In a recent article, Peter Schiff blasted Bitgold as being a “Secret Taxation Time Bomb“.
Schiff laid out improbable strawman arguments based on tax consequences that as a practical matter do not exist in the real world.
Ironically, his tax arguments would equally apply to “SchiffGold” purchases.
Usability and ownership are the heart of the matter, not taxes. Let’s start our discussion there.
First Mover Advantage
Citing a “first-mover advantage” Schiff states “There are several other companies offering gold-backed, prepaid debit cards, including my own company, Euro Pacific Bank, that first began offering them over three years before BitGold copied the concept. In fact, my bank even offers silver-backed prepaid debit cards, a service not currently provided by BitGold.”
What “first-mover advantage” was that?
BitGold has 800,000 accounts and $1.75 billion assets in those accounts. What are Schiff’s numbers?
Schiff notes “BitGold accepts American customers” but his bank does not.
Excluding US customers is a big deal. Schiff was never able to get US approval. Why is that?
BitGold has first-mover advantage in the US and many other countries as well.
Regardless, the question is not who is first, but rather who the market has selected as the legitimate answer.
Taxes, Possession, Hyperinflation
In his article, Schiff went way off the deep end with a strawman attack on BitGold involving taxes, hyperinflation, and physical possession.
In the attack, Schiff gave a preposterous example in which a bitgold purchaser would choose to redeem his purchase for physical gold. Schiff went on to calculate the taxes one might have to pay were hyperinflation to occur.
In real life, someone would not redeem BitGold to purchase physical gold. They already own physical gold!
And BitGold customers can use their physical gold to make purchases in the US, something SchiffGold customers cannot say.
Finally, here’s the curious thing about Schiff’s tax argument. If and when SchiffGold cardholders make purchases with their card, they too are subject to the same tax consequences that Schiff rants about.
BitGold provides full audit history for tax purposes. What does Schiff provide?
James Turk’s Response
James Turk, founder of GoldMoney accurately responded to Schiff in his article Peter Schiff’s Taxation Tantrum Post about BitGold.
Turk questions Schiff’s tax advice.
Peter Schiff purports to give tax advice to US citizens on the purchase and sale of gold coins. I am not aware of his qualifications to do so, and there is no mention of his training in this specialized field.
Maybe he is a trained tax attorney or expert tax accountant. I am neither of those, but I can spot as good as anyone attempts to pull the wool over people’s eyes.
Despite Schiff’s attempt to put them at center stage, taxes are not the issue here. There are always taxes that need to be considered. Rather the real question is how to buy physical gold. Taxes are a consequence of what gold you buy and how you buy it.
There are only two ways to buy physical gold. You buy it and store it yourself. Or you buy it and have someone store it for you, like BitGold and of course GoldMoney.
Schiff finished his article with a preposterous statement “under a worst-case scenario, having gold stored at BitGold will be virtually identical to having no gold at all.”
That is precisely the kind of hysterical, as well as nonsensical rant for which Schiff is famous. Anyone recall his comparisons between the US and Zimbabwe?
Once again, Peter Schiff has stepped well over the bounds of common sense into complete Fantasyland scenarios.
The market selected BitGold, not SchiffGold for a reason. Is Schiff himself part of the reason?
The sad part of discussions like this is we are all on the same side, or rather should be.
Roy Sebag, founder of BitGold; James Turk, founder of GoldMoney; and Peter Schiff founder of SchiffGold should all be on the same side promoting gold as money, not bickering over who was first with various products.
- Squabbles over who was the “first-mover” are irrelevant.
- The market has decided the winner of this debate is Bitgold.
- Using a BitGold or Schiff “goldcard” to buy things logically have the same tax consequences.
- Theoretical discussions about hyperinflation tax consequences make hyperinflation proponents look silly.
- There are ample reasons for owning gold. Let’s focus on those reasons, not egotistical sideshows that unfortunately require rebuttals like this one.
In the sake of full disclosure, I have a relationship with GoldMoney and BitGold.
As I have stated on many occasions, my reputation is very important to me. I do not enter relationships easily. If I genuinely thought there were major issues with GoldMoney or BitGold, my relationship with them would be over.
I have taken the time to research this matter thoroughly, and have concluded the GoldMoney/BitGold deal is a good one for the industry, for merchants, and individuals alike.
Mike “Mish” Shedlock