SALT LAKE CITY (AP) - After observing an increasing interest in the use of bitcoin, a Utah lawmaker is asking the state to study the feasibility of accepting the digital currency.
Rep. Marc Roberts, R-Santaquin, made the case to a House committee on Tuesday that the state should make sure it understands how bitcoin works and determine whether it is a valid payment method for state services. He presented a resolution that would allow a group of industry professionals and government employees to study the issue.
Bitcoin is a digital currency that is not tied to a bank or government and allows users to spend money anonymously. The coins are created by users who “mine” them by lending computing power to verifying other users’ transactions. They receive bitcoins in exchange.
Rep. Ken Ivory, R- West Jordan, asked whether the state risked losing money through digital bitcoin transactions. He said he is concerned about the currency’s changing value, calling it “pretty seriously volatile.”
Ivory compared bitcoin to precious metals like gold and silver, which he said the state should also explore using as an alternative form of currency.
But Deputy State Treasurer David Damschen said the parallel between metals and bitcoin was flawed.
Bitcoin users can lock the value of the bitcoin at the time of purchase, he said, committing to paying the state the dollar value at that moment in time. The state could immediately convert the bitcoins to dollars, Damschen said.
Not so with precious metals, whose users typically want the state to assume the risk associated with fluctuating value, he said.
“It’s helpful to think of bitcoin as Visa, Mastercard, Discover, Paypal, bitcoin. It’s another payment option,” Roberts told the committee. The option could save the state money, as the transaction costs for bitcoin payments are less than the fees charged by credit card companies, he said.
Roberts’ proposal originated when Tyler Seamons, a Farmington resident and virtual currency advocate, contacted lawmakers about the possibility of accepting bitcoin for state services.
Although Seamons acknowledged Tuesday that bitcoin can be volatile, he said that is common with new currencies. He expects its value to stabilize over time, especially if hedge funds and other “institutional players” invest in the currency. Seamons said such investment has already begun.
If the state accepted bitcoin as payment, it could be used by individuals or corporations like Overstock.com to pay taxes, Seamons said. It could also be used for other services, like purchasing alcohol at a state liquor store.
Part of the purpose of the study group is to explore which services bitcoin users are most interested in, he said.
Roberts said the state would be one of the early adopters of bitcoin if it decided to accept the currency, saying the only other state he knows of that is considering the move is New Hampshire.
Tennessee has pending legislation that would allow candidates to accept virtual currency such as bitcoin as campaign contributions, according to information from the National Conference of State Legislatures. While other states are working on or have enacted legislation addressing digital currencies, Utah and New Hampshire appear to be the only places considering accepting it for taxes and other payments, according to the National Conference of State Legislatures’ information.
The Internal Revenue Service treats virtual currency like bitcoin as taxable property.
Roberts’ proposal would create an informal working group instead of an official task force, which he said will allow the study to be conducted for free. The resolution does not set a deadline for the group to present its results.
Although some lawmakers said they would like to see a study that considers more alternative forms of currency, such as precious metals and other types of digital currency, Roberts’ resolution was approved unanimously. It will now be considered by the entire House.
HB 214: https://1.usa.gov/1FpdtnX
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