Acquiring Bitcoin

| Cryptocurrency
Acquiring Bitcoin | Munro's Accountants and Advisors

The content in this article is provided for general information purposes and is not tax, legal, investment or other professional advice. Readers should seek appropriate professional advice prior to making any decision.

I'm writing this blog on a milestone day for bitcoin. Today the price of bitcoin has passed $2,000 for the first time.

I remember when I first heard about bitcoin in 2012. I was watching The Keiser Report and the host Max Keiser was interviewing someone about this "cryptocurrency" called bitcoin. It sounded very interesting so after the show I “Googled It”.

Although a lot of it was over my head, I was intrigued. However, at that time the only way I knew of how to get bitcoin was to use the bitcoin exchange Mt Gox (note: does not exist anymore – which is an interesting story in its own right).

To use Mt Gox, I had to open an account and make an international bank transfer. Then I had to work out what to do with the bitcoin afterwards. In those days there were few bitcoin wallet options and the learning curve was steep. I gave up. (You’re probably interested so I’ll tell you, the price was around $7 back then.)

These days, getting bitcoin is now much simpler.

Your options (not an exhaustive list):

  1. Purchase

There are many bitcoin exchanges both in Australia and internationally. What you need to do is open an account at the exchange. Then you make a bank transfer via online banking. After the funds are credited to your account at the exchange, you buy bitcoin at the prevailing market rate. The market rate for each exchange varies a little, so it is a good idea to check on the best available rates before buying.

Once you have the bitcoin, you would take it out of the exchange by sending it to your bitcoin wallet. More on wallets below.

  1. Earn 

Just like how you get paid in Australian dollars, you can also get paid in bitcoin.

For now, I doubt you can get paid your wage in bitcoin, although this is possible using an intermediary.

Businesses can choose to accept bitcoin as payment, rather than Australian dollars. They don't need to do this for every invoice. You can give your public bitcoin address to customers and they can choose to pay in bitcoin.

Alternatively, you can partner with a bitcoin payment processor who will help setup a system for you to accept bitcoin. You can then choose to keep the bitcoin or have the payment processor convert it to Australian dollars and remit the dollars to your bank account. This latter option allows your business to accept bitcoin from customers but you only ever receive Australian dollars. You might do this to broaden your appeal to holders of bitcoin.

Currently, accepting bitcoin in your business can have adverse GST implications and you may wish to discuss these issues with an Accountant before proceeding.

  1. Gift

There are many bitcoin enthusiasts out there who will happily send you about a dollar or two worth of bitcoin to help you get started. They generally do this because they want to help bitcoin progress into the mainstream. Another way to get a small amount of free bitcoin is by going to a bitcoin faucet (Google it).

Ok, so you have your bitcoin, now what? Well now you need to secure them.

Wallets

At this stage, you'll either already have a bitcoin walletor need to set one up. For simplicity purposes, I suggest you think of a bitcoin "wallet" as an account where you keep your bitcoin. There are desktop-based wallets, browser-based wallets, app-based wallets and paper-based wallets (yes you can keep your bitcoin on paper, amazing right).

Industry best practice is to setup a bitcoin walletusing a unique and strong password (one which is not used elsewhere), turn on two-factor authentication, and write down on paper the recovery "seed" (never storing this online or where anyone can access it because if someone gets a hold of the seed then they can steal your bitcoin).