By Jonathan Mohan
Making Sen$e recently examined Bitcoin and the rise of its mainstream appeal.
Paul Solman: Our Bitcoin story on the NewsHour is proving so popular that we’ve decided to post longer excerpts of our main interviews. Earlier Wednesday, we published our conversation with Bitcoin Education Project’s Charles Hoskinson. This one is with Jonathan Mohan, recently profiled in the Financial Times.
“My goal is to get rich,” Mohan, told the FT, which described him as a “23-year-old Queens native studying entrepreneurship at New York’s Baruch College…[i]ntellectually self-confident and eager to plunge into debate [who] is quickly becoming a catalyser of the New York Bitcoin community. He is organiser of a regular ‘meet-up’ group which aims to connect the Bitcoin-curious.”
“Mohan wants to get rich,” wrote FT reporters Stephen Foley and Jane Wild, “and he wants to wreck government as we know it, too. Through Bitcoin, a currency outside the purview of banks and government control, Mohan sees ‘a chance to build a financial business with no regulation. Government is coercion and force.'”
“Would you rather buy a diamond or a blood diamond?…Obviously a diamond. So, would you rather use a Bitcoin or a dollar? When I gave someone $5 in Bitcoin, I didn’t kill any children in Iraq.'”
Here’s what Mohan had to say to us:
Paul Solman: How did you get involved in all this?
Jonathan Mohan: So about three years ago, someone introduced me to Bitcoin and said, “Hey, look, this is a currency that someone’s trying to start and it’s apolitical in nature. No one can manipulate it and what do you think this will do?” And I was just so blown away by it — just the thought of money that was beyond the control of one organization dictating what happens to that currency — that I was hooked, line and sinker ever since.
Paul Solman: Are you sort of a libertarian?
Jonathan Mohan: I would say that I accept the nonaggression principle, which is to say, yes. It essentially means that as long as coercion is not being enacted, I have no issue with what is happening. So that would, I guess, make me a philosophical libertarian.
Paul Solman: Not an anarchist?
Jonathan Mohan: No. no.
Paul Solman: And so what have you discovered as you’ve moved into this space, as you call it?
Jonathan Mohan: There are a lot of people trying very hard not to break the law. At my meetings, the name of the game is discussing how to operate legally. And because it’s such a new space, the thing about being a pioneer is you’re doing something that no one’s done before, so there is no legal precedent to guide your actions. So not only is it a space where it’s possible to do something illicit, but it’s also a space where it’s very easy to do something illicit because you have no idea what you’re supposed to do. Even the regulator doesn’t even know what you’re supposed to do. If he doesn’t know, how am I supposed to know?
So when it comes to Bitcoin, it’s so new that everyone kind of doesn’t even really know how to handle it.
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Paul Solman: But it’s mainly known for facilitating illicit transactions?
Jonathan Mohan: No, I wouldn’t say that. That is what a lot of media likes to harp on, but as the market is maturing and as more laws are coming about to mitigate the risks of starting a business in this space, you’ll see a lot of businesses start accepting it.
Paul Solman: So your bet is that Bitcoin is going to become a pervasive phenomenon?
Jonathan Mohan: Bitcoin is the first in the space called cryptocurrencies, so whether or not Bitcoin is going to succeed, this industry of cryptocurrencies — of apolitical distributed money — is a market that’s so matured at this point that, even if Bitcoin were to fail, just as MySpace were to fail, you’d have another contender coming around, and I believe that this space as a whole will stay with us in the near future.
Paul Solman: And how common will it be? Will our viewers, for example, encounter cryptocurrency on a regular basis?
Jonathan Mohan: So if I were to ask you what the number one operating system in the world is, what would you say?
Paul Solman: It’s Linux.
Jonathan Mohan: Right, and most people don’t know that because Linux isn’t a consumer level thing. It is a back end thing. So when you use the Internet, over 40 percent of all computers in the world — your watch, your cell phone, the computer you’re using — use Linux, but it’s not something that you as a consumer would necessarily be aware of.
When you use Bitcoin, it’s our contention that Bitcoin will be like Linux for finance, where it’s the back end. It facilitates things, and you’re not necessarily aware of how your car works; you just put the key in the engine and you turn it. And we believe that Bitcoin will be a payment processing solution that a lot of people will find merit with in terms of reducing their costs on their end and providing a better service to you.
Paul Solman: So it’ll be kind of like a credit card company that I’ve never heard of, but it will be doing all those sorts of payments and verifications…
Jonathan Mohan: And it can do it currently in a much more cost effective manner. So you’ll be paying a lot less.
Paul Solman: Because credit cards are taking from both me and the vendor, right?
Jonathan Mohan: So right now if you look at Bitcoin, one of the things that makes it so novel in terms of saving costs is that there are no chargebacks. Now, a chargeback is when in our credit system if you spend money, you, as a credit card holder, are able to rescind the money and take the money back. Now this puts a large liability on the company because they have to worry about whether or not you’re going to scam them, because once they send the product out, they’re not going to get their money.
Now because of this, 60 countries in the world are not allowed to engage in global commerce. These 60 countries include places like Nigeria, where there’s just so much fraud that merchants can’t assume that level of liability. And if you look at Bitcoin, Bitcoin’s the opposite. Bitcoin doesn’t allow you to take back your money. Once you spend money with Bitcoin, it’s gone. So what it transfers the liability in an interaction from the merchant to the consumer.
Paul Solman: So you do expect this to become pervasive.
Jonathan Mohan: I actually think that Bitcoin adoption will be last in the developed nations. I think that America’s the last place you’ll see Bitcoin, because we have such a mature financial ecosystem. But if you look at countries that are on the precipice of financial collapse, that’s really where Bitcoin shines the most.
Paul Solman: And those countries would be?
Jonathan Mohan: For instance, in Iran, they have sanctions right now. That’s creating massive levels of inflation. In Argentina, it’s practically illegal to convert your currency into dollars. So capital flight can’t even occur because there’s no outlet for the money to get out to. So in these places you’re going to see Bitcoin do fairly well.
In August, Germany recognized Bitcoin as a type of “private money,” meaning it could be used legally for both private and commercial transactions, subject to both capital gains and sales taxes. While the United States has not legally recognized Bitcoin, the government is taking steps toward making Bitcoin transactions taxable.
This summer, James White, director of tax issues at the Government Accountability Office, attended the Bitcoin conference in New York, where we did the bulk of our interviews, to tell attendees in no uncertain terms that “if it’s taxable in dollars,” it’s taxable, period. Here’s a very brief video of how he put it.
The Government Accountability Office’s James White explains to Paul Solman how Bitcoin is taxable.
This entry is cross-posted on the Rundown — NewsHour’s blog of news and insight.