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Spending your digital coins on stuff is easier said than done

Annie Nova

One of the biggest criticisms of cryptocurrencies is that they're trying to be something they're not. None of them, after all, is as readily usable for day-to-day purchases as a currency.

"Would you be willing to put bitcoin in your pocket and leave for a one-year trip, knowing you're going to survive?" Aswath Damodaran, professor of finance at the Stern School of Business at New York University, asked during a CNBC interview last fall. "We're nowhere near that comfort."

Many cryptocurrency experts and developers argue that we don't yet see the currencies readily used in say, the supermarket, because the technology is still in its early stages.

"Right now there's no easy way to buy, send or spend cryptocurrencies," said Nick Saponaro, co-founder of The Divi Project, which educates people on the digital tokens.

That's something Saponaro hopes the project will change, leading to wider adoption of cryptocurrencies. Their goal: to make "the entire money-sending process more approachable to non-geek users."


To be sure, there are reasons why spending cryptocurrencies on everyday transactions might not be wise at the moment.

For one, each time you buy, sell or use the currencies, that's a taxable event, since the IRS considers them an asset, not a currency. If you convert your bitcoin into cash to buy a cappuccino, you'll need to pay taxes at your capital gains rate.

Then there's the issue of transaction costs . At one point in December, a bitcoin transaction fee was more than $50. It was less than $3 at time of this story publication, however.

Taken together, those fees and taxes would significantly boost the price of a small-ticket purchase.


In addition, many of the cryptocurrencies are so volatile that making any regular payments with them is incredibly risky.

For example, say your rent is $2,000 a month. If you paid it in bitcoin on Dec. 1, you would have shelled out 0.20286403 bitcoins. But if you'd held on to those coins, they would have been worth $2,800 on New Year's Day.

"Those merchants who are accepting it are bullish on bitcoin," Damodaran said.

There is an irony here, he added: "The excitement of it as an investment is drowning out its ability to be a currency."

Still, many people are dedicated to making cryptocurrencies a real payment method.

According to calculations by Chainalysis, which tracks cryptocurrency data, consumers used bitcoin on merchant services for a monthly average of $190.2 million in 2017, compared with just $9.8 million a month in 2013.

Bitwala, a financial technology company, is opening a cryptocurrency bank in a few months to provide a digital currency debit card to account holders. Users can pay for a restaurant meal with their card, and the bank will automatically convert their bitcoin into currency.

Some 20,000 people have already signed up, said CEO Jorg von Minckwitz. While cryptocurrency exchanges can be confusing and daunting to most people, "nothing is more easy to explain than a normal bank account. It's a one-stop solution," he said.


Consumers looking to spend their bitcoin have other options. There are cryptocurrency ATMs from providers such as Coinsource, and you can even filter your Yelp search for places that accept bitcoins.

Kim Grauer, senior economist at Chainalysis, was on vacation with her boyfriend in Tulum, Mexico, when she passed a restaurant with a sign saying it accepted cryptocurrencies. It hasn't been the last such place.

"You definitely see it popping up more and more," Grauer said. "As the developers are creating extremely user-friendly apps, it would make complete sense it would pick up."

Some people are even paying their rent with bitcoin .

ManageGo, a New York-based rental platform that offers payment and maintenance services to landlords and tenants, accepts the cryptocurrency for its 400,000 units across the country. In January, 38 people paid their rent with bitcoin, said Chaim Lowenstein, vice president of business strategy at ManageGo.

"It could be close to double [in February]," he said.

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