Bitcoin: Anatomy of a transaction

Michael’s Auto Plaza general manager Eugene Rubinchuk stands in the lot of his family’s business in East Greenbush, N.Y. The car dealership accepts bitcoin and several other digital currencies. (AP)
Updated 27 February 2018
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Bitcoin: Anatomy of a transaction

NEW YORK: Bitcoins can buy you a TAG Heuer watch, a cross-country flight or a meatball marinara sub.
Purchases with bitcoin and other digital currencies remain rare relative to cash and credit cards. Many bitcoin holders value it more as an investment than a day-to-day currency.
And the complex workings behind the notoriously volatile currency can be off-putting to neophytes. What are the fees? Are there taxes? How do you spend a currency that can devalue dramatically between ordering appetizers and paying the check?
Buying with bitcoin can be as easy as tapping your phone, though there are some cautions. A look at a single bitcoin transaction, the sale of a 2017 Subaru from an upstate New York car dealer to a buyer from Virginia, offers some insights into the currency’s uses.
IN BUSINESS WITH BITCOIN
Eugene Rubinchuk didn’t get into digital currency for the anonymity or to strike a blow against centralized banking. He was just looking for more business.
Rubinchuk and his father, who goes by “Mike the Russian,” already ham it up in local TV commercials for Michael’s Auto Plaza wearing furry hats. Digital currency is just another potential edge.
“It’s just a way to reach customers we normally couldn’t reach, that normally wouldn’t think of us,” he said.
The cars and truck on the lot near Albany are priced in US dollars. Rubinchuk simply signed up for one of the services that allowed him to accept digital currencies if a bitcoin buyer came along.
CASHING IN CRYPTOCURRENCY
Jonathan Cypert got into bitcoin early and made out well.
In 2011, he read about a 2-year-old currency skyrocketing in value and soon invested $2,000 in computers to “mine” bitcoins for about a year and a half. That’s the complicated process that rewards tech-savvy participants for verifying bitcoin transactions in its public ledger, called the blockchain.
When he started, a single bitcoin was worth around $2.50. By the time he was ready to buy a used, low-mileage Subaru for his wife, a bitcoin was worth over $14,000.
The 32-year-old Virginia resident sees his bitcoin cache as a nest egg to tide him over after he retires from the military. (Wary of attracting scammers, Cypert requested that his hometown and military branch not be made public). The purchase gave him a chance to recoup his investment many times over with a fraction of his cache.
“At this point it’s like, why not?” Cypert said. “I might as well realize some of that gain.”
BITCOIN BARGAINING
Rubinchuk and Cypert talked on the phone on the evening of Jan. 2 and settled on a sale price on the Subaru WRX STI of $34,640.
Then they had to agree on what that equaled in bitcoins judging by the exchange rates that moment. Tracking bitcoin prices on their screens, the pair agreed to proceed with one bitcoin equaling about $14,755. Cypert sent 2.34790481 bitcoins from his personal electronic wallet to the public address of Rubinchuk’s wallet.
Cypert also paid a fee of about $3.50, which goes to reward miners and keep the system running.
Then Rubinchuk watched bitcoin’s value go up and down as he waited to convert his digital money into dollars.
BLOCKCHAIN BLUES
Rubinchuk wanted to convert quickly in case bitcoin’s value suddenly dropped against the dollar, costing him money. The fear is well-founded, since bitcoin’s value can gain or lose more than $400 in a half-hour.
But the digital currency service he uses required him to wait for multiple confirmations from the bitcoin network before he could convert it into dollars, a process that can be affected by network congestion and other factors. Rubinchuk recalls waiting about 30 to 45 minutes.
“I’m sitting there on pins and needles checking every five minutes if it’s available,” he said.
Rubinchuk converted the sale into dollars with bitcoin just slightly below where it was at the time of the sale earlier that evening. He made about $7 less than the sale price.
The money was in his business’s bank account within 48 hours.
Rubinchuk soon after signed up for a separate merchant account through another provider that assesses him a 1 percent fee on all transactions, insulating him from short-term volatility. He compares it favorably to credit card fees that run 2 to 3 percent for merchants.
KEEPING IT LEGAL
Digital currencies are notoriously used by criminals to transfer funds anonymously. But Rubinchuk told the tax collector about this transaction.
In a standard IRS form for cash payments over $10,000, he reported the money he received, from whom it came and the fact that it originated “via bitcoin.”
Cypert avoided sales tax under a federal law covering service members that lets him retain his official residency in Alaska, which does not have a sales tax.
But he will pay taxes on a long-term capital gain.
YOUR TIME MAY VARY
Bitcoin miner fees have dropped markedly this year, and advocates say congestion issues are being solved by new technologies. Rubinchuk waited about 15 minutes to make a dollar exchange last week for his second bitcoin sale, a 2016 Hyundai Elantra.
And recently in Hillsboro, Oregon, Jeff Hanzlik bought $288 worth of marijuana-growing supplies from a store in a transaction that took a few minutes to finalize. He transmitted 0.03305451 in bitcoins from his phone, which read a code on the merchant’s tablet. The same phone app allowed Hanzlik to choose to pay about a quarter in fees.
“Once you understand what this technology is and this genie’s out of the bottle, you’re not going to have any choice but to be using it in the future,” Hanzlik said.
But the bitcoin network at this stage is still not suited to smaller, everyday transactions, said Christian Catalini, founder of the Massachusetts Institute of Technology’s Cryptoeconomics Lab.
“If you’re thinking about paying for coffee in bitcoin, that’s not what it’s good at right now,” he said. “Things can change.”


Closing Bell: Saudi main index rises to close at 11,864 

Updated 24 November 2024
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Closing Bell: Saudi main index rises to close at 11,864 

RIYADH: Saudi Arabia’s Tadawul All Share Index rose on Sunday, gaining 24.38 points, or 0.21 percent, to close at 11,864.90. 

The benchmark index recorded a trading turnover of SR4.22 billion ($1.12 billion), with 124 stocks advancing and 99 declining. 

The Kingdom’s parallel market Nomu also posted gains, climbing 345.06 points, or 1.13 percent, to close at 30,885.34, as 49 stocks advanced and 32 declined. 

The MSCI Tadawul Index increased by 4.74 points, or 0.32 percent, to close at 1,491.56. 

The best-performing stock of the day was Arabian Contracting Services Co., whose share price surged 9.97 percent to SR167.60. 

Other notable gainers included Saudi Reinsurance Co., rising 4.97 percent to SR45.45, and Saudi Public Transport Co., which climbed 3.98 percent to SR23.00.     

Al-Baha Investment and Development Co. led the decliners, falling 6.06 percent to SR0.31. Aldrees Petroleum and Transport Services Co. dropped 4.33 percent to SR123.60, and Batic Investments and Logistics Co. declined 3.23 percent to SR3.59. 

Leejam Sports Co. announced the opening of four new fitness centers. These include a men’s center and the first ladies’ center in Al-Rass city, Qassim Province, as well as the first men’s and ladies’ centers in Al-Qunfidah city, Makkah Province.  

Branded under “Fitness Time” and “Fitness Time - Ladies,” the centers will feature state-of-the-art facilities, high-spec sports equipment, and modern designs. 

The financial impact of these openings is expected to reflect in the fourth quarter of 2024. Despite the announcement, Leejam Sports Co. closed the session at SR180, down 0.34 percent. 

Obeikan Glass Co. reported a net profit of SR29.89 million for the nine months ending Sept. 30, a 58.3 percent drop from the same period in 2023. The decline was attributed to lower average selling prices due to global market conditions and increased administrative expenses related to a new investment in a subsidiary, Saudi Aluminum Casting Foundry.  

The stock ended at SR49.60, down 1.59 percent. 

United Mining Industries Co. announced the issuance of two exploration licenses for gypsum and anhydrite ore from the Ministry of Industry and Mineral Resources. The company plans to conduct studies to determine the availability of raw materials, with financial impacts to be announced upon completion.  

Its stock closed at SR39.60, up 0.26 percent.


Morgan Stanley receives approval to establish regional HQ in Saudi Arabia

Updated 24 November 2024
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Morgan Stanley receives approval to establish regional HQ in Saudi Arabia

RIYADH: US-based investment bank Morgan Stanley has been granted approval to establish its regional headquarters in Saudi Arabia, as the Kingdom continues to attract international investment.

This move aligns with Saudi Arabia’s regional headquarters program, which offers businesses various incentives, including a 30-year exemption from corporate income tax and withholding tax on headquarters activities, as well as access to discounts and support services.

Saudi Investment Minister Khalid Al-Falih confirmed the progress of this initiative in October, stating that the Kingdom has successfully attracted 540 international companies to set up regional headquarters in Riyadh—exceeding its 2030 target of 500.

“Establishing a regional HQ in Riyadh reflects the growth and development of Saudi Arabia and is a natural progression of our long history in the region,” said Abdulaziz Alajaji, Morgan Stanley’s CEO for Saudi Arabia and co-head of the bank’s Middle East and North Africa operations, according to Bloomberg.

Morgan Stanley first entered the Saudi market in 2007, launching an equity trading business in Riyadh, followed by the establishment of a Saudi equity fund in 2009.

This approval follows a similar move by Citigroup earlier this month, with the bank also receiving approval to establish its regional headquarters in Saudi Arabia.

Fahad Aldeweesh, CEO of Citi Saudi Arabia, emphasized that this development would support the firm’s future growth in the Kingdom.

Goldman Sachs, another major Wall Street bank, also received approval in May to set up its regional headquarters in Saudi Arabia.

Prominent international firms that have already established regional headquarters in Saudi Arabia include BlackRock, Northern Trust, Bechtel, PepsiCo, IHG Hotels and Resorts, PwC, and Deloitte.

In addition, a recent report from Knight Frank noted that Saudi Arabia's regional headquarters program has led to increased demand for office space in Riyadh, with the city’s office stock expected to grow by 1 million sq. meters by 2026.

In August, Kuwait’s Markaz Financial Center echoed this sentiment, predicting a significant uptick in the Kingdom’s real estate market during the second half of the year, driven by the regional headquarters program.


QatarEnergy strengthens global footprint with offshore expansion in Namibia 

Updated 24 November 2024
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QatarEnergy strengthens global footprint with offshore expansion in Namibia 

RIYADH: QatarEnergy has expanded its portfolio through a new agreement with TotalEnergies to increase its ownership stakes in two offshore blocks in Namibia’s Orange Basin. 

According to a press release, the state-owned energy firm will acquire an additional 5.25 percent interest in block 2913B and an additional 4.7 percent interest in block 2912 under the new deal, subject to customary approvals.  

Once finalized, QatarEnergy’s share in these licenses will rise to 35.25 percent in block 2913B and 33.025 percent in block 2912.  

Saad Sherida Al-Kaabi, Qatar’s minister of state for energy affairs and CEO of QatarEnergy, said: “We are pleased to expand QatarEnergy’s footprint in Namibia’s upstream sector. This agreement marks another important step in working collaboratively with our partners toward the development of the Venus discovery located on block 2913B.” 

TotalEnergies, the operator of both blocks, will retain 45.25 percent in block 2913B and 42.475 percent in block 2912. Other partners include Impact Oil & Gas, which holds 9.5 percent in both blocks and the National Petroleum Corp. of Namibia, which owns 10 percent in block 2913B and 15 percent in block 2912.   

Located about 300 km off the coast of the African country, in water depths ranging from 2,600 to 3,800 meters, these blocks host the promising Venus discovery. The Venus field has attracted considerable attention as a significant find that could impact Namibia’s energy future.  

This offshore acquisition complements QatarEnergy’s recent ventures into renewable energy. In October, the company announced a 50 percent stake in TotalEnergies’ 1.25-gigawatt solar project in Iraq.  

The initiative, part of Iraq’s $27 billion Gas Growth Integrated Project, aims to enhance Iraq’s energy self-sufficiency by addressing its reliance on electricity imports and reducing environmental impacts.   

The solar project, set to deploy 2 million bifacial solar panels, will generate up to 1.25 GW of renewable energy at peak capacity, supplying electricity to approximately 350,000 homes in Iraq’s Basra region.  

QatarEnergy will share equal ownership of the project with TotalEnergies, which retains the remaining 50 percent. 

The firm’s dual focus on traditional and renewable energy highlights its strategic approach to meeting global demands while addressing sustainability concerns.  

Its involvement in Namibia’s offshore blocks and Iraq’s shift toward renewable energy highlights a well-rounded portfolio that includes fossil fuels and clean energy investments. 


GCC lending growth hits 3.1% in Q3, Saudi Arabia leads: report

Updated 24 November 2024
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GCC lending growth hits 3.1% in Q3, Saudi Arabia leads: report

RIYADH: Listed banks in the Gulf Cooperation Council achieved their highest lending growth in 13 quarters, with loans rising 3.1 percent to $2.12 trillion in the third quarter.

According to a report by Kamco Invest, Saudi Arabia led the surge with a 3.7 percent quarter-on-quarter increase in gross loans, marking its fastest growth in nine quarters.

Qatar followed with a 1.9 percent rise, while Bahrain recorded a 1.2 percent increase.

This growth aligns with the International Monetary Fund’s projection of 3.5 percent nominal gross domestic product growth for GCC nations in 2024, driven by the strong performance of non-oil sectors in the UAE, Qatar, Bahrain, and Saudi Arabia.

The region’s commitment to diversification and long-term infrastructure development continues to drive its financial sector.

 Despite record lending levels, aggregate net income for GCC-listed banks increased marginally by 0.4 percent to $14.9 billion.

While total revenues grew 4.1 percent, supported by a 2.8 percent rise in net interest income and a 6.9 percent increase in non-interest income, higher expenses and impairments weighed on profitability.

Loan impairments rose to a three-quarter high of $2.5 billion, with increases in the UAE, Saudi Arabia, Oman, and Bahrain partially offset by declines in Qatar and Kuwait.

Customer deposits across GCC-listed banks reached a nine-quarter high, rising 3.2 percent to $2.5 trillion.

Saudi Arabia led with a 4.6 percent increase, while the UAE maintained its position as the largest deposit market at $828 billion.

Deposits in Oman and Qatar also saw solid growth, contributing to the region’s overall resilience.

The aggregate loan-to-deposit ratio remained stable at 81.4 percent, with Saudi Arabia reporting the highest ratio of 92.8 percent and the UAE the lowest at 69.3 percent, reflecting its strong liquidity position.

The GCC banking sector’s resilience is further demonstrated by its consistent focus on operational efficiency. The cost-to-income ratio declined slightly to 39.9 percent, highlighting the sector’s ability to manage expenses effectively despite rising costs. 

As the region continues to diversify its economy, the banking sector remains a critical enabler of growth, funding large-scale projects and fostering financial innovation.

While rising funding costs and potential interest rate cuts may pose challenges, the sector’s robust fundamentals and strategic focus on non-oil growth position it for sustainable expansion.

The commitment to balancing economic diversification with financial innovation is expected to drive the sector’s continued success, reinforcing its pivotal role in the GCC’s broader economic landscape.


Saudi Arabia launches Ramlah Co. to boost tourism in Hail region

Updated 24 November 2024
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Saudi Arabia launches Ramlah Co. to boost tourism in Hail region

RIYADH: Saudi Arabia’s Ministry of Tourism is supporting private sector growth by launching Ramlah Co. for Tourist Trips and Resorts, a new initiative to attract visitors to the Hail region.

This undertaking is part of the broader Saudi Winter Season campaign, which offers unique experiences in its key destinations.

The Minister of Tourism Ahmed Al-Khateeb inaugurated the Ramlah Co. during a visit to Hail, signaling the Kingdom’s ongoing efforts to develop the tourism sector and foster private-sector participation, the Saudi Press Agency reported.  

Al-Khateeb, also the chairman of the Saudi Tourism Authority, emphasized that the launch of the company aligns with Saudi Arabia’s Vision 2030 objectives to diversify the economy and promote tourism as a key growth sector. 

The Saudi Winter Season, which began in October and runs through the first quarter of 2025, highlights seven key destinations, including Riyadh, Jeddah, and AlUla, as well as the Red Sea, the Eastern Province, Madinah, and Hail.  

The campaign is designed to showcase the Kingdom’s cultural and natural attractions, with private companies like Ramlah Co. offering tailored experiences for visitors. 

Ramlah Co. has met all licensing requirements set by the Ministry of Tourism and will offer a diverse range of activities in the region, from desert camping and sandboarding to off-road safaris and historical tours of landmarks such as Jubbah.  

The company will also provide stargazing experiences and flexible tourism packages designed for families, groups, and solo travelers.  

During his visit, Al-Khateeb announced several initiatives aimed at further developing the region’s tourism infrastructure. He revealed plans for 1,000 international training opportunities and 10,000 domestic training programs for Hail residents, according to the minister’s official X account.  

He also highlighted efforts to enhance tourism initiatives and projects, underscored by the signing of two memoranda of understanding with the Hail Development Authority.  

Speaking on future investments, Al-Khateeb noted that the Tourism Development Fund is currently evaluating support for several key projects in the Hail region.   

“The fund is studying supporting a number of distinguished projects, the value of which exceeds SR1 billion and is expected to contribute to providing more than 850 hotel rooms in the area,” Al-Khateeb said.   

These projects are anticipated to boost Hail’s hospitality capacity while fostering economic growth and job creation.  

The minister also visited the Hail Tourism Development Authority, where he reviewed several qualitative initiatives designed to enhance the region’s tourism offerings.   

The launch of Ramlah Co. reflects the government’s commitment to developing regional tourism hubs and providing a platform for private companies to play a pivotal role in the country’s tourism sector.

Hail, known for its UNESCO-listed Hail Rock Art and Fayd Historic City, is one of the Kingdom’s most culturally rich regions. The area also features natural attractions like Al-Adham Park, offering tourists a range of recreational activities.

Al-Khateeb continues his tour as part of the Winter Season campaign, with AlUla being his next stop.