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Crypto Payments, eCommerce Accounting

Crypto Payments, eCommerce Accounting its kind of like a crypto payment pioneer a you know ICO fractional ATM proprietor and a logistics trucking guy all walk into oh in an accountant Ill walk into a crypto shell so we have a very diverse panel and but in addition to that a lot of great backgrounds so even though what each of we do today is a little bit off the topic of payments theres a lot of experience up here on the panel payment experience in both traditional as well as crypto but I guess were probably not going to get Rick so should we just get it underway whatd you say okay Ill start off by introducing myself my name is Steve Beauregard Ive been around the industry for six seven years now started back in 2012 I founded a company called go coin back then which was a competitor of bitpay and a competitor of coin base in the merchant processing space go coin was a was a little bit different in that we were raising our Series A during mount GOx and so we didnt have the luxury of some of the other guys were a little bit better funded before mount Cox occurred and so we had to be a little bit more thrifty in and take a bit of a different approach but in the time that I ran go coined over those four years we processed about a hundred million dollars of crypto payments across about four blockchains so we were the first to enable payments beyond Bitcoin on to other crypto platforms and so recently Ive also joined the company Block B loq doing more in the enterprise space and in addition to that I you know get involved in a lot of a lot of startups and a lot of ICS new projects some of the ones Im advising on include the academy token which is about education one called ox token which is for networks of auctions a new one hasnt released yet my company block is releasing a new foundational cryptocurrency which is meant to be for payments and thats called metronome and you can find that at metronome IO and then finally Ive recently started advising company Nexus earth which is a quantum resistant blockchain that has a lot of really exciting features at scale so thats sort of my background Im gonna turn it over to David to talk about where hes coming from hi my name is David Gosselin Im a partner in cpa at DB b McKennon were a fullservice CPA firm and you know honestly as were at the booth today and yesterday we get a ton of tax questions but actually my area of expertise over the last two years have been audits and reviews for companies that are using the JOBS Act through regulation A or reg cf and so were one of the top CPA firms in the nation if youre an issue were looking to do one of those things and thats been kind of become extremely important to people out there like you who are looking to kind of tokenize something or create a token because just as offer you was saying and two panels ago theres stos are coming out and and you know floodgates are starting to open theyre replacing icos but they have to be done compliantly and thats usually through reg d reg CF or reg a plus the thing that I always talk about and why its important the the JOBS Act is because most companies that issue tokens dont want their tokens to be held by ten rich you know dudes in Silicon Valley they need their tokens to be owned by the masses and you cant do that through reg D you have to do it through rakes yet for reggae Plus this be able to sell to the unaccredited investor so its a space thats everevolving and a whole lot of fun I think a lot of people forget about the other reg which is reg fu and thats the one where you just say forget the United States were just going to do it all over seas and I dont think theres been a lot of talk about that on the panel yesterday they talked a little bit about you know if youre doing things offshore but you live in the US that youre doing something shady whats your opinion to that you know Im not a securities attorney but I always heard if youre if youre selling to a US citizen then you be you come your by default part of the securities laws here just like if youre a u.s.

Crypto Payments, eCommerce Accounting

entity and you sell to someone that lives in Singapore Canada or whatever you become attached to that country and their securities law so you have to make sure youre doing anything compliantly and Ive heard a ton of people come by the booth and theyre saying we will not sell it Americans yeah and I think thats you know thats thats logic was an unfortunate situation I wish that our regulators and government could get out of out of our way so to speak its a little bit unfortunate but its anyway lets move on to Sebastian Sebastian tell us a little bit about what youre up to and then you also had quite an interesting past in payments so my name is Sebastian Kawika Im from Germany and Im the founder of Trillian IL which is a company that produces and runs a network of cryptocurrency ATMs in europe with focus on Germany and my backgrounds actually Im coming from the payment industry so I had a payment company before in Brazil and we were processing I can talk about great yeah so one of the things that really hurt payments in cryptocurrency in particular especially in the United States once again with regulation back in 2014 the IRS sent out guidance which you know bitcoin was going to be taxed as a property and what that meant is even your you know small cup of coffee that you bought for five dollars if your basis was a couple cents and that you would have to pay a gain on that so from an accounting standpoint have you seen you know if you do have any clients that that became an issue for yeah this this year by the last six months Id say we get a lot of intake from people that are looking for tax advice anywhere from you know someone has said you know I made a couple thousand dollars and two transactions great easy no problem we can handle that to one client that said came to us with an Excel spreadsheet ten thousand lines long and said I owe tax I just dont know what to do and were looking at him like what can we do with this this theres a lot of information here and thats you know from my standpoint on the regulations side is what everybody talks about is utility and security utility and security over and over every conference nobody talks about hey its gonna be security and then then what happens right and then what happens is there is no accounting system there is no QuickBooks there is no anything to track the gains and losses right now on a tax perspective and on a GAAP perspective which regulation a companies and rake CF companies are gonna need so what I always predict is youre going to have all these companies raise these secured stos and raise all this money and then within a year to two years theyre all gonna fall flat on their face because they didnt think about what the habit was gonna happen with the accountant and they can no longer be compliant and thats when you know the regulators are gonna come after him again yeah and then thats really painful I mean I have a ridiculous spreadsheet that Ive been tracking you know ever since I started buying coins back in in 2012 and you know the hard thing is to when you then go into other other coins and so forth and I know theres some tax loopholes that theyve now closed but to me it really seems like the way that youre using should be it should be regulated different based on what youre using it for for example if youre buying something youre in Singapore and youre an American and you want to buy theres a couple bars down there where you can buy beers and so forth if you Brian beers its really no different than going to an ATM getting out Singh dollars and using that when youre really just trading your US dollars for singing so in that situation I think for these de minimis kind of you know payments that were really doing ourselves a disservice by even claiming the tax on that but I think that the fallacy of that argument is then youll find someone that will figure out how to do a hundreds of millions of micro transactions to kind of skirt the system and saying hey if its just a small transaction who really cares right so that I think thats the whole the reason why theres there needs to be some kind of regulation I agree you know the I dont see Bitcoin is anything different than a dollar its just a medium of exchange for the fair value of service is what you and I agree upon and its unfortunate that theyre kind of paying it to one thing but they have to do something right they have to take a stay but they can also just build structuring into that and say you cant structure payments in this way and if its done that way then bulk that youre breaking the rules youre just having more regulation which is kind of Sebastian youve done a lot of cross border I can maybe give you a good German standpoint which is that Bitcoin is taxed like gold so in terms of spending its stuff you dont pay any taxes or not and in terms of like investing in Germany you just pay normal taxes on your profit and losses unless you hold the asset or the coin for more than one year and from that point on its taxfree one thing that Ive we talked about recently is that like when you buy and sell Apple stock Facebook stock is whats called a wash sale and so if you buy and sell it within 30day time it is basically considered your basis carries over so if you do think about if you did something with that Bitcoin it was considered some kind of security or you were trading some day with the security if theoretically if youre buying and selling it regularly your basis may not change because its essentially a wash sale right thats a good point point so Sebastian youve done a lot of a crossborder payments I mean this lets face it for making payments within the US when you have credit cards it doesnt make a whole hell of a lot of sense especially if youre holding the the digital currencies perspective purposes to use that in the transaction especially for gonna get taxed on it but for crossborder payments thats where theres a lot of friction tell us about some of your experience so I actually have like the perfect use case for this so the company I was running in Brazil we process credit card payments and mostly for European companies that were selling stuff in Brazil and very niche by the way it was small it more or less like products virtual products software dating websites tickets all these kinds of things so the companies in the UK or in Germany they contacted us and said well can you be our bridgehead in Brazil and process the card payment and then send the money to us so in fact we make money on the transaction itself then we converted that from Brazilian reais into euros or pounds and then we sent them over to the UK and we made three times Commission on that and imagine nowadays like if they were using cryptocurrencies we would wouldnt be there anymore and so what do you think David in this situation of decentralized exchanges or like you know the Aqsa token platform that I talked about whether they want to launch auctions where your smart contracts handle all of the you know arbitration of the of the payment out to the various parties what do you think the implications are there on the on the taxes and how do you track that I dont have a good answer to that yeah the you know what I always shaped shift lets say you know shaped if for example I guess you know for me Im an auditor so I want proof right and one of the things I talk about all the time is like we have all these companies out here in the ballroom over here and there I always think that theyre creating problems to solutions that already exist right theyre not necessarily game changers but one of the things that I think really needs to happen in this space really really needs to happen is when I like when we do taxes and Im not a tax guy but when we do it we get a statement from Merrill Lynch from TD Ameritrade from fidelity and we rely on that statement because we know that those companies go through massive internal control checks over and over and over from people like me to ensure that the transactions have happened the same way every time compliant and get reported the same way every time all the time so when we get that we can rely on it the problem is now we have you know these hundreds of companies out there that are crypto everything Bitcoin everything and no ones actually checking it you know everyone says that the blockchain is secure its you know theres smart contracts but for people like us theres no check yet so someone has to create the kind of service organizations that are are checked and to ensure that you know when theyre when theyre reporting something to us and not just us but you know anybody government agencies whatever might be that is happening the same way every time you know all the time with controls and checks in place because theres always going to be the exceptions and it has to be a control check for those exceptions so I think theres gonna be a lot needs to be a lot more service organizations that are going to kind of those really vetted procedures you know complicated this is already on a national level in the states and now if you go internationally its virtually impossible to actually combine and line it up yeah lets shift gears a little bit I would like to talk a little bit about ATMs Sebastian and I remember the early days the first time I ever used a Bitcoin ATM I was in a coffee shop in London and I you know wanted to get my 50 pounds out so I sent my transaction and I waited and I waited and I waited and the coffee shop was closing Im like well you cant close my I havent got my cash out yet and so that was my first painful lesson so I assume weve come a good way in the technology another thing that that started to be a trend that I dont know whether its really caught on was to be able to pay your bills via the ATMs with crypto on you know pay your utility bill or pay you know different credit card bills etc well thats also very you were talking generally but you always have to look at the national level and then for example in Brazil people have been paying their bills for utilities on ATMs for years now with crypto or with the normal amount okay well then again if you look at Germany people dont even use credit cards like they really really like dont like credit cards theyve wanna be in control and I think even for Visa MasterCard its been like the most painful country adoption so no try to get these people into using crypto to pay their bills yeah well I mean one of the doubleedged swords in crypto has always been the recurring payments you know a go coin that was something we were always trying to see how we could tackle the best we could really do is just send an email out that when they click the button it would you know launch an invoice but that always requires them to do something but the beautiful thing about crypto is you control your money nobodys pulling your funds out youre pushing voluntarily your funds out to them so do you see anything coming in the ATM markets that that you know can help with those problems well in the end of the software solution like its all software you can do it easily its more of us how can you convince people of starting to use it and then definitely youre gonna have countries where you are gonna be able to convince people are much faster like Brazil and they already used to it and then then Germany I think its gonna be a very long process good so lets talk categories for a second like categories of transactions I mean recently weve seen a go coin an uptick in travel you know we have a cheap air for example theres a couple of other like escrow companies that are doing like large portfolios of domain names and things of that so those are some of the legal we see a lot of so a lot of people are paying their legal bills now in crypto and you know what the lawyers want to be paid out in fiat so what are the categories to you the to you you know what are your opinions that youll see some good trends Switzerland Switzerland you can already pay your taxes in Bitcoin so like pretty much the most advanced nation in Europe in terms of cryptocurrencies so then when you pay your taxes on it you have to pay tax on the gains of the taxes you know right no but even on your normal income you you just send them bitcoins for pay for your taxes right right but Im saying that youre liquidating bitcoins so then you have to pay tax on the tax right in theory yeah so anyway but its an interesting use case but you know weve seen a lot of different categories start to emerge how about an accountant so you guys gonna start taking crypto payments likely not cash is king yeah hes a sucker how much does your cash going up in last year you know one of the things actually somebody else said two panels ago is that you know when we go to audit a company we cannot take their security we cannot take a note we have to be paid in cash its its by our regulations and that is for our independence and so were not tied to the company in any way so manok Bitcoin might be one thing but definitely if someones doing a token offering we a hundred percent could not take that I think all those sort of the crypto currencies that have had organic mining like you take you know pick coin like coin and some of the newer ones like Nexus those of those arent going to be considered securities because they have a different they werent an ICO they never actually had an offering and so theres sort of new security aspect to it do you guys agree with that out of their wheelhouse I think you should speak a little bit on yeah no I I think if you think about it logically the the ones that just started you know mining on a certain day and have convinced miners to mine those coins to me that very clearly you know passes the Howey test you know Id love to hear opinions up to the contrary but I think even the sec recently that was sort of their opinion so so you mean like the coins that start from zero and then thats right and so theyve had sort of organic growth it wasnt sort of somebody who priced theyre offering okay were gonna come out and were gonna sell it at 50 cents and then once thats over its now a dollar and theyve sort of set those prices and what I dont like about that is number one you dont get actual price discovery of what the you know the the buyers think its worth you just know its that price so from one side theyve left some money on the table and from the other side you know they theyve said of an artificial price so you dont know what really what the market price is in those whats the underlying asset I mean when when you go when we think about investing right if someones gonna think about investing in one of these coins you know in a traditionalist say in an sto that are gonna be coming out in the next year theres an underlying company that creates you and it to come people are mining these and it starts at zero how hows the value get created how whats the underlying asset well theres theres a couple of them that have mining that that goes toward things like development and marketing and and part of the mining reward goes into a specific pool and so I know that the for example does that Nexus does that theres a couple of others that have that and that those are part of the mining rewards but the people have voluntarily done the mining and they know that thats part of it which helps to build the ecosystem so I think its your you have to start to think of it differently if we just go and go to the same constraints that weve had were not going to innovate so I think we have to be able to rethink these things and push the lawmakers to to make laws that are going to agree with the way the industry is evolving as opposed to trying to stuff us into the confines of what has been because be depending on you know youve got the SEC youve got the CFTC all these guys the FDA thinks it even tastes like chicken I mean all of them want to regulate this so why cant we just you know say hey this is actually a new asset class lets regulate it differently so try to get Congress to do their job and were working on it theres in through the chamber of digital commerce well we already saw during the Facebook interviews how much Congress knows about technology that was great but theres a theres the chamber of digital commerce which is doing a lot of work theyve helped to create the blockchain caucus I do recommend anybody who cares about the industry and wants to see it move forward the largest trade association that the chamber of visual commerce is a great organization theyve been very active I participated on the you know educator your congressman day where we you know a bunch of us flew in and spent you know an hour with eight different congressmen or senators and you sort of told them about blockchain and how they should be thinking about it but the blockchain caucus is another group within Congress that is uh gaining some momentum you know Steve I would love to know and Sebastian as well you know we work with small companies every day right and were you know this is a conference and we walk outside to Staples Center and 99 of the population doesnt know what walk chain is in fact when you ask them about blockchain theyre like Bitcoin right and and Bitcoin is essentially has such brand equity its become the Kleenex of tissue paper right and its what is it gonna take what you know whats it gonna take for the small business to accept the payment whens it gonna become tip that you know tip the scale of market acceptance from kind of the early adopters and the market loggers to you know hey Im gonna pay my gardener in Bitcoin or some kind of token security yeah and I dont think that it really comes down to whats the need why do you need to use a cryptocurrency versus another form of payment so where you see the most friction is in crossborder payments thats where cryptocurrencies do an outstanding job theres nothing that matches it youll see that with the the OPSEC ins of Wax I think Malcolm was up here earlier after trading yeah asset trading digital asset trading and international payments I mean the friction in trying to get payments out to a large international population of like you have development teams that are all over the world now that are you know developing for projects commonly try to get them paid through these companies like transfer wise and these other ones I mean they just get raped and if they can use crypto and teach them how to you know get liquidity on the other side when they need to pay their bills I mean do you think that puzzles gonna take you because I know like people have no idea what were talking about now if you go outside in the street right yeah and how long is it gonna take I mean I think if you look at credit cards it took about 30 years for credit cards to go mainstream so I think its gonna get down to the point where you have loyalty systems or you have some other reason that theyre going to use I mean thats why credit cards got so popular they put these loyalty systems in place and made us slaves to it its it was a brilliant move by the card issuers well I like three flights yeah yeah do you think theyre free no I know I still like them we all do okay you want to open up some questions from the audience you got anybody in the back on the right in the glasses Oh wasnt you okay right here did I get no no so I mean what happens is when you file your tax report in Switzerland there are some of the states its not like nationwide at statewide they offer you the option okay you can either transfer money to us for the taxes or you can even pay with Bitcoin but then again its souk were just like the crypto value of Switzerland and they really use it as well as a showcase like they want to be marked marketing themselves as the crypto friendly Compton which is the state thats why they accept if you have a question keep your hand in the air so they can get around to you with the mic I know the gentleman in the glasses back there has one but see if we can uh if you dont have a mic yet see if you can at least use a powerful voice here we go i dmitri man the overthecounter trades now question is why oh confusing kind of critter which is of the banks system with actual on the system payments and when I hear a clarification in terms of taxation so lets say if you can t use the crypto for pay your taxes so whatever else it became more visible for the government or for any other regulator so the question is doesnt make sense still to kind of pursue crypto payments in terms of the systemic payments I dont think were very clear what youre asking sorry to say were all trying trying to listen closely but all the sounds going that way away from us can somebody summarize what he said let me try a second time okay okay keep it brief yeah so while youre confusing the actual crypto which is kind of the banking system with payment flow and payment use case for the taxation payments lets say because there would be transparently visible for the government which means and for the other Turkish which means there there is no point in crypto besides like you know IDO or something like that I dont think you talk about government coins not really because the government coins they are just obsolete right there is only like Venezuela and you know speculation on this petrol door but what about actual crypto lets say Bitcoin which is like more like a goat versus lets say like nano coins which used for lets say payments for the actual payment transactions so why confuse the sweet oh yeah I dont know I think you have the audience stop Im sorry were gonna have to move on nothing wrong nobodys quite gentleman right here with the cool tennis shoes my question is for a day Im Darrell Im a CPA as well and one of the issues that Im coming across like you said is like the people with the long spreadsheets which trades on them and I just want to know if you guys are using or beta pipe like you have anything in the beta process where you can like kind of take those transition transactions and process a report like TD Ameritrade you made or something like that thats a great question and 100 no I mean this is literally kind of happening for the first time I mean we we put up a blog and this is well known that between 2013 2015 there were 900 people that claimed gains on their taxes in the u.s. 900 we definitely know theres more than 900 right so if the government wants some money you know where theyre going now one thing that like one one group that I talked to yesterday one of the very few that I like okay this is a really good idea theyre actually outside theyre called tax bit and theyre creating kind of software I think if Im getting the gist right where they can kind of API into somebody or you know hook into somebodys system and then they can basically follow the trades and calculate the gains and losses and stuff like that and then give you a report I mean theyre also going to allow you to kind of escrow some funds to withhold enough to pay the taxes on it but you know talkin theres also some things that they havent figured out in terms of you know the nuances but I think thats about is the best Ive seen so far at least talk to cool theres a gentleman right back here on the Rights been very patient thank you my company makes payments to micro influencers and cryptocurrency and enables them to purchase products in our marketplace and theres a lot of ambiguity around where the tax burden who bears the tax burden and you know one thing I would say is that if anyone has tax questions our tax guys here today at her booth were in the middle of the room over there and Im sure he would love to talk to every single person here but hell probably give you my card the burden is always on the company really I mean you if you have to produce a 1099 its your responsibility if youre giving them over six hundred dollars a year and theyre like an individual and if you dont do it yeah the IRS could come out to you for like one hundred two hundred dollars I cant remember what the penalty is but they could come after you and then the burden is to also on the individual receiving it to report it and they should what happens in this scenario where you give somebody five hundred and ninetynine dollars at spot rate when you give it to them but then it appreciates and the coins are worth its whatever you give it to them and this is the biggest problem I see with the stos is that the mechanisms to track all the stuff dont exist yet so if youre trying to token a utilities your security token thats a big issue because its one thing to pass around fiat currency its a whole nother thing when youre lets say your pointofsale system has to know exactly what you you sell your may be a meal for and taking a token at and then exactly what you give them only your best customers as a loyalty point at because thats all a taxable event and its all gaps advantage if you want to support for example the chamber of digital commerce and then I give them like five Bitcoin lets say as a donation theyre a 501 C 3 organization is there tax benefit to that talk to my tax cut but I assume yeah I mean theres its probably the same thing as giving artwork or property theres theres probably a taxable benefit it would be my guess that was shameless I know any more questions how we doing on time theres no more time for question one more do it five minutes okay my name is Wolfgang Strasser Im the general partner of a blockchain investment company and we also recently started the United States blockchain and crypto currency association and the job of that organization is to do some lobbying work in Washington and were currently collecting proposals for reasonable regulation so feel free to contact me after this talk to with ideas is there a question Im sorry was that just an advertisement sure this is an industry organization so its not advertising I see do we have any other questions question have you guys sort of middle pay this is another advertisement okay its about meta pay metal pay of metals a stimulus I cant say that I have heres the question about crypto right so most crypto cannot get out in cash US dollars in a very easy way and in the payment platform POS right now in my opinion has been very very slow the scalability issue at the same time theres not enough incentive for people to get in and out of crypto hook into cash so again hold it as a question but really what we try to do with metal pay and TLS ticker symbol is that actually we spin sense of ice okay all right all right so theres plenty of ways to do the coin op plenty of ways to do to fiat and actually pointofsales deadonarrival we tried to do that years ago go coin and its just a terrible use case to do point of sale at this stage especially with Bitcoin with some of the newer coins thatll be about faster and better performance youll see better there was one more question over here lets hit down theres going to absolutely be a stable coin that catches ground I mean tether has done a phenomenal job for us at the exchange as being a stable coin pegged to the u.s.

Crypto Payments, eCommerce Accounting

dollar Im sorry to cut your question off too fast yeah no I think thats the most important part of having payments work is to have a stable coin where you where the merchant doesnt have the risk of conversion thats you know the whole thesis behind bit Pago coin and coin bases merchants offering was to get them you know safe at Fiat and then we would assume the risk but if we could flip immediately into a stable coin without having to flip to fiat and even work the payments and net the payments out thats really when the ecosystems can start to build and thats where I get into the utility of of a token like this where you dont need you just youre tracking what the balances are youre using the ledgers as they would naturally be used do we have time for one final one here lets do it Ill defer to the accountant you know I dont know but I know this if governments were smart they would totally grab on to this create some kind of government token that you have to exchange in and out of in tax you at every single transaction because then there would be no more tax evasion they would be prepaid on all your tax payments and they would be the richest entities in the world so you should hope that the governments get involved if you want a rich government okay its just fun lets just play the game because we all like to play it a little bit give me the price of Bitcoin December 31 2018 Im sorry we have one more question before we put these guys on the spot yeah one more question in terms of the accounting for payments and so forth it sounds to me that thats a problem thats been solved by a large corporation like IBM and I know theyve been doing a lot of stuff at blockchain have you guys had any contact in terms of getting larger corporations involved in setting up the structure infrastructure with respect to the payment of taxes and the calculating of it yeah I mean Im not aware of what IBM is doing in that space I mean Im familiar with whether their projects in hyper ledger and what theyre doing in enterprise but not so much what theyre doing in that in the tax space but David any ideas thoughts on that IBM I couldnt even get the door of IBM I have no idea what theyre talking about theres theres no way theyre giving away that information right so thank you okay lets play the game who wants to play lets play it over under so are we over or under 20, 000 the end of the year I dont know but I liked your first question because I already had an answer for it okay go back to the first question its one hour of my time thats the other question hundred ninetyfive dollars under okay well thank you guys everybody great audience appreciate all the participation

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