer scientist David Chaum creates eCash, a digital currency that uses a type of cryptography called blind signatures to provide secure and anonymous transactions. It is the first known example of what would become cryptocurrency.

1997: Building on what Chaum had started, cryptographer and cypherpunk Adam Back invents Hashcash, which uses a proof of work system that will later make Bitcoin mining possible.

See: How Does Cryptocurrency Work and Is It Safe?

Looking back, its hard to believe that a whole decade passed after 1997 without someone inventing the equivalent of Bitcoin. Between proof-of-work protocols, the internet, public-key cryptography and blind signatures, the crypto community had everything it needed plus two decades worth of research, experiments and knowledge to build on. Yet somehow, the world waited until 2007 for a mysterious person or people that went by the name Satoshi Nakamoto to bring to fruition the combined efforts of all those who had come before.

Story continues

2007: Satoshi Nakamoto begins coding for what will become Bitcoin. The name is a pseudonym for the still-anonymous crypto creator, who could be a man, woman or even a group of people. Since Satoshi is traditionally a mans name, Satoshi Nakamoto is often referred to as he or him.

2008: Satoshi Nakamoto publishes a white paper called Bitcoin: A Peer-to-Peer Electronic Cash System to an online cryptography newsletter.

Check Out: Bitcoin Cash (BCH): Hows It Differ From Bitcoin and Whats It Worth?

2008: The domain name bitcoin.org is registered.

2009: The Bitcoin network goes live when Satoshi Nakamoto mines Bitcoin block No. 0, known as the genesis block. It came with a reward of 50 Bitcoins and its coinbase was embedded with this text: The Times Jan/03/2009 Chancellor on brink of second bailout for banks.

2009: In the worlds first P2P Bitcoin transaction, Satoshi Nakamoto sends 10 Bitcoins to Hal Finney, a computer scientist and early adopter of Bitcoin, after he mines a block. Also in 2009, Finney became the first person to tweet about Bitcoin.

Bitcoin had no quantifiable value in its infancy. Hobbyists and computer scientists like Finney traded it amongst themselves. That all changed on May 22, 2010, when a man named Laszlo Hanyecz got hungry.

2010: Crypto-miner Laszlo Hanyecz offers 10,000 Bitcoins from his personal stash to anyone who can make two Papa Johns pizzas appear at his house. A fellow crypto-geek delivered, then Papa Johns delivered, then Hanyecz delivered on his end of the bargain. It was historys first real-world cryptocurrency payment for something of tangible value two large pies for the 2021 equivalent of nearly a half-billion dollars.

More: Coinbase, the Largest US Cryptocurrency Exchange, Goes Public

2010: Since the two pizzas cost $25 and that transaction was settled with 10,000 Bitcoins, the cryptocurrency community agreed that a single Bitcoin should be worth one-quarter of a penny. Bitcoin now had a monetary value and an exchange rate.

2010: Just a few months after Laszlo Hanyecz ate what would become the worlds most expensive pizzas, Bitcoin began trading on open exchanges. Non-computer whizzes could now buy it, sell it and price it against the U.S. dollar. Its opening asking price was $0.0008, or eight 10,000ths of a dollar. In less than a month, its price skyrocketed to eight cents per Bitcoin.

In the 2010s, Bitcoin went on one of the wildest rides in the history of investing. With a run defined by giddy highs and bottomless lows, Bitcoin began the decade as a virtual unknown that traded for a few pennies per unit. By the end of the decade, companies like Tesla accepted Bitcoin as payment and it was so valuable that a single one was enough to buy an actual Tesla with plenty of change to spare.

Read: Ethereum (ETH): What It Is, What Its Worth and Should You Be Investing?

2011: Bitcoin makes history when it breaks through the $1 mark and keeps climbing all the way up to $31. Ecstatic investors are disappointed to realize its a bubble the first of many for Bitcoin and when it pops, prices crater back down to single digits.

2011: In the first known mainstream news coverage of Bitcoin, Time runs an article by Jerry Brito with the headline Online Cash Bitcoin Could Challenge Governments, Banks.

2013: Bitcoins potential and its potential for extreme volatility are realized when it starts 2013 trading around $12 and leaps to $1,242 about the same as an ounce of gold by November. From this moment forward, there is simply no more ignoring Bitcoin.

2016: After crashing into the low triple-digits, Bitcoin is back approaching $1,000 in 2016.

2017: Bitcoin hits the $1,000 mark again and begins a run reminiscent of the dotcom bubble of the 1990s. On Dec. 16, Bitcoin peaks at an astonishing $19,497.40.

2018: Prices collapse to sub-$10,000 levels again before reaching bedrock in the low $3,000s. Moving into 2019 prices briefly reach $10,000 again.

The private, untraceable and anonymous nature of Bitcoin put the cryptocurrency in high demand during the uncertainty and mistrust that defined the pandemic. Thanks to COVID-19, Bitcoin gained rock-star status and a place in the mainstream.

See: Dogecoin (DOGE): What It Is, What Its Worth and Should You Be Investing?

2020: Bitcoin starts the year at $7,200 but roars back into five figures by midsummer. As the year draws to a close in December, Bitcoin leaps past its 2017 record after trading in the $20,000s for the first time ever.

2021: Bitcoin passes $30,000 at the beginning of January, $50,000 one month later in February, then $60,000 just one month after that in March. As of April 22, Bitcoin is trading at a little over $52,000 per coin.

2021: As of April 2021, some of the worlds biggest and most recognizable brands are accepting Bitcoin as a form of payment. You can buy just about anything anywhere with a Bitcoin Visa or Mastercard. Microsoft, AT&T and Burger King all accept Bitcoin, as do KFC, Overstock, Subway, Shopify, several pro sports franchises and Pizza Hut (but not Papa Johns). You can buy a Tesla with Bitcoin and you can buy, sell and hold it on PayPal. As the third decade of the 21st century gets underway, it does so with Bitcoin squarely in the mainstream.

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Heres a Bitcoin Timeline for Everything You Need To Know About the Cryptocurrency - Yahoo Finance

South Korean Police Officers Banned From Buying Cryptocurrency Regulation Bitcoin News – Bitcoin News

A recent ban imposed by the South Korean National Police Agency will bar particular officers from purchasing additional cryptocurrencies. The announcement coincides with a report revealing a heightened domestic availability of digital coins, in comparison to the global marketplace.

Officers with certain investigative and inspective responsibilities have been prohibited from buying additional cryptocurrency. Reporting on the Friday announcement suggests that Korean National Police Agency (KNPA) officers will be obliged to make additional disclosures on any held digital assets.

The countrys main law enforcement agency stressed penalties for non-compliance, without any indication to their severity. Domestic sources suggest the move aims to introduce additional transparency to sensitive KNPA departments, after a last-month announcement from the South Korean government that it would crackdown on illicit crypto transactions.

The government claims that market price increases have inflated risks of money laundering and fraud. Between April and June, additional efforts will be made to curb illegal activity. Countermeasures were recently discussed at a meeting between various ministries, law enforcement agencies, and financial regulators. It remains uncertain what other policies may be implemented in the coming summer months.

While the KNPA has moved against its own officers holding digital assets, a media report has turned attention to the wide availability of cryptocurrencies in the South Korean market.

According to the Chosun Ilbo daily, the country has more cryptocurrency exchanges than Japan and the United States. The Financial Services Commission warned that all of the countrys crypto exchanges, around 200 platforms, could be shut down for failing to register with the regulator. Among these exchanges include controversial smaller trading platforms, which often deal in a variety of more volatile currencies.

Currency variety is not unique to the younger and smaller domestic exchanges. Upbit, South Koreas largest crypto trading platform, supports 178 different cryptocurrencies. Another major exchange, Bithumb, offers 170. In comparison, Coinbase, the leading U.S. crypto exchange, trades 58 currencies, and every listed exchange in Japan combined only 29.

Many transactions are being made solely based on agreements between issuers and exchanges, said Choi Gong-pil, an associate of the Korea Institute of Finance. He suggested a lack of transparent standards and current industry rules contribute to speculation, and a risky environment for investors.

Whats your opinion on the ban imposed by the Korean National Police Agency? Share your thoughts on the subject in the comments section below.

Image Credits: Shutterstock, Pixabay, Wiki Commons

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Cryptocurrency Clamor: Paying Employees in Bitcoin Has Reached the Mainstream – JD Supra

Its been a big year for Bitcoin. Between hitting an all-time high trading price over $63,000, landing on the balance sheets of major companies, and being recognized as inevitable by financial institutions that once tried to avoid it, the rise of Bitcoin and the broader adoption of cryptocurrency is one of the bigger stories of 2021. Cryptocurrencies are becoming more mainstream as a form of payment and investment or speculation, depending on your perspective.

Perhaps the appeal is in the underlying technology (that is, the use of math, rather than third-party banks, to facilitate nearly instant, inexpensive, irrevocable transactions anywhere on Earth). Perhaps its the arguable benefit of holding cryptocurrency, particularly Bitcoin, as a long-term hedge against inflation. Or maybe its the indisputable entertainment value of casting a one-minute candlestick chart to a big screen TV to watch the price move on a volatile day (a purely hypothetical scenario).

Whatever the case, cryptocurrencies are clearly here to stay. Innovative employers are responding by putting Bitcoin compensation on the table as a benefit to attract top talent and it its not just tech companies. This year, Twitter, the City of Miami, the City of Jackson, TN, the Sacramento Kings, and others have announced their exploration of Bitcoin payroll. We expect more are coming, and to start seeing employee-driven requests for the option. If your organization is considering paying employees or contractors in Bitcoin, what do you need to know?

Is it Legal to Pay Wages in Cryptocurrency?

The first question you need to confront: whether it is permissible under federal and state law to pay your workers in Bitcoin or similar cryptocurrency.

Under the Fair Labor Standards Act, wages must be paid in cash or negotiable instrument payable at par. Cryptocurrency is, of course, neither. And while the more popular cryptocurrencies can easily and immediately be sold for cash, this fact might not matter to the U.S. Department of Labor.

Further, employers must also consider state laws, some of which require wages to be paid in U.S. currency (including California, Washington, Georgia, Maryland, Delaware, Pennsylvania, Michigan, New Jersey, Texas, and Illinois). The specific restrictions and accompanying exemptions vary from state to state. In Georgia, for example, the statute does not apply to salaried company officials, superintendents, or certain department heads, or to employers in the farming, sawmill, and turpentine industries. Meanwhile, in Texas, while wages are generally required to be paid in U.S. currency, an employee may agree in writing to receive part or all of the wages in kind or in another form.

For these reasons, you should pay base compensation in the U.S. currency in amounts that meet the federal, state, and local requirements for minimum wage, overtime, or salary-based exemptions. Any cryptocurrency payment program should be optional and authorized in writing by the employee (on a form clearly acknowledging the risks of doing so).

Why Would an Employer Want to Pay in Cryptocurrency?

Considering the legal hurdles and risks facing employers who explore this option, why bother? Primarily, talent acquisition by virtue signaling. Competition for hiring and retaining the best and brightest employees is fierce, especially in the tech industry. By offering to pay employees in cryptocurrencies, companies may attract workers looking for a forward-thinking employer by distinguishing themselves as early tech adopters that offer compelling benefits and compensation.

Companies with remote or international contractors or employees might also appreciate the ease of making cross-border payments in cryptocurrency. Who needs to pick among international currencies and worry about exchange rates when anyone can send and receive Bitcoin in minutes with nothing more than a cell phone?

Is It Practical to Pay in Cryptocurrency?

If your company decides to offer cryptocurrency as part of its payroll or bonus program, there are two general ways it can be done. Employees can either be paid (1) in their normal currency, with a designated portion of their wages being converted to their selected cryptocurrency and sent to their wallet; or (2) in the cryptocurrency itself.

In the conversion option, the employee may bear some risk that the exchange rate available to the employer is not as favorable as what the employee could get buying the cryptocurrency themselves. In the direct payment option, you are technically making a payment in property, not cash, under current IRS guidance (check out the IRS FAQs, a 2014 Notice, and a 2019 Revenue Ruling on the matter). The fair market value of the cryptocurrency easy to determine for coins as popular as Bitcoin and Ether is subject to payroll taxes and must be reported on Form W-2. While not impossible, this impact on payroll reporting and tax withholding could be administratively difficult. Regardless of the option chosen, most employers should strongly consider using a third-party service dedicated to processing payroll in cryptocurrency.

One common concern about paying employees in Bitcoin is its volatility risk $100 worth of Bitcoin on payday might only be worth $80 when it hits the employees wallet. These days, it might be a fair presumption that anyone comfortable enough with cryptocurrency to opt in to receiving it as part of their wages would be very familiar with this risk. (Many would even be excited if the price fell dramatically right before payday, so they can buy the dip. Lots of users are dollar-cost averaging cryptocurrency into their portfolios just as they would buy mutual funds in a 401(k).) But you need to consider the risks that would likely accompany those disgruntled employees who are not happy with such a precipitous drop. And you might not want to simply assume that anyone signing up to receive compensation via cryptocurrency understands these swings, making sure to provide sufficient notification about the realities to those considering the option.

Another concern is taxes. Despite IRS guidance published on the topic in 2014, and clarified in great detail in late 2019 (links above), many cryptocurrency holders seem to be unaware that they are walking into an interesting lesson in capital gains taxes when they buy, sell, exchange, and are paid in cryptocurrency. You should include relevant disclaimers, and perhaps a reference to current tax guidance, in any employee authorization to be paid in a digital asset.

The Future Of Cryptocurrency

Bitcoin adoption has been moving at light speed in 2021. Simply stated, it is not a passing fad.

Private Businesses Getting in on the Act

WeWork announced that it will start accepting payment in Bitcoin, Ether, and several other cryptocurrencies as payment, including for its memberships, and intends to hold the assets on its balance sheet. It will also work with landlords and other partners to make payments in cryptocurrency. Coinbase, the largest cryptocurrency exchange in the United States, will be the first client to pay for its WeWork membership in cryptocurrency.

Mastercard has announced that it plans to give merchants the option to receive payments in cryptocurrency this year. Mastercards Executive Vice President for Blockchain and Digital Asset Products, Raj Dhamordharan, commented, Our philosophy on cryptocurrencies is straightforward: Its about choice. Mastercard isnt here to recommend you start using cryptocurrencies. But we are here to enable customers, merchants and businesses to move digital value.

Venmo, a large peer-to-peer payment app, announced that it would support cryptocurrency payments between users. PayPal announced that its users will be able to buy, sell, and transfer cryptocurrencies.

Federal and State Governments are also Signaling Interest

In February, Treasury Secretary Janet Yellen indicated that central banks should be considering issuing digital currencies. From Yellens view, a digital dollar could help alleviate hurdles that many low-income households face in financial inclusion. However, Secretary Yellen has also warned that Bitcoin is extremely inefficient, and the Biden administration is reportedly developing a crypto regulatory framework.

In 2019, Ohio gave companies that operate there the option of paying their taxes with Bitcoin. Other states, such as Georgia and Illinois, have considered legislation to allow cryptocurrency tax payments but to date, that legislation has failed. As Bitcoin becomes more widely adopted and used as a currency, look for other states to follow in Ohios footsteps and accept Bitcoin. States will likely make this move, and take other steps, to attract businesses just as private companies have begun to do.

The government taking note of the benefits of cryptocurrencies is a large step toward legitimacy and mass adoption. Further, acceptance by the government could lead to systematic changes that would make it much easier for employers to accept payment in the form of cryptocurrencies and in turn pay employees with crypto.

Conclusion

The recent Bitcoin announcements by major companies is a sign of the increasing adoption of cryptocurrencies as currencies. This increases the likelihood that an employee may request to be paid in Bitcoin. As we have discussed, there are many potential traps when paying employees with Bitcoin and the decision to offer payment in Bitcoin should not be taken lightly. If you make the decision to pay employees in Bitcoin, or other cryptocurrencies, ensure that nonexempt employees are paid the applicable minimum and overtime wages.

While there are many potential legal issues that may arise, employers who want to pay employees with cryptocurrency can likely find solutions with the help of legal counsel. Moreover, regardless of which state an employer is operating, you should never proceed with introducing cryptocurrency into wage or bonus payments without first consulting with your employment counsel.

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Cryptocurrency Clamor: Paying Employees in Bitcoin Has Reached the Mainstream - JD Supra

Rise of cryptocurrency: How it works, where its going – RochesterFirst

ROCHESTER, N.Y. (WROC) Cryptocurrencies are big business on Wall Street as valuations soar, but are they a form of currency for the masses?

CPA Garrett Wagner discussed the rise of these digital currencies Thursday during News 8 at Sunrise.

For many, Bitcoin is the most well-known cryptocurrency.

Bitcoin is a truly interesting technological creation, said Wagner. What makes it really interesting, if we go back to the beginning, no one knows who created it. Unlike Kodak we all know here in Rochester George Eastman was the founder of Kodak no one knows who created Blockchain and cryptocurrency. So its shrouded in mystery. But their goal was to take power away from the banks and let people like you and me exchange money without banks. So thats kind of how it got started take power away from the banks and create a global currency. Its just kind of gone from there in this big mess of confusion which is what were seeing today.

Wagner explained how cryptocurrency works.

Its very similar to the fundamental idea about you and I exchanging cash. Instead of having cash in U.S. currency, well have cash in Bitcoin or Ether or something else and well exchange that from one to another. Now thats not what gets most of the hype of cryptocurrency today. Most of the hype that we hear about is people investing in Blockchain, in Bitcoin, in Ether more like its a stock and they hope that if I buy $1,000 worth of Bitcoin today it will be worth $5,000 tomorrow. They dont want to actually conduct transactions with it. They hope that they just make a bunch of money and get out before it crashes back down.

Bitcoin has been around for more than 10 years, but Wagner said people outside investors have been slow to gravitate to it.

Were used to U.S. dollars. Were used to credit cards. Were used to ATM cards. Trying to get everybody to switch over to something else is a monumentally difficult task. So its been very, very, very slow to gain that adoption because no one wants to be the only person at a dinner party with 20 people who has Blockchain when everyone else has actual cash. So its been slow to make that change. Itll come at some point in the future, possibly, but for now, all of the speculation is about how can people get rich on this technology.

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Rise of cryptocurrency: How it works, where its going - RochesterFirst