Who’s in the Forbes Blockchain Top 50?

The Forbes annual Blockchain 50 is on its second outing. It lists the companies making the biggest strides in blockchain, and most of them are valued in the billions of dollars. Indeed, to appear on the list, Forbes says, “To qualify, Blockchain 50 members must be generating no less than $1 billion in revenue annually or be valued at $1 billion or more.

There are some surprising names that turn up in the Blockchain 50, if only because on the face of it they have little to do with blockchain.

For example, De Beers is on the list. The diamond giant’s new software, Tracr, follows diamonds through the supply chain as they are mined, cut, polished and sold and tens of thousands of stones are being registered per month.

Foxconn makes the iPhone trade-finance venture, Chained Finance, pays more than 20 electronics suppliers using digital coins minted on the Ethereum blockchain. As a result the costs have dropped from annual percentage rates as high as 24% to a mere 10%.

Dole Foods is another blockchain adopter. It is using it across all vegetable processing, for millions of pounds of lettuce, spinach and coleslaw. Customers at Walmart can now check where their fruit comes from by scanning a code used by farmers. It is soon expanding this use of blockchain to its fruit.

LVMH, the luxury goods brand, is using blockchain technology for traceability and proof of authenticity. Among its brands, Louis Vuitton is already tracking millions of its products in an effort to reduce counterfeiting.

The United Nations, a 75-year-old organisation is using a number of blockchain initiatives, including one that is intended to combat warlords who steal aid using pilfered ID cards, the UN has over the past two years disbursed funds to 106,000 Syrian refugees in Jordan, using blockchain-verified iris scans instead of ID cards.

As Forbes says in its introduction to the Top 50, “Blockchain started as a way to move bitcoin from point A to point B, but it is now being used by a host of big companies to monitor and move any number of assets around the world as easily as sending an email.”

From the instantaneous settlement of German government bonds to verifying the provenance of diamonds mined in Africa and bringing liquidity to a small supplier of sliding shower doors in Zhongshan, China, this year’s members have largely moved beyond the theoretical benefits of blockchain, to generating very real revenues and cost savings.

How do you pay crypto taxes?

I would be prepared to wager that many people who bought cryptocurrencies, never thought about any tax considerations. It is unsurprising that the tax authorities are ahead of the crypto owners, because they see plenty of new income for their coffers. The IRS in particular has started on a crackdown, because when it sees that only a few hndred people report their crypto trades, but Coinbase has 35 million accounts, they know something is going on.

It used to be that you might have got away with saying that the law isn’t clear, but there is no denying it now that the IRS has decreed that cryptocurrency is property. Not an asset or a security — it’s a property. Therefore, as capital assets, they give rise to capital gains and losses when disposed of.

As William Baldwin writes at Forbes: “A profit is taxable as a short-term gain if a position has been held for a year or less, as long-term if held for more than a year. If a coin is held for profit rather than amusement, which is presumably almost always the cases, then a loss on it is a deductible capital loss.” Also, you need to note this: you can go out at a loss and then right back in without losing the right to immediately claim the loss.

Don’t trust your exchange

For some reason, many people are convinced that the exchange they use won’t reveal their name to the tax authorities. Wrong! Especially if you are a prolific trader. For example, in the US, the 1099-K is mandatory for a customer who in one calendar year does at least 200 transactions with proceeds totalling at least $20,000.

Watch out for the forks

The IRS also has a view about what happens when there’s a fork in a blockchain. It believes that a fork gives crypto owners a windfall that should be taxed at high ordinary-income rates.

Also, if you have benefitted from an airdrop, that’s income, and obviously, so is mining. if you join a mining pool, spend $8,000 on electricity and get rewarded with a bitcoin worth $9,800, then Eeen if you don’t sell the coin, you have to report a $1,800 profit, and that profit is ordinary income.

Gifts and donations?

On the other hand, if you donate crypto to a charity, or gift it to your kids, then it is treated like ‘gifts of stock’. Baldwin gives this example: “Say you bought a bitcoin at $12,000 and give it to your niece when it’s worth $11,000. If she sells at more than $12,000, then she uses $12,000 as her basis. If she sells at less than $11,000, she has to use $11,000 as her basis, reducing the capital loss that she can claim. Any sale between $11,000 and $12,000 is in a dead zone that creates neither a gain nor a loss.”

If you’re confused about tax rules around your crypto holdings, I would suggest you find a tax adviser who knows crypto — there must be several trying to occupy this niche now. If they don’t know crypto — you could find yourself in some trouble later on. It really is worth getting expert advice about your crypto holdings.

Who will be Top Dog in Digital Currencies?

Digital currencies have been popping up like daisies over the last several years and there doesn’t seem to be an end to it. Some might say that it would be more accurate to compare them to weeds and that an awful lot of them need to be removed from the cryptocurrency environment.

It is certainly true that there are questions marks over the long-term survival of a significant number of them. Brad Garlinghouse, the Ripple CEO, thinks that around 99% of digital assets will “got to zero”. And there are many others who agree with him, even if they don’t put a precise figure on it.

Now the survival of what I might call the ‘smaller’ coins is even more in question, because central banks are moving into the digital asset arena with their own digital currency, and this will put a lot of pressure on all but the strongest cryptocurrencies.

Mati Greenspan, senior analyst at eToro remarked to Charles Bovaird at Forbes: “At the moment the three biggest currencies in the world are racing to make their fiat digital.” In this race, China is winning, because the European Central Bank and the Federal Reserve haven’t put in the effort to keep up. Then we add something like Libra into the mix and for a time it looked like Facebook’s digital coinage had the potential to threaten every other cryptocurrency,. Now, that project looks less certain to be such a major threat.

So what is the likely outcome? Some market observers believe that whatever happens, there won’t be a winner-take-all scenario. Jacob Eliosoff, a cryptocurrency fund manager thinks there will be around 100 widely used cryptocurrencies that will survive. Marouane Garcon, managing director of Amulet said, “There won’t be a single currency because of too many political differences in the world, but just like fiat currencies some will be stronger in value than others.”

Furthermore, bitcoin, which is currently the leading digital currency, may not be the ultimate winner, but it is likely to be in the winning group. Jake Yocom-Piatt from Decred had this to say: “Instead of a large amount of capital and attention spread across many currencies, we will increasingly see that same capital and attention spread across a smaller number of SOVs, leading to a corresponding increase in their value.”

Who do you think will win the race to be Top Dog in this race? The central bank coins, stablecoins like Libra, or bitcoin and its peers?

5 fintech trends for 2020

As we approach the end of 2019 it’s the time of year when sector pundits start to look at trends for 2020. You’ll find these within nearly every imaginable product group, and fintech is no different. This year, as in mnay others, the trends are identified at the major conferences, such as Money 20/20, which took place in Las Vegas in October.

1. Product bundling

Fintech startups have typically released single products. Transferwise is an example. As a result, what a bank offered had been ‘unbundled’ by the fintechs. Now there is a move to rebundling products to provide a one-stop experience, but it’s still early days.

2. An holistic experience

Fintechs were initially about financial inclusion and affordable options, but now there is a move towards creating an holistic customer experience that focuses on financial health. Financial health is becoming more vertically focused. This trend includes companies that target specific demographics (e.g. seniors or kids), job categories (e.g. gig economy) and industries (e.g. dental practices).

3. A more global vision

US-based conferences in the past tended to focus on the domestic market, but this year has seen attendees arrive from around the major world regions. It forces the Americans to think more globally and recognise that some of the largest fintechs in the world are global, including the neobanks, such as Nubank in Brazil. We will definitely see an acceleration in the growth of fintech globally, as Asia and Europe are already outperforming North America.

4. More focus on security

Cyber threats are certain to rise, not least because quantum computing is about to come into play and its method of computing will upset the current cryptographic security.

5. From vertical to horizontal

In the beginning fintech startups were vertical, as they travelled alone, so to speak. But the big news is that in the next few years, it will look at horizontal integration as it introduces its innovative ideas to other industries, and also make it possible for non-financial firms like Amazon to offer financial products. It was apparently noticeable that a significant number of C-Suite execs from other industries were at the Las Vegas event.

Of course, fintech is still in its infancy, and we will see many more changes, probably in the not too distant future, as fintech evolves to meet a range of needs worldwide.