Ohio Bitcoin Payment System Suspended Amid Legal Questions

Concerns over how former State Treasurer Josh Mandel set up the system that allows residents and businesses to pay taxes via bitcoin prompted state officials to halt use and launch an inquiry into its creation.

by Andrew J. Tobias, The Plain Dealer / October 3, 2019
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(TNS) — Less than a year after launching it, Ohio has suspended its online portal that allows residents and businesses to pay their taxes using bitcoin.

And it’s not clear if or when it’s coming back.

Elected officials on the Board of Deposit, a state panel that oversees the state’s banking and financial methods, voted Wednesday to suspend OhioCrypto.com while Attorney General Dave Yost researches the legalities of how it was set up. The website has been taken down and replaced with a page re-directing users back to the Treasurer’s Office’s main site.

State Treasurer Robert Sprague said Wednesday he asked for the review after he raised questions about how it was set up by his predecessor, Josh Mandel. He said he and his staff reviewed the program as part of its routine diligence after he took office in January.

Sprague said he believes it’s possible the payment-processing contract to run OhioCrypto.com should have been competitively bid under state law. He also told reporters that Mandel’s office never put the program through the state’s administrative rule-making process that formally lays out how programs are implemented.

“It was stood up very quickly,” Sprague said.

Mandel, who has withdrawn from public life since leaving elected office in January, didn’t return a message seeking comment.

Sprague said he supports research into blockchain, the de-centralized database technology used to power bitcoin and other virtual currencies. But he was noncommittal about whether he would re-launch OhioCrypto.com once Yost’s review is complete. The state has accepted fewer than 10 tax payments since the program went live.

Sprague said the lack of use by taxpayers can be part of the debate over whether the program should continue.

"This is why we’re having this review in a very public forum,” he said.

He said part of Yost’s review will determine whether the treasurer’s office can re-launch the program unilaterally, or whether approval will be needed from other members of the Board of Deposit, which is made up of Yost, Sprague and State Auditor Keith Faber. Sprague, Yost, Faber and Mandel are all Republicans.

“Once we get the opinion back [from Yost], we’ll go from there,” Sprague said.

Mandel announced OhioCrypto.com late last November, launched weeks before he left office, via an article in the Wall Street Journal. He touted the program as the first of kind, and said it was meant to market Ohio as a place that embraces innovative technology.

During and after Wednesday’s meeting, Yost, whose vote may be needed to restore OhioCrypto.com, raised concerns about the program’s merits.

“This is a payment device used by organized crime, and people in various black markets who don’t want to have traceable bank records,” he said. “There are good businesses uses, but I don’t see any of those applying to paying your taxes.

Faber didn’t share his thoughts on the merits of OhioCrypto.com before leaving the meeting. A message has been left with a spokesperson seeking comment.

Bernie Moreno, a Cleveland businessman who is a prominent booster of the blockchain technology, said he hopes Sprague will re-launch the program.

“My first reaction would be let’s get it done properly,” he said. “My second reaction is, let’s get it back in place once the process is followed.”

©2019 The Plain Dealer, Cleveland. Distributed by Tribune Content Agency, LLC.

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