There are people in SA who get paid and spend only in bitcoin. What is that like? Carel van Wyk, founder of MoneyBadger, weighs in on how to unbank yourself. From Moneyweb.
You can also listen to this podcast on iono.fm here.
There are bitcoin ‘circular economies’ such as Bitcoin Ekasi down in the Western Cape, where surfing coaches are paid in bitcoin and local shops have been convinced to accept bitcoin and participate in these growing numbers of local bitcoin networks.
Listen/read: More and more people are using their crypto for purchases
What’s it like to live on bitcoin only? Carel van Wyk, founder of MoneyBadger and one of the original founders of Luno, knows something about this.
Getting off the fiat grid brings up a lot of questions. Can you really use bitcoin to buy everything you need, even paying rent and municipal rates? What about taxes? What are the advantages and the disadvantages?
“I’ve only really been trying to live off of bitcoin only since about March or April this year. And the reason for this is that with this new project and company called MoneyBadger – if you’ve not heard of us, our mission is to make bitcoin money; so the idea is that you should be able to spend crypto assets as money to support your day-to-day spending as well as any kind of luxury and special things you want to get for yourself.
“So for me personally, that’s what the company does. And as the CEO of the company, there’s this term called dog fooding. There was a dog food company in the United States many years ago where the CEO used to eat the dog food at board meetings to demonstrate how good the quality of the dog food is.
“In the same spirit, I’ve decided to put my money where my mouth is and try to live most of my life as far as possible off of a bitcoin standard.”
“So what I’ve done is that, yes, I still pay pay-as-you-earn [PAYE tax], still get an IRP5 [tax certificate], but then I convert all of my salary – which is a startup salary, by the way; this is not a market-related salary – I convert everything into bitcoin and take that and then try to see if I can cover all of my expenses.”
Read: What happens when you put 10% of your monthly salary into bitcoin
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In the original bitcoin white paper by Satoshi Nakamoto, Bitcoin is conceived of as a transactional digital currency, not really as a store of wealth. The paper talks of person-to-person electronic cash, peer-to-peer electronic cash.
There is debate within the crypto community as to whether bitcoin is a store of value and should be saved – not spent – and another group who see it as a medium of exchange.
The beauty of bitcoin-as-currency is that there are exchanges all over the world allowing users to off-ramp to fiat.
In-store purchases
MoneyBadger was involved in enabling bitcoin spending through Pick n Pay stores, and – by way of partnerships with electronic payments companies like Zapper and Scan2Pay – to tens of thousands of other stores around the country.
There’s not much that you cannot purchase with bitcoin, says Van Wyk, but in some instances – such as taxes and municipal rates – you will need to off-ramp to ZAR.
What about those who say that bitcoin should only be saved, not spent?
“That’s probably the biggest barrier actually to people spending bitcoin,” says Van Wyk. “There’s a couple of misconceptions that need to be addressed. There’s a thing called Gresham’s law where people talk about bad money [driving out] good money. People try to apply these older mental models to bitcoin and it doesn’t always apply really well.
“When people say you shouldn’t be spending bitcoin because it’s going to go up in value forever and therefore it makes sense to rather spend your rands, I think what we’re talking about today specifically is the case where people try to live off of bitcoin entirely.
“So that means you’re earning your salary in bitcoin and then that is what you have to spend. So it’s not like you are buying some bitcoin today and then spending it.”
Read: Banks are about to enter the crypto space
The trick, says Van Wyk, is to allocate some bitcoin to a spending wallet and some to a savings wallet. Experience shows that those who spend bitcoin tend to accumulate more over time.
The tax aspect
This raises the question about taxes: is it capital or income when you spend bitcoin?
By separating bitcoin into spending and savings wallets, the tax situation becomes easier to solve.
Bitcoin received and spent this month is unlikely to change drastically in price, and there’s a range of software apps designed to link to your various wallets and keep good accounting records.
There’s an annual R40 000 capital gains exclusion that may exempt you from any spending of bitcoin profits, while your bitcoin savings wallet remains untouched.
Bye-bye credit card?
Van Wyk then discusses his latest project, MoneyBadger.
“I know this sounds crazy, but we’re trying to build a network … to compete with the likes of Visa and MasterCard.
“So Visa and MasterCard, they’ve got their card network, and we are building the crypto payments network.
“It’s early days. It’s easy to laugh at a small project when it’s early days,” he adds.
“But we seem to be getting some good traction and growth.
“And that’s the goal, ultimately – to build this alternative rail, but that’s built on, in my mind, a superior technology.”
