Tales from the crypto: Is bitcoin a fraud?
If there was any doubt left that Jamie Dimon wasn’t a fan of bitcoin, JP Morgan’s CEO laid them to rest when he spoke at a conference recently.
The cryptocurrency, Dimon said, “doesn’t exist” and was only fit for use by criminals and people marooned in failed economies. There was even something for fans of 17th-century financial bubble references, with Dimon calling bitcoin “worse than tulip bulbs”.
This isn’t Dimon’s first attack on bitcoin. Actually, he has campaigned tirelessly against bitcoin’s perceived volatility and fraudulent nature. Dimon’s criticisms practically merit an entire genre of their own by now.
But that’s not to say he’s some sort of wild-eyed outlier. Indeed, his point of view resonates with some AccountingWEB members. Commenting on Sooraj Shah’s recent bitcoin article, member ShayaG admitted that while “bitcoin has delivered good returns to investors”, it is “too slow to confirm transactions to merit serious consideration for a day to day currency”.
“Its USP seems only to appeal to the criminally minded,” ShayaG wrote, echoing Dimon’s aspersions on bitcoin’s legitimacy.
It would seem, too, the effect of Dimon’s latest tirade proved his point about the bitcoin’s volatility. By yesterday, bitcoin’s value had dipped 10% since his speech, falling below $3,800 per bitcoin.
But according to Baroness Michelle Mone, founder of the wildly successful lingerie brand Ultimo and now a bitcoin investor, the timing of the drop is purely coincidental. In fact, she told AccountingWEB, Dimon’s past criticisms actually precipitated a rise in bitcoin’s value.
The drop, Baroness Mone explained, actually relates to the Chinese government closing down illegal bitcoin exchanges. She added: “On a lighter note, every time Mr Dimon makes a comment it seems to be a great time to purchase bitcoin. I believe that people shouldn't throw stones in glass houses, if I recall JP Morgan suffered $20bn in fines not so long ago.”
As far as the accusations of bitcoin’s inherent criminality, she was unconvinced. “The blockchain protects users from fraud because the decentralised network confirms each transaction on the blockchain to be valid and true. This also means that no chargebacks can occur within bitcoin. Once your transaction has taken place and is confirmed, it is placed on the public ledger and can never be undone.”
According to Mone and many other crypto partisans, bitcoin is the future of currency. But if it is indeed the future, HMRC will need to catch up quickly. Up until now, the tax authority has remained very circumspect on its interpretations of cryptocurrencies.
The latest guidance on offer was published in 2014. That’s aeons ago in the fast-moving world of cryptocurrencies. HMRC’s guidance does seem a tad inadequate for a topic involving billions of pounds, with the advice saying whether any profit or gain is chargeable or any loss is allowable will be looked at on “a case-by-case basis”, and the “relevant legislation and case law will be applied to determine the correct tax treatment”.
AccountingWEB user Jonathan Smith from Aiteo Consulting notes that: “The preliminary view is that [bitcoin] mining isn’t an economic activity for VAT purposes, based upon a draft EU view. However, they do view the holding of cryptocurrency as any other currency, so it could be treated as a gain when it is translated into (say) GBP.”
Of course, if you ask Jamie Dimon he’d tell you that new legislation isn’t needed since the crypto bubble is fixing to burst. “The currency isn’t going to work,” he said flatly. He might, however, have to tell his own daughter the bad news: “My daughter bought bitcoin, it went up and now she thinks she's a genius.”