The company behind the consensus network and currency, Ripple, has announced a new office in Sydney, Australia as part of a push further into the large Asian and Pacific markets.
“We are excited to formally unveil a presence in Asia Pacific — an area that has been aggressively pursuing faster payment technologies for both domestic and cross-border payments,” said Ripple Labs CEO and co-founder Chris Larsen.
According to a Ripple Labs s, the expansion is to meet a “growing demand” for the currency’s payment services in the region. Unlike Bitcoin, Ripple relies on intermediaries to work as gateways and exchange the ripple currency (XRP) for fiat currencies or intermediaries. The Ripple currency serves as way to send any form of value (fiat currencies, precious metals, etc.) across the globe quickly and cheaply.
Since it is not decentralized like Bitcoin, the alternative cryptocurrency has been able to find use cases as a money transfer service and seen adoption among small financial institutions. Fidor Community Bank, a banking startup, and the Bank of Weir, another experimental bank, became Ripple gateways last year.
“I am thrilled to bring Ripple Labs to Sydney, where we can more effectively serve eager markets in India, Singapore, the Middle East and across APAC,” said managing director of Ripple Labs Asia Pacific, Dilip Rao. “Banks and enterprises can leverage Ripple to more efficiently service the exploding trade and remittance flows in this region.”
“Dilip is a natural fit to lead this office because of his years of experience in the space and his deep, engaged network in the region,” Larsen added.
Rao will be leading Ripple Labs’ efforts in Australia and throughout Asia in his new role as head of the Asia Pacific subsidiary. The first Asia Pacific office will be opened in a large Australian city, but the company plans to expand to other parts of central and eastern Asia in the coming year.
Rao will bring more than 25 years of management and business development in the technology and payments sector to the digital currency company. He was the founder and CEO of Australia’s first peer-to-peer payments company, Paymate. More recently, he founded Woomera Labs, Inc., a business development firm that matches innovative startups with large companies.
He also holds degrees in physics and electrical engineering and an MBA from the Indian Institute of Management, Ahmedabad, India.
Rao will be in charge of the company’s business development and expansion in the region, as well as leading the company’s efforts with regulators, lending banks and central banks.
Though this is the first official presence of Ripple Labs, numerous third-party Ripple gateways already exist in the region. Japan, Singapore, China, Israel, India and South Korea are just some of the countries with Ripple exchanges.
The new office and focus could mean more activity for the digital currency in the region.
This is a guest post from Digital Currency Council member Kirk Phillips.
The burden of managing a tax calculation every time you buy something with bitcoin creates adoption friction that’s counterintuitive to the frictionless nature of bitcoin that we all know and love. (More on this in my article titled, “A Gift from the IRS and the Coffee Problem.”) So what if there was a better way to align the tax rules with the uses and benefits of bitcoin, to naturally accelerate adoption? How about eliminating short-term capital gains rules for bitcoin and other digital currencies?
Old world ways
Most folks generally understand the tax implications of using bitcoin by now, which includes having to track bitcoin to calculate a gain or loss whenever you buy a cup of coffee. Bitcoin may have become a victim of its own volatility when the IRS, during its decision-making process, was perhaps looking at the rise of bitcoin without considering price drops. Nonetheless, the application of property rules with short-and long-term capital gains is consistent with the taxation of any other assets going up and down in value. Bitcoin, however, deserves an exception, one that will take us into warp-speed and mass adoption.
Bitcoin simultaneously encompasses two wonderful traits of money, serving as both a store of value as well as a medium of exchange. The frictionless, almost instant transfer of value speaks for itself by transforming the Stone-Age model full of fees and headaches we’ve come to expect. Bitcoin has a magical store of value component because it’s a self-contained system combining a currency, a protocol and a network into something useful and scarce. The IRS short-term capital gains rules, as pointed out in the coffee reference, erroneously add friction to bitcoin’s otherwise frictionless medium of exchange. Ironically, the very same rules are like a gift from the IRS when applied to bitcoin’s store of value. Long-term holds of bitcoin or any other asset have the lowest possible tax rates — 15 percent in some cases — compared to ordinary income as high as 39.6 percent.
Exploring a new frontier
A few IRS rule changes could easily transform this strange dichotomy into a slam-dunk for bitcoin. My assertion is simple: The cost of supporting the rules is greater than the benefit. The aggregate cost of compliance for taxpayers, combined with the IRS costs to administer the rules, outweighs the benefits to the U.S. Treasury.
Here are just a few of the most obvious costs:
- IRS staff training on understanding digital currencies
- IRS staff training on how to field bitcoin-related questions
- IRS resources spent on processing tax returns with pages and pages of bitcoin transactions (an effort that diverts resources away from areas that produce a higher return)
To illustrate this wasted use of resources further, let’s take data sets from individuals and businesses, while assuming the transactions were in an all-bitcoin world, and calculate the net gain or loss at the end of a year. An analysis of 2014 would likely result in a net gain close enough to zero to justify eliminating the short-term capital gains rules for bitcoin and other digital currencies. For bitcoin to become a truly frictionless medium of exchange, these rules need to be eliminated. Meanwhile, long-term gains for bitcoin held longer than one year would remain intact because larger, infrequent transaction amounts are easy to track. It’s also consistent with taxation of asset appreciation related to bitcoin’s store of value property.
A long-term relationship
The modification I’m proposing creates the perfect dance between store of value and medium of exchange while making things easier for the IRS and the taxpayer. If a business or individual holds bitcoin for 10 months, the question they will ask is: Do I want to continue holding bitcoin into the long-term capital gain zone or use it now for things I need anyway? Those in the game for a long-term play won’t flinch and those who are not will spend the bitcoin and get it flowing again.
In addition, the IRS “wash sale rules” would apply, essentially prohibiting a repurchase of the same cryptocurrency within 60 days of a sale. The wash sale rules normally prohibit sales and repurchase of securities within 30 days so taxpayers can’t recognize a loss. In this context, however, it would extend the 30-day period to 60 days to thwart the game of resetting the clock on a long-term hold. The wash rules would not apply if bitcoin was used to purchase goods or services. It applies only when bitcoin is sold for USD. For example, if you use bitcoin to buy office supplies, you can’t turn around and use office supplies to buy back bitcoin. On the other hand, if you sell bitcoin for USD you can use the USD to buy back bitcoin, which is why I’m proposing a modified wash sale rule.
If you don’t like the above example, consider these alternatives:
- Increase long-term capital gains to 22.5 percent
If the IRS were to eliminate short-term gains, then let’s increase the long-term rate to 22.5 percent to offset the revenue that would have been gained from short-term gains, while still remaining a bargain for the taxpayer. Within the current system, collectibles, such as paintings, antiques and baseball cards, have a special tax rate of 28 percent; therefore, bitcoin and other digital currencies should be able to have a special tax rate.
- Implement de minimis transaction relief
Transactions for purchases of goods or services less than $100 would not be subject to short-term capital gains (for individuals). Similarly, transactions less than $250 would not be subject to short-term capital gains (for businesses). Long-term term capital gains rates would still apply to bitcoin held longer than one year.
- Establish a volatility threshold
Both individual and business taxpayers would be exempt from short-term capital gains when the price of bitcoin fluctuates within a volatility threshold. As long as the highest price at any point during the year is less than 150 percent of the lowest price during the year, then no transactions will be subject to short-term capital gains tax. For example, if the lowest price was $400 and the highest price was $595 then no capital gains would apply because 150 percent of $400 is $600 and $595 is less than $600. In this case as well, long-term term capital gains rates would still apply to bitcoin held longer than one year.
- Create a 5-year short-term capital gain exclusion
Under this exclusion, all bitcoin transactions for purchases of goods or services, for both individuals and businesses, would be exempted from short-term capital gains. This proposed five-year sunset is consistent with other sunsetting provisions that end temporary relief. Long-term term capital gains rates would still apply.
Any of these proposed changes would likely come with unintended consequences, but progress always comes with growing pains. Any new rules that stimulate bitcoin adoption, reduce taxpayer burden, and give the IRS a fair share, should be welcomed.
How would you change the IRS rules?
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