Last week, Ohio became the first state to allow businesses to use bitcoin to pay 23 different taxes at OhioCrypto.com, a website run by the Office of the Ohio Treasurer.
“I believe if we’re going to make Ohio a place for the leaders in the technology economy we have to make Ohio a leader in technology first,” Ohio Treasurer Josh Mandel said. “I envision it as Ohio planting the flag to make us the leader in blockchain technology.”
Blockchain technology is a growing list of records linked by cryptography — coded secure communications — to act as a public ledger for cryptocurrency transactions. The technology was invented for bitcoin.
Mandel said he’s been a crypto-enthusiast for a long time and the initiative has been in the works for a year. He hopes to recreate the success of his OhioCheckbook.com, a break-through website for transparency that shows how tax dollars are spent.
“As state treasurer, I’ve tried to create a culture that embraces technology to make government more efficient and life easier for Ohioans,” Mandel said. “All of this falls under the umbrella of modernizing government through technology.”
The treasurer's office plans to accept other forms of cryptocurrency in the future, but for now, bitcoin is the only accepted cryptocurrency available to businesses.
“During phase 1 of OhioCrypto.com, a business can make tax payments via bitcoin, but we eventually envision it expanding to include an individual’s taxes as well as other forms of cryptocurrency,” Mandel said. “This all is in an effort to stake Ohio’s claim as the national epicenter of blockchain technology.”
The announcement coincided with the Blockland Solutions Conference in Cleveland, which starts Saturday and will educate people on the practical uses of blockchain technology in the public and private sectors.
“I think it’s great to show that the public sector is adopting cryptocurrency,” said Ira Lewis, the cryptocurrency advisor to the treasurer’s office. “For a while now it’s been in its own niche, but this will help the technology become more accepted in the mainstream.”
What is bitcoin?
Bitcoin is a digital currency created in 2009 with its own exchange rate to the U.S. dollar just like other nations’ currencies. But unlike conventional currency, its decentralized by using encryption techniques to remove the need for intermediaries like a bank or a nation to support the currency’s value.
Blockchains help keep the currency secure and can trace a bitcoin all the way back to its initial creation to ensure a user doesn’t try to spend the same bitcoin twice.
“When a taxpayer pays their taxes it will be verified using blockchain technology,” Mandel said.
The currency is kept in a “digital wallet” online until it’s spent. The cryptocurrency grew popularity in recent years because the ease of international payments, low fees and the privacy offered to users.
The treasurer's website allows companies to pay their taxes using Bitcoins, but at no point will the government possess or invest in cryptocurrency. This will be done to avoid the pitfalls in the currency’s mercurial fluctuations in worth.
In 2017, Bitcoin’s worth peaked at about $20,000 for a single unit, but it has since fallen drastically and is currently hovering at about $4,000.
Payments made to the website will immediately be transferred into U.S. currency by BitPay, a global bitcoin payment service that processes transactions for the state.
“When a taxpayer uses cryptocurrency, BitPay converts it, so the state of Ohio will receive the payment in U.S. dollars and doesn’t bear any of the volatility risk associated with bitcoin,” Mandel said.
BitPay will also assume the risk of any market fluctuations for businesses during the 15 minute time window for transactions.
The treasurer's office says payments through bitcoin offer advantages to both fortune 100 companies and small businesses, which includes:
• Easy process: taxes can be paid in three quick steps
• Tracking: payments can be tracked in real-time using the blockchain
• Secure: cryptocurrency can’t be transferred without user’s approval
• Low fees: minimal fees compared to other methods
• Transparency: transactions on the blockchain can be seen by anyone
• Mobility: payments can be made from a phone or a tablet
Businesses can register to pay taxes using bitcoins at OhioCrypto.com.