Between allowing business to pay taxes with Bitcoin and investing more in blockchain startups, Ohio may be making the Midwest a tech destination.
Ohio has made some major technological strides in the past couple months. In November, state treasurer Josh Mandel announced that Ohio would become the first US state to allow businesses to pay taxes with Bitcoin. Soon after, at least seven tech funds across Ohio pledged to invest $100 million in blockchain startups.
"Blockchain is a major enabler for businesses across industries. Over the past year, the growth of blockchain-related jobs is on the rise—with almost 2,000 additional job openings in the US, up from less than 500 at this time last year," said Craig Mc Gregor, co-founder and CEO of DSTOQ.
As of August 2018, Glassdoor's database hosted 1,775 blockchain-related job openings—a 300% increase from last year. However, out of Glassdoor's list of the Top 15 US Metro States for Blockchain Job Openings, only one is in the Midwest.
"All the startups that I've spoken with in these areas are not in the US Midwest—they're either in Silicon Valley, sometimes New York and more often Basel, Switzerland, where the laws are much more favorable in cryptocurrency," said Avivah Litan, vice president and distinguished analyst at Gartner Research. "The Midwest is not known as a hotbed for [Blockchain] innovation, but maybe it'll become one."
SEE: Research: The current state and predictions for the future of blockchain in the enterprise (Tech Pro Research)
"It's clear that Ohio is becoming one of the states most accepting of emerging technology," said Mc Gregor. "I believe that this decision is an opportunity for Ohio to 'plant a flag' in the adoption of Bitcoin, and hopefully add momentum to the increased adoption of all cryptocurrencies."
Adopting Bitcoin puts Ohio on the emerging tech map, and it could also be beneficial to attracting talent across the Midwest.
Right off the bat, allowing business to pay in cryptocurrency definitely ups Ohio's "cool" factor, according to Litan. "They're trying to have that cool technology factor in Ohio, so they can attract startups and technology innovations. This gives them an edge in attracting blockchain-based startups," she added.
Adding Bitcoin as a form of payment is also extremely convenient and useful for the business consumer. "One of the most obvious benefits to paying tax with Bitcoin is of course lower fees. BitPay—the third party processor of Bitcoin tax payments charges a 1% transaction fee, which is less than half of what Ohio taxpayers face when using a credit card (2.5%)," Mc Gregor said. "It is also much easier for businesses to pay their taxes online as the nature of crypto is that these transactions can be completed via the Ohio Crypto website from any device around the world."
Plus, as with any blockchain transaction, "the payments will be fully traceable, which will provide more transparency to the user," added Frank Wagner, co-founder and CEO of INVAO.
Some people may consider Ohio's movement towards Bitcoin to be risky, as the crypto market has plummeted over the last year. "Many may be under the impression that due to the recent market volatility, that crypto payments are risky for those paying taxes in Ohio," Mc Gregor said. "However, the state itself does not hold the Bitcoin—instead they leverage blockchain technology that converts the crypto payment into USD, and then deposit it into a state account."
Bitpay is even taking the current state of the market into account. "To protect against market volatility, the payment processor (BitPay) will set the exchange rate for a 15-minute allotted time window for each transaction," Wagner said. "Once a business taxpayer begins their payment on the website, BitPay assumes the risk of any market fluctuations during the allotted time window. This will protect investors from any sudden dips in price."
The main risk for Ohio really lies in public interest, said Litan. But even so, that isn't necessarily as much of a risk for Ohio as it is for the Bitpay company. "I don't think they take any risk at all by doing this in Ohio, it's really just turning on Bitpay," Litan said. "The risk is to Bitpay, that people won't be interested in Bitcoin anymore for payments."
How other Midwestern states can attract blockchain tech talent
Ohio's blockchain and Bitcoin ventures demonstrate that there is potential for making the state a blockchain-focused industry hub, said Wagner. "No longer are tech professionals confined to these sort of high-growth jobs in Silicon Valley unprecedented access to high-growth jobs," he added. "This in turn will create more jobs and contribute the economy as whole."
The growth of blockchain businesses in the state could also prevent tech talent from leaving the area for the coasts. "I'm sure there are very skilled people in the Midwest that would like to stay there because their family and cost of living, so this is one step towards fostering an innovative community in Ohio and other surrounding states, if surrounding states take the same policy," Litan said.
All that surrounding Midwestern states can do at this point is follow the leader. "I think [other states] should do exactly what Ohio did: Accept state payments in cryptocurrency," Litan said. "They can also open centers of excellence, like give tax breaks to innovation and start-ups, and create a favorable business environment through lower taxes and different financial incentives."
- Cryptocurrency: An insider's guide (free PDF) (TechRepublic)
- Executive's guide to implementing blockchain technology (ZDNet)
- Bitcoin: A cheat sheet for professionals (TechRepublic)
- Will blockchain be mainstream by 2025? (ZDNet)
- How the blockchain could transform local economies (TechRepublic)