Australian gold dealer sees the digital light and expands to bitcoin

A Brisbane gold and silver bullion dealer has become the first in the country to start trading in bitcoin after 43 years in operation, following federal government recognition of it is as a legitimate currency and the removal of GST from the purchase of digital currencies.

Prior to July 1, digital currency users were slugged twice with GST. Once when they purchased the currency, and then again when they used it to purchase goods and services subject to the tax.

Ainslie Bullion and Reserve Vault director Paul Engeman said he had been buying and selling bitcoin since August and the business has seen “strong demand” from new and existing customers.

“The surprise to us has been the extent to which self-managed superannuation funds have been the predominant cohort of buyers,” he told The Australian Financial Review.

“We’ve sold gold and silver for 43 years now and those buyers are attune to monetary assets and can see similar properties in bitcoin.

“The fundamentals for what constitutes a monetary asset are the same – it must have intrinsic value and have a medium of exchange. Gold and silver have been the champions of the space for 5000 years, but bitcoin has the same properties in that there’s only 21 million of them and it’s a slow process to digitally mine new ones.”

On Friday the price of bitcoin exceeded $6000 ($US4800) for the first time. According to CoinDesk, this was driven by an overall rise in cryptocurrency prices that pushed the collective market capitalisation above $US170 billion.

In the past year bitcoin prices have surged more than 700 per cent and the market value of all bitcoins is more than $US78 billion.

School kids investing

Brisbane high school teacher Chris Tippler has been a long-time investor in bullion and first bought bitcoin in the early days of the cryptocurrency in 2009.

At the time it was only a few cents, so he bought 2100 bitcoin, which would be worth $12.6 million today. Unluckily for Chris, he sold out when bitcoin hit $1, thinking that was high for the new digital currency.

“It was 2009 and it was very obscure. Because bitcoin had moved so far, I was cautious that it was up so much already,” he said.

“It was the very start of these initial coin offerings [ICOs] that are popping up all over the place now.”

Now Mr Tippler teaches his business and economics students about cryptocurrencies like bitcoin and ripple, along with bullion, including how to trade them.

“Some of the kids who were seniors at that stage got me interested in it again when it was about $30, so it was still very cheap.

“I knew about investing from trading currency, and I was teaching them how to read graphs. I’m not sure that this is a solid part of the curriculum, but in my experience it needs to be.

“It’s something you’re hearing about in the financial news, so it makes sense that needs to flow into the classroom. This is the modern version of silver and gold. We were focused on buying silver because that was accessible to students … now they’re looking at bitcoin and it’s opening up their minds to investing.”

As well as the ownership, the usage and acceptance of bitcoin is becoming more widespread. There are now cafes, bookshops, real estate agencies, vehicle manufacturers and a fruit and vegetable grocer that all accept the cryptocurrency.

Mr Engeman believes older SMSF investors have been attracted to the digital currency as a way to diversify their portfolios, and said the paper wallet provided by Ainslie Bullion gave them additional peace of mind around the security of their investment.

“There is a misconception about hacking. The actual currency itself that’s contained in the blockchain is a fairly bulletproof platform … the hacking becomes an issue in regards to how you store it,” he said.

“The paper wallet we produce in front of them on a computer that’s never been online and never will be online, linked to an offline printer, and then we load that wallet up in front of them. It never has a digital footprint.”