What’s happening, Idiots?



“Glad you have some content in this bulletin…we really don’t care about your golf game.” -Jerry



I know, Jerry. I know. You and many others, including Circle (good), the CoinSummit attendees (good) and the IRS (not bad), really don’t give a crap about my vacation this week. That’s cool. I still love this stuff, so I borrowed a computer in order to deliver this morning’s goods.



First the news that is hot off the press…



Jeremy Allaire’s Circle Internet Financial, a leading bitcoin wallet and merchant services company based in Boston, announced this morning it has raised a $17 million Series B from new and existing investors–a mere 5 months after its $9 million Series A. Existing backers Breyer Capital, Accel Partners and General Catalyst were joined by a slew of new investors in the round, including venture capital firms Oak Investment Partners and Pantera Capital. Barry Silbert’s Bitcoin Opportunity Fund, board member Raj Date’s Fenway Summer, board member Michele Burns herself and former SWIFT (Society for Worldwide Interbank Financial Telecommunication) CEO, Leonard Schrank, also chipped in for the round.



Perhaps equally exciting: Circle is (finally) shipping product! Sign up for the beta here.



The company announced it will debut its 1.0 consumer products today in a limited release. Yours truly will be reviewing it in full after I’ve had some time to play around on the site. (The consumer wallets and other services will be made available to broader audiences later this year.) While the team was characteristically vague about its beta products in the press release, they will “allow consumers and businesses to use digital currency easily, reducing much of the friction and risk that is currently associated with Bitcoin.”



It is noteworthy that Circle goes to great lengths to avoid calling itself a “Bitcoin company” and rather refers to “digital currency” throughout the release. Indeed, from conversations with the team, it is clear they are building a robust platform that will work seamlessly with many different types of digital currencies, although Bitcoin will certainly be the first. This is consistent with the currency-neutral brand Circle has sought to build from day one.



For those who haven’t even heard of Circle, you are not alone. The company has been operating in stealth mode, hiring like crazy, and keeping a lid on its developments since its Series A announcement in late October. I recommend reading my piece on Circle from December in which I paint a fuller picture about the company. Read more about “The Inner Circle” here.



Circle is a much needed competitor (complement?) to Coinbase in what will be ultimately be a heavily regulated cloud wallet industry. After all, these companies are essentially Bitcoin’s banks.



Circle has been vocally supportive of common-sense Bitcoin regulations for Bitcoin, treating governments, regulators and the commercial banking industry as partners rather than antagonists. Allaire himself testified in front of the US Senate and NY Department of Financial Services regarding Bitcoin’s potential, Circle is a gold sponsor of the Bitcoin Foundation, and General Counsel, John Beccia, was recently elected to the inaugural board of advocacy group DATA (Digital Asset Transfer Authority). The company highlighted its commitment to building regulated services that “are audited and examined by governments in order to ensure businesses are held to stringent requirements around consumer protection and criminals and bad actors are thwarted from abusing digital currency platforms.”



No word on valuation, but the whisper number was close to $100 million for the company. I first learned that the team was receiving bids from venture firms who wished to “pre-empt” the Series B round in late-December. By January, it sounded like the anticipated valuation was somewhere in the $70 million range, so it wouldn’t be a surprise if that had ticked upwards two months later. My guess (based on my experience in VC using round numbers for investments), is that the deal represented a 20% deal at $85 million.



For context, Coinbase raised $25 million in December from Andreessen Horowitz at a ~$150 million valuation after a banner year in which the company reached cash-flows of up to $1 million / month in the fourth quarter. The fact that Circle is already fetching valuations, pre-launch, at half that number speaks to the confidence investors have in Allaire and his team, the stunning growth of the entire industry, and maybe even the speed with which an upstart could poach customers from a rival.



Congrats to the deal team.





***Obligatory quotes from the Circle press release***



“We are thrilled to have such a strong showing of support and vote of confidence from world-class investors and strategic individuals as we move into the commercial phase of Circle,” said Jeremy Allaire, Circle founder, chairman and chief executive officer. “With accelerating consumer and business interest in digital currency all around the world, it’s critical that we have the capital and leadership team to execute on our vision for consumer finance and global payments built on Bitcoin.”



“Circle has continued to make tremendous progress in helping to shape and define the digital currency industry, and I am excited to be continuing to invest in and partner with Jeremy and the Circle team, “ said Jim Breyer, founder and chief executive officer of Breyer Capital. “The global transformation in payments made possible by Bitcoin and digital currency is one of the most significant investment opportunities in the past 30 years.”





***Major IRS news yesterday: Bitcoin is property***



The big news yesterday from the IRS was that Bitcoin and other virtual currencies will be taxed like property rather than currency. While this gives investors some much-needed clarity, it also imposes potentially cumbersome record-keeping rules (not to mention tax liabilities) on Bitcoiners. The IRS said it would treat Bitcoin like stock or other intangible property; if the digital currency is held for investment, gains will be treated as either long-term (>1 yr) or short-term (<1 yr) capital gains, meaning they will likely be subject to lower tax rates than ordinary income.



I have written extensively about this topic (including my first post and one just two weeks ago), and this notice comes as no surprise whatsoever. Yet many are still flipping out at the potential implications of having “taxable events” every time you buy something as small as a cup of coffee.



Is this a pain in the ass? Yes and no. It’s going to be pretty easy for most people to do their taxes because solutions will be made available by the major wallet companies and merchant services providers, which make it mindless to prep for taxes. By 2015, people and businesses will get single annual or quarterly statements similar to what you would get from a stock broker that allow them to punch in their tax liabilities. If you are a miner or run your own wallets and are responsible for self-reporting, it gets a bit trickier.



There is a lot of nuance to this release and I’m going to include a link to my full post on the topic tomorrow. I’ll be writing this up for Investopedia today (my first piece for those guys).



IRS Notice: http://online.wsj.com/public/resources/documents/0325irsbitcoin.pdf





Now for Today’s Tid Bits:



What does the IRS Ruling Mean for Me?

http://www.washingtonpost.com/blogs/the-switch/wp/2014/03/25/got-bitcoins-heres-how-the-irs-says-to-report-them-on-your-tax-return/

The Washington Post put out a helpful guide for the layman in in the form of a Q&A that hopefully clears up some of the confusion that understandably might be there with the new tax guidance. That being said however, if the new IRS rules do apply to you, be sure to go to a certified tax professional instead of listening to someone over the internet. God knows that has never ended well.



Kraken Raises $5m

http://www.coindesk.com/bitcoin-exchange-kraken-5million-hummingbird-ventures/

Payward, Inc., the owner of US-based digital currency exchange Kraken, announced on 25th March that it has raised $5m in a new capital as part of a Series A fundraising round which was led by Hummingbird Ventures. The round comes in the wake of news that Kraken had passed a verifiable proof of reserves audit and the US releasing tax guidance in regards to digital currency. Much of the round will be used to ensure the exchange’s compliance with the legal system. Combined with Kraken’s recent financial bill of health, this combination could ensure their long term sustainability.



Danish Bitcoin Tax Ruling

http://www.coindesk.com/denmark-declares-bitcoin-trades-tax-free/

The US wasn’t the only country clearing the air in regards to its cryptocurrency taxes. The Tax Board in Denmark has ruled that gains and losses from casual Bitcoin trading are not subject to taxation. The reasoning behind this is that since digital currencies don’t exist in a physical form, they can’t be considered “real” money to be taxed by the government. The transactions are as Hanne Søgaard Hansen, the chairman of the Tax Board, puts it “purely private”. The US and Denmark took two drastically different routes in regards to taxation, with the US flexing its tax collecting muscle and the Danes letting Bitcoin run free. This also means that the Danes will be paying less in taxes than Americans, which, for anyone who’s ever lived in Denmark (including yours truly), is truly shocking.



ECB: Don’t Ignore Bitcoin

http://www.coindesk.com/european-central-bank-bitcoin-shouldnt-ignored-dismissed/

In a speech delivered at the at the ECB/Banca d’Italia Workshop on Interchange Fees, Yves Mersch, Member of the Executive Board of the ECB, said digital currencies are still too small to have an impact on retail payments and central banks, a stance the ECB took in 2012 as well. However, this time around they also acknowledged that digital currencies shouldn’t be ignored either, especially given their tremendous rise in popularity. He went on to conclude that cryptocurrencies do not pose a serious risk to price stability or financial stability in Europe, but they do pose a risk for users. Mersch also made a distinction between using speculating in Bitcoin and using Bitcoin for payments, which was somewhat mirrored in the US’s tax guidance.



Is Bitcoin Ready for the Big Leagues?

http://pando.com/2014/03/25/can-the-bitcoin-market-absorb-hundreds-of-millions-in-institutional-capital-were-about-to-find-out/

The Bitcoin market is getting closer and closer to the mainstream trading. As Michael Carney writes, “The bitcoin market is about to get slammed with more capital and more trading sophistication than it’s ever faced.” SecondMarket is developing both its institutional Bitcoin exchange and its Bitcoin Investment Trust, just as Pantera Capital is raising large sums of institutional money. All told, the amount of capital flowing through the global Bitcoin markets seems likely to grow many times over. Even a small fraction of this money would shake up the entire market tremendously, send prices upwards, and set the wheels into motion for the big players in the markets such as established banks to make moves as well. Only time will tell if the system is ready.



Doge for Nascar

http://www.coindesk.com/moolah-founder-accidently-donates-20-million-dogecoin-to-sponsor-nascar-driver/

In typical philanthropic and ridiculous dogecoin fashion, the community just helped out Josh Wise, who drives the No. 98 Chevrolet SS in the Sprint Cup Series. Until the dogecoin community stepped in, he didn’t have a sponsor. The dogecoin community raised $50,000 (67 million dogecoin) to buy a sponsorship, and the car will be “primarily dogecoin themed, and will also feature the reddit alien logo,” according to a press release. I don’t typically watch Nascar but I just might this time around to potentially see a dogecoin themed car go around the track.





If you feel bad that I had to work during a vacation and want to donate to the Country Club Pity Party, please feel free to send beer money so I can get back to enjoying my time in Myrtle Beach: 151RFDQNQkJCjjGQ4ASudY6yyWBVnY8Ngi



Cheers,

TBI