Most U.S. banks and governments are crypto-cautious. You might even say crypto-averse.
Fears of being associated with the criminal element that uses digital currency, concerns about digital currency’s volatility, anxiety about the risks of anything new, and overall regulatory compliance issues stand in the way of wholehearted acceptance.
But not for Ohio. State officials recently launched Ohiocrypto.com, a site where businesses can pay their taxes with cryptocurrencies like bitcoin. It is the first state to allow this. The state also recently held a blockchain technology conference called Blockland, and it maintains a public ledger of all government expenses that could run on a blockchain.
These initiatives are the brainchild of state Treasurer Josh Mandel, and he has a few different motives.
One is to make it easier for Ohioans to pay their taxes.
“The embrace of cryptocurrency and the blockchain technology that enables it is all about democratizing finance, making finance easier for individuals and eliminating friction in paying along the way,” Mandel said. “We’re trying to give taxpayers more options and ease in paying their taxes. If they want to pay their taxes with a check, ACH, or credit card, that’s fine, and now they have an added option with cryptocurrency. The more we can leverage modern technology to give taxpayers added options and ease, the better it will be for families and businesses in our state.”
Another is to “plant the flag in Ohio and project to the rest of the country that we’re loud and proud about embracing blockchain technology and cryptocurrency,” Mandel said. He wants to encourage the rest of the country to adopt cryptocurrency.
“I’m a believer in the concept that the states are the laboratories for democracy, that most good ideas that have come out of government have been ignited at the state level,” he said.
And like officials in other tech-friendly states — such as Arizona,
Downplaying crypto fears
A perception exists among U.S. banks and governments that digital currencies are part of a shady underworld where a lot of drug dealing and money laundering go on under the cover of anonymity. There is also the real risk of price volatility. And several cryptocurrency exchanges have been hacked. Consequently, many executives and officials steer clear.
Ohio has taken steps to try to minimize the risk in accepting cryptocurrency. It’s working with Bitpay, a payment processor that immediately converts the digital currencies to fiat currency, so that the state never actually holds the digital currency.
Stephen Pair, founder and CEO of BitPay, argues that crypocurrency is not that risky.
“A lot of people talk about bitcoin as this unregulated thing,” he said. “It pains me to hear that because it’s not the case. We’re subject to all the same regulations banks are subject to and everybody else. There’s an extensive regulatory framework at the federal and state level that covers our activities. When a company signs up for BitPay, they go through an extensive [know your customer] process. They have to upload documents, we have to make sure we know who they are, and in many cases we go above and beyond what the regulations require us to do.”
Cryptocurrency has many legitimate uses, said Ari Lewis, cryptocurrency adviser to the Ohio treasurer’s office.
For instance, Waverly Willis, a Cleveland barber, recently began accepting cryptocurrency for haircuts.
“For him, it’s a good novelty to bring in new customers who may not have known about his shop,” Lewis said. “People who are more tech savvy are going to him because they can pay with bitcoin; he also takes bitcoin cash.”
Paying with digital currency can be cheaper than some options. Square transactions, for instance, cost 2.9% plus 30 cents. BitPay charges 1% of the transaction fee.
Blockchain enthusiasts
This is not the first time Ohio has adopted a new technology in the name of efficiency. Four years ago, Mandel’s team created a website called Ohiocheckbook.com, the first government transparency website. The state posted more than $500 billion of state expenditures, everything from a $2 pack of pencils to millions of dollars in road contracts.
“We put that on citizens’ smartphones and computers so they could follow the information, follow the money and hold politicians’ feet to the fire,” Mandel said.
A lot of politicians were upset about the site.
“We have a lot of politicians who are good ol' boys who are trying to hide their actions from the taxpayers,” Mandel said. “Ohiocheckbook.com shines sunlight on the decisions that public officials make.”
Many questionable expenses have been exposed through the site. In one case, tax money was used to buy a subscription to Playboy magazine.
Today, more than $690 billion of Ohio state spending is tracked online.
Though the site is a public ledger of sorts, it does not run on blockchain or distributed-ledger technology yet. In the future, it may migrate to blockchain technology. In early December, Ohio hosted a conference called Blockland Cleveland in the hopes of turning the city into a blockchain tech hub.
“There’s a lot of activity in and around the tech space here in Ohio,” Mandel said. “As the cost of living becomes increasingly insane in places like San Francisco and New York, you’re going to see more software developers and entrepreneurs coming to the heartland. When they look to come to the heartland, we want them to come to Ohio. Ohio is a great place to build a business, raise a family, your dollars go a lot farther here and there are strong, modest, Midwest values.”
More than 1,700 people attended the conference. Speakers included Joe Lubin, one of the founders of Ethereum; Nick Zalos, one of the pioneers of bitcoin; Mark Hurd, CEO of Oracle; and Beth Mooney, CEO of KeyCorp.
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