Government of Bermuda Accepts Tax Payments in USDC Stablecoin

  • Bermuda now formally accepts tax payments in the USD Coin (USDC).
  • The USDC Coin is backed by Circle and Coinbase.
  • There is a marked increase in the use of stablecoins.

Bermuda has become the first country in the world to formally accept tax payments in the USD Coin (USDC) cryptocurrency. According to a press release issued by Circle, the development is part of a new initiative by the government to support USD-based stablecoins. The USDC digital currency is backed by both Circle and Coinbase. One USD Coin has the equivalent value of one dollar.

Coinbase is a digital currency exchange headquartered in San Francisco, California. They broker exchanges of Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, and Litecoin with fiat currencies in approximately 32 countries, and bitcoin transactions and storage in 190 countries worldwide.

The development marks a major milestone in the industry and is an indicator that governments around the world are warming up to the idea of using cryptocurrencies and decentralized networks. According to Circle, the USDC cryptocurrency is the second most popular stablecoin the world and is supported by over 100 companies worldwide.

Because USDC is controlled by government regulated entities, risks to investors are limited. The recent Tether stablecoin scandal gave the asset class a bad rap and made investors more mindful about dabbling in related ventures.

The promise of stability by Tether founders was among the main contributors to its popularity. Recent investigations, however, revealed that the cryptocurrency was not 100 percent backed by cash reserves, a contravention of the basic concept of stablecoins. Only about 74 percent of tokens in circulation were found to be covered by cash reserves.

Stablecoins are cryptocurrencies designed to minimize the volatility of the price of the stablecoin, relative to some “stable” asset or basket of assets. A stablecoin can be pegged to a cryptocurrency, fiat money, or to exchange-traded commodities (such as precious metals or industrial metals). Stablecoins redeemable in currency, commodities, or fiat money are said to be backed, whereas those tied to an algorithm are referred to as seigniorage-style (not backed).

The government of Bermuda is working together with Shyft Network to create a digital identity framework that will enable businesses entities within the country to seamlessly integrate their systems with the platform.

Jurisdictions around the world are starting to embrace crypto. The State of Ohio recently became the first in the United States to accept tax payments in bitcoin.

The advent of the Libra cryptocurrency project is credited for sparking mainstream interest in collateralized currencies.

Why there is Increased Stablecoin Adoption

Stablecoins are becoming more popular because of their use as a means of payment. They offer redemption guarantees which help mitigate against market value fluctuations, especially when trading crypto pairs. Research reports indicate that a majority of bitcoin trades are carried out using stablecoins such as the USDT by Tether, and the USDC.

Transactions made using these types of coins are also more cost-effective as compared to fiat currencies, their networks have a global reach, and fund transfers are almost instantaneous. While services such as PayPal are fast, currency conversions, withdrawal charges, and related surcharges add up significantly when compared to stablecoin networks.

That said, however, regulators across the world are becoming more aware of the potential risks. Some legislators have expressed that adoptive decentralized crypto networks such as Libra infringe upon the sovereignty of nations by bypassing government-controlled currency transfer systems. They make it hard for governments to control capital inflows and outflows.

The fact that transacting using stablecoins also allows a certain level of anonymity is also a major concern. The aforementioned are among the many reasons why major economies such as China prohibit trading in cryptocurrencies.

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Samuel Gush. W

Samuel Waweru is a Technology, Entertainment, and Political News writer at Communal News.

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