DIGITAL FINANCE (FIN 1107)

FINAL EXAMINATION (A.Y. 2022-2023, 1st Semester)

ANALYSIS AND APPLICATION: Read the scenario below and answer the following essay question
concisely.

From a Facebook post of Charles Peralo on 27 September 20221, the following are written:

“36.8 billion dollars was Colorado’s state budget in 2021.

32.4 billion was its state revenue in 2019. Although some numbers for 2021 are still
being accounted for, it’s pretty proportionate to the 2019 numbers.

Colorado, today, made a big move: becoming the first state to accept Bitcoin as a form
of payment for taxes.

Take note that the state has a pretty unique tax structure compared to most states in
how they collect revenue. Where most states in the US have property taxes as the
primary income tax source, Colorado only has a 0.4% rate, putting it as one of the lowest
taxed states on property, yet its imposed state income tax is higher at 4.6%, bringing in
over 65% of tax revenue. It has also capitalized early on marijuana, where the
commodity in 2021 brought 423 million dollars in tax revenue.

Now, Colorado accepting bitcoin for tax revenue is actually a big deal and I’m writing
this as someone who thinks crypto is a total scam.

The reason it’s important is this:

29.4 billion dollars was how much venture capital (VC) money went to crypto in 2021.

Just for a comparison on that, VC in startup or early phased companies in Colorado hit
6.9 billion dollars in 2021. The numbers are still growing with them from 2.5 billion in
2019. Colorado has gotten more tech heavy with Palantir relocating there, along with
companies such as Facebook, Salesforce and more setting-up offices.

The governor, Jared Polis, is also more pro-tech, publicly asking Elon Musk to relocate
Tesla to Colorado on Twitter and has the biggest tech background of anyone in politics
personally, founding Techstars and several companies to do centi-million-dollar
buyouts.

1
https://m.facebook.com/story.php?story_fbid=pfbid0253yigJFozVKEuNQL7GbwiCbbQsAPiQma6rjeadG47R
ZegExtbbchQVhuBBamuPWSl&id=100000336285076&mibextid=Nif5oz
 This makes a strong case for allowing taxes to be paid in bitcoin, because it’s good
marketing for that industry to incorporate there, even if many of the companies could
be scam rich or have problems down the road.

The other truth is it won’t impact revenue at all.

Colorado can easily make a deal with companies that will convert the bitcoin it receives
into cash. Bitcoin also likely won’t be that huge part of revenue, were they can count
capital gains returns as income taxes, but the exemptions are fairly large and today, not
even 1% of revenue for that state. This means it will be a pretty small tax issue, if any,
but Colorado in sheer marketing makes itself look better to a tech industry getting
increasingly annoyed by Colorado.”

Based on what you have learned this semester on DIGITAL FINANCE, provide a feedback on
the post. Comment on whether it has weight or not. You may say that one, some, if not all, of
the arguments and conclusions has/have bearing, but point it/them out. Explain your answer
comprehensively. You may use outside course materials. Just make sure to cite all and do not
plagiarize. (100 pts.)

*** Good luck! ***

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