We reached out to Dr. Evans to talk about South Florida, his Bitcoin accountancy, and his Conscious Entrepreneurship Foundation.
Cointelegraph: What are some big ideas for decentralized applications that you are either working on or excited about?
Dr. Charles Evans: My focus is on application rather than technical innovation. I'm more interested in using this stuff than reinventing it.
I live in South Florida, where the economy is driven by logistics, international finance and tourism. This is the only net-exporting region in the USA, and home to the world's two busiest cruise ports and the highest concentration of international banks in the USA. Visitors often do not realize that there is much more here than beaches, 11-month summers and gambling. This is the sixth-largest metropolitan area in the USA, often referred to as the commercial capital of Latin America.
Before Satoshi Nakamoto released the Bitcoin white paper in 2008, the Byzantine Generals' Problem had been mathematically proven to be insoluble, meaning that something like Bitcoin was understood to be literally impossible. For more than a quarter-century, the wisdom was that the only way to transact across national borders is via banks, Western Union, hawalas or some other centralized system based on trust. Five years ago, with the release of the first Bitcoin client, distributed and trustless networks were shown to be possible, and the 21st Century finally got underway. Now, we can transact with anyone, anywhere in the world, who has a smartphone but not a bank account.
Bitcoin's highest and best uses are as a long-term store of value and as a medium of exchange across national borders. It is not so much about being able to buy a cup of overpriced coffee in a hipster café as it is about being able to buy a container full of green coffee beans directly from a small-scale grower in Central America.
The idea of transacting directly with the 85% of humanity outside of OECD member states — who have been excluded from participating in the increasingly integrated global economy as equals — is very exciting. That is where we are focusing our attention.
CT: How was preparing taxes this year with so many more people interested in, and investing in, Bitcoins and other digital currencies?
CE: It is common practice to file extensions for corporate taxes, so the fact that the IRS issued its guidance on virtual currencies after the 15 March filing deadline was not a problem for Bitcountant's commercial clients. That it came out three weeks before the 15 April personal income tax deadline was a godsend.
We intentionally held off filing for our individual tax clients in the hopes that we might get some guidelines in time, and our gamble paid off. We had argued all along that Bitcoin transactions should be declared barter, and we had prepared our clients' taxes based on this assumption.
All in all, given the existence of taxes, declaring bitcoins to be property was about the best outcome that we could have hoped for.
If IRS officials had declared bitcoins to be currency, buy-&-hold investors would not be able to pay lower long-term capital gains rates. When Bitcoin advocates insist that bitcoins be recognized as currency, they are asking government officials to put the Bitcoin system into the same category as the central banks of small nation-states, except that this “nation” is a globe-spanning diaspora with no homeland. That is asking a bit much.
Also, the IRS guidance potentially gives virtual currency traders access to the same kinds of loopholes that billionaires in the USA routinely use to defer taxes indefinitely, including Like-Kind Exchange.
CT: You said previously that the IRS’s guidelines classifying cryptocurrencies as an asset fall in line with what Richard Rahn predicted 15 years ago in The End of Money. How so?
CE: Richard Rahn predicted in his 1999 The End of Money: "In the future, trade will be executed by instantaneous and simultaneous debiting and crediting liquid wealth accounts, held by both banking and non-banking institutions. The new electronic digital payments technology will enable property rights claims on real assets, such as stock and bond funds, or gold, to be utilized as the medium of exchange for virtually all transactions." (p.33)
In this context, Bitcoin holdings can be seen as Rahn's "liquid wealth accounts" that one can use to spend, e.g., $X worth of bitcoins, instead of Y bitcoins. Bitcoin thus serves as the medium of exchange and store of value, and the $ serves as the unit of account or measure of value. This makes bitcoins transferable assets that one can spend directly from one's own portfolio directly to a merchant's or a client's portfolio, enabling one to buy goods and services with assets rather than money.
Intriguingly, by separating the medium of exchange and store of value features from government-issued currencies, they no longer fulfill the full definition of money, giving Rahn's prediction even more support.
CT: Tell us about your work at the Conscious Entrepreneurship Foundation.
CE: Some of us from the South Florida Bitcoin community formed The Conscious Entrepreneurship Foundation (CEF) in November 2013 and are awaiting the IRS's granting of 501(c)(6) non-profit membership organization status. CEF's mission is to pursue the Bono Declaration of August 2013: "Capitalism takes more people out of poverty than aid."
We are beginning to work with interns who are reaching out to small-scale entrepreneurs in Middle Income Countries, mainly via Facebook contacts, who might be willing to sell consumer goods directly to us in exchange for bitcoins. The plan is to offer drop-shipping services from South Florida for a small fee, or for us to buy at wholesale prices and resell with retail markups.
We have contacts in Latin America, the Caribbean, and unexpectedly Sub-Saharan Africa. We are investigating the possibility of setting up a trust company to enable us to provide vendor credit guarantees and extend access to credit to areas of the world where it is largely unknown, as well.
CT: And you have said Miami and South Florida are destined to become the Silicon Valley of international finance. What developments or businesses are you seeing that might signal that emergence?
CE: In addition to the points above, I maintain a list of South Florida superlatives at BitcoinOfTheAmericas.com that highlights some of the features that make South Florida perhaps the premier base of operations for a Bitcoin firm.
Already, Bitcoin is used widely in South Florida to remit value to Argentina, Brazil and Venezuela, all of which have currency controls. We are also hearing that South American investors are beginning to use Bitcoin to buy commercial and residential real estate in Miami.
One reason why you do not see as much activity here as you might see in New York City or San Francisco is that people sending money — often, substantial amounts — surreptitiously to friends and family members in authoritarian regimes and real estate investors skirting currency controls are not especially eager to brag about it and post their home addresses on CoinMap. Bitcoin usage in South Florida is much higher than one might expect. It's just that people here have a long history of not drawing attention to themselves in matters of money.
This is driven in large measure by the fact that we are closer to dozens of foreign capitals than we are to Washington D.C., and all five major languages native to the Western Hemisphere — English, Spanish, Portuguese, French, and Creole — are spoken widely in South Florida. We also are at the boundary of the eight-million-pound gorilla of capital markets on the one side and a half-billion individuals on the other side who do not have efficient access to capital, credit and banking services.
Miami is one of the top five interconnected cities worldwide, ahead of San Francisco, New York City and Austin. It is also home of NAP of the Americas, one of the biggest Internet landing points in the world. Nicest of all, Florida's 0% personal state income tax is mandated by the state constitution.
CEF has secured an office on Brickell Avenue — Miami's financial district, with the highest concentration of international banks in the USA — that gives us access to conference facilities within view of Biscayne Bay. This summer, we begin incubating startups that build on South Florida's strengths in trade, and to seek investment from foreign investors who want to take advantage of business- and investment-related visa programs, rather than appeal to conventional venture capitalists for funding.
Where all of this will lead remains to be seen, but I haven't felt this excited in nearly two decades, when the Internet as we know it was just getting underway. Being involved with Bitcoin startups is like being young again.