Auto dealer accepts Bitcoin payment for purchase of Tesla Model S
By Brian Dodson
December 9, 2013
The value of a thing is what it will bring, or so says an old financial aphorism. It appears that the value of Bitcoins earlier in the month was such that 91.4 Bitcoins had the same value as a used Tesla Model S in Newport Beach, a quiet beach town midway between LA and San Diego in California.
Bitcoins were an idea in 2008 that quickly learned to run when publicly issued in 2009. Now there are about 12 million Bitcoins in circulation, which have a total exchange value of over ten billion US dollars. While not considered legal tender by any nation currently, it appears that no government has declared Bitcoins to be illegal financial instruments, nor have they been subject to overly harsh regulation, although both the US and China are taking a serious look at regulations. It appears that the present "wait and see" approach being taken by the European Union is currently in control over most of the world.
If you are lucky enough to have a batch of Bitcoins (currently valued at about US$870 apiece), just what can you do with them? How about buy a used Tesla Model S?
This is just what happened on December 6 at Lamborghini Newport Beach in California. A used Model S (presumably free of fire damage) was sold to an unidentified purchaser in Florida for 91.4 Bitcoins. The cash value of the car was $103,000, meaning that the equivalent value of the Bitcoins was $1,127 each.
The exchange value of Bitcoins was very fluid during that period, with the actual exchange value being about $1,000 on Dec. 6. The rate reflected in the sales price was typical of the two previous days, however, and the actual exchange of Bitcoins may have been made at that time. The transaction was handled by payment processor BitPay, so the dealership did not need to worry about gains and losses in the value of the Bitcoins. They received an immediate bank transfer in US dollars.
This is the approach currently being taken by most companies that accept Bitcoin payments (approaching 100,000 with Shopify's recent activation of Bitcoin payment for its 75,000 online shops). Simply keeping the Bitcoins leads to a horde of potential business and tax problems, with which most companies don't want to get involved.
Typical issues include "Is investment in financial instruments within the declared purpose of an incorporated business?" and "Is the value of a Bitcoin payment their value on the day I make the sale, or their exchange rate value on the day of sale, plus whatever capital gain or loss I encounter on the day I sell the Bitcoins?".
Businesses know what they would like the answers to be, but it is going to take a few years in courts of law to pin down just what rules will be applied to Bitcoins. Right now they are a square peg in laws and regulations full of round holes.
Regardless of what the future holds for Bitcoins, the excitement this year is that they are making the transition from a means of exchange mostly used on the Dark Internet onto the world stage. Despite being rather small in scale, and having exchange rates whipped hither and yon by rampant speculation, Bitcoins are poised to be a economical factor to watch.
Source: Lamborgini Newport Beach