Will Bitcoin spark ‘a new era of banking’ for UK businesses?
National second hand goods chain, CeX, has announced this week that it will be accepting Bitcoin as currency and will provide the currency in exchange for hardware or software that people bring in to trade.
Bitcoin, for those who aren’t in-the-know, is an online currency and payment system. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen.
The currency was invented in 2009 by an unknown developer under the alias Satoshi Nakamoto. All transactions are anonymous and there is no middleman or bank involved. The authenticity of each transaction is protected by digital signatures corresponding to the sending addresses.
As Bitcoin is not tied to any country or location, transferring money internationally is without charge and is not subject to any regulation. Bitcoin is created by a process called mining, in which participants verify and record payments into a public ledger in exchange for transaction fees and newly minted bitcoins.
There are several different dealers of Bitcoin online, most of which are based in the US. Coinbase is one of the largest buyer and seller of Bitcoin on the internet, calling itself a ‘bitcoin wallet.’ Founder Brian Armstrong has confirmed that Coinbase deals with “hundreds of millions of dollars” worth of Bitcoin .
Currently, Coinbase doesn’t trade to the UK because of difficulties convincing the bank of its concept. The firm is struggling to get a UK bank account, with Armstrong saying: “These banks are usually quite sceptical. That’s a hard, difficult process that involves a lot of meetings. We have to be patient. It could happen in a week or ten years.”
Dell.com, Overstock and Expedia are amongst the large, international businesses that are now accepting Bitcoin as payment. Other British businesses which currently accept the currency include takeaway.com, fashion rental firm Girl Meets Dress and private jet hire website PrivateHire.
However, there are still several issues causing concern for British businesses in regards to the stability of this new-fangled currency. The value of Bitcoin has dramatically increased since the start of 2013, sparking a debate as to whether Bitcoin is simply a currency or more of an investment.
There are also serious tax implications regarding the use of Bitcoin in the UK. Currently, there is no VAT due on the value of Bitcoins sold. However, regular VAT rules remain when goods and services are supplied in return for Bitcoin. The government has recognised Bitcoin’s potential threat to its taxation policies and, in an announcement last month, Chancellor George Osborne announced that the Bitcoin measures will be outlined in the 2015 Budget.
In conclusion, the government must embrace Bitcoin in order to keep up with UK businesses. London is already home to the largest share of Bitcoin businesses in Europe, with other areas of the UK at its heels. Osborne reckons that the government “make the UK the destination of choice for setting up a FinTech company” and states “we stand at the dawn of a new era in banking.” The UK has the potential to either ride the Bitcoin wave all the way to economic growth, or stumble in its wake and suffer as a result.