Crypto Old-Head Otoh Talks Casascius Bitcoins, Tax Havens and Old Friends

Otoh is a speaker at this year’s Consensus festival, in Austin, Texas, May 29-31.

In an interview with CoinDesk, Otoh explained that he had never sold any bitcoins before, instead opting to hoard them as a personal form of cold storage during the recent auction of over 200 physical Bitcoins – marking Heritage auction firm’s first crypto sale.

Mike Caldabsell, known as “Casascius” in Bitcoin communities due to his bluntness, devised Casascius coins as an alternative method for exchanging bitcoins during direct transactions. These unique coins incorporated a Bitcoin private key within their metal construction.

As a crypto investor, I’d put it this way: Back in 2013, I came across some unique digital coins called Casascius. These coins were last produced around that time, and there are approximately 90,000 of them in circulation today. Each coin bears a physical QR code that can be scanned to access the corresponding bitcoin balance. However, it’s important to note that I, like many others, obtained these coins from manufacturers other than Caldwell. Bobby Lee is one such manufacturer who also produced similar coins.

Bitcoins’ legendary backstory and tangible past include Casascius coins, which are now highly prized by collectors. Some of these coins hold such significant value that they necessitate declaration to U.S. Customs upon entry into the country. Essentially, Casascius coins represent the most enduring and iconic depiction of this purely digital currency.

“Otoh felt it was appropriate to part with some of the actual coins,” he remarked. “Allow others to take care of them and delight in their possession.”

As a crypto investor, I’m all too aware of the risks that come with holding physical bitcoins. It’s convenient, but it makes the assets as vulnerable as a $20 bill in a purse, easily stolen. Sadly, I can relate to this issue as I once experienced what I believe was a theft. Around a decade ago, I received a package containing my bitcoins, but upon inspecting it, I noticed clear signs of tampering on the box.

Approximately $20,000 worth of Bitcoin, representing 55 units, have gone missing from his possession. Today, this amount is equivalent to around $3.5 million. This substantial sum, as he acknowledged, brings joy to him, and he is prepared to pay a generous half-million-dollar reward for their recovery. He expressed his intent not to press charges if the Bitcoin are returned to him without any conditions.

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As a crypto investor, I recently had the opportunity to chat with Otoh before Consensus. During our conversation, he shared some fascinating insights about his recent auction of vintage physical bitcoins and his early investments in cryptocurrencies like Ethereum‘s initial coin offering. He also discussed how he manages his wealth by diversifying into properties around the world and residing in a tax haven located in the British Channel Islands.

Could you give a sense of what you’re talking about at Consensus?

As a stand-in for Mike Caldwell, the inventor of Casascius coins, I’ll be representing our panel on physical Bitcoins today. Unfortunately, he couldn’t join us.

Oh, that’s so cool.

As a researcher, I’d be thrilled to have the opportunity to meet Bobby Lee and Charlie Lee in person. They graciously invited me to step in as a panelist when they identified a need for a representative investor.

Do you remember buying your first coin?

I recall vividly attending the Bitcoin Conference in London during the winter of 2012. Having become interested in Bitcoin around July 2011, I was intrigued to meet some privacy-conscious Germans there, who wore masks and offered physical coins for sale. They had both 10 regular Bitcoins and a 10th bitcoin unit piece available. The price, including premiums, hovered around $12 per Bitcoin at the time.

What does Otoh stand for?

Bitcoin and crypto are an “alternative perspective” in finance for me. I often see things from different angles, not necessarily arguing but exploring various viewpoints. The acronym “BUT” (which stands for “on the other hand”) is a common way to express this concept, and it’s how I came up with my nickname on BitcoinTalk forum. At the time, I didn’t put much thought into it; it was just a convenient label.

Are there any particular memories of the early days of Bitcoin that you remember fondly?

As a newcomer in the scene, receiving my first digital coin was an exhilarating experience. Back then, giving away free coins was common practice. When I entered the world, however, the word had already spread. The coins weren’t whole ones anymore but just fractions of them. Nonetheless, having my own digital address and receiving those tiny tokens to experiment with was still an enjoyable part of the journey.

During that period, I frequently traveled between Europe and the United States while engaging in transactions in both regions. Bitcoin made this process remarkably simple by enabling seamless money transfers.

A few of the other memories are more traumatic. It’s very easy to mess up. As you learn as you go.

You’ve probably lost more bitcoins than most people have today.

If we include the items that were taken from me in the past, the value of that list I made nine years ago amounts to several million dollars, which is currently missing or stolen.

What do you suspect happened there? A rogue employee?

As an analyst, I believe it’s highly plausible that a rogue USPS employee came across a package containing precious metal coins, such as Gold Eagles or Silver Eagles, while on duty. Intrigued by their discovery, they may have used a box cutter to open the package for a closer look. The employee’s reaction could vary; perhaps they were disappointed upon finding only tokens and discarded them, or maybe they found the coins intriguing and kept them for themselves.

As an analyst, I’ve pondered over this situation many times, hoping that I would recall where I hid certain items. However, it seems illogical to me – I take great care of my belongings and keep them organized and categorized. Yet, a friend of mine recalls receiving a package from my residence during that time, which was later opened and resealed.

Is there anything that you want to say about the OTOH Collection of Physical Cryptocurrency?

After ten years, I came to the point of making a decision: it was time for me to part with my possessions. I hadn’t sold any of them before, instead choosing to hoard them as a personal form of investment or savings, akin to cold storage for digital currencies. Now that I’ve successfully sold all my digital crypto coins, I felt compelled to let some of my physical ones be passed on to new owners. Letting others appreciate and cherish these items seemed like the appropriate next step.

As a crypto investor, I’ve been pondering over the question of whether it’s wiser to put my funds into Bitcoin or physical real estate. Both have their unique advantages and risks. Bitcoin offers the potential for high returns with its volatile price movements, while real estate provides a tangible asset that generates income through rental payments or capital gains upon sale. Ultimately, I believe the best choice depends on individual circumstances, risk tolerance, and investment goals. If you’re looking for quick profits and aren’t deterred by market volatility, Bitcoin might be your pick. On the other hand, if you prefer long-term stability and passive income, real estate could be a better fit. It’s essential to consider all factors before making an informed decision.

Bitcoins present a significant risk with the potential for substantial rewards, while real estate functions as a protective measure and is less susceptible to theft.

If I were still in my twenties, I would likely have a larger proportion of my funds invested in cryptocurrencies. However, at this stage in my life, I prefer the stability that comes with owning multiple properties and take pleasure in their renovation projects.

Are you interested in other digital assets?

Following my investment in Litecoin, I shifted my focus to Dash and became a significant investor, contributing to its development in various ways. However, my interest waned, and I moved on to other projects. At a Dutch conference, I was strongly advised to explore Ethereum and took part in their Initial Coin Offering (ICO). I acquired 100 bitcoins’ worth of Ethereum, which equated to approximately 10,000 tokens. Regrettably, I prematurely sold these for a mere $2 each, resulting in a profit of around 100% or 200%, but the potential gains could have amounted to over $800 million. Currently, I’m predominantly invested in Bitcoin.

As a crypto investor, I’ve been primarily focusing on bitcoin’s role as a means of exchange due to its transactional capabilities. However, I’m intrigued by the perspective that it shares similarities with gold. Can you expand on why you believe this to be the case?

In my opinion, this asset class excels as a investment choice. Its primary function currently is as the best-performing investment in history, with continuous growth. Valued at over a trillion dollars, it serves as an effective store of value. Originally conceived by Satoshi as a hedge against questionable actions of governments and financial institutions regarding our daily use currencies, it offers more versatility than gold. With the ability to transfer it instantly across borders with minimal fees and no physical transportation required, it’s truly remarkable that such a development has emerged. We are still in the early stages, but the impact on the world has already been immense.

What have been your biggest purchases made with crypto?

As a neutral observer analyzing your situation, I can relate that my experience with cryptocurrency trading has been quite limited. I primarily convert my fiat currency into crypto and subsequently convert it back into fiat money.

Capital gains taxes make spending crypto sort of annoying, to some extent.

Many individuals, including myself, are privileged to reside in countries with no capital gains or income tax. This means I avoid paying taxes on my investments and earnings when I withdraw them, as long as I am present there in person.

As an analyst, I’d like to ask about your approach to managing the tax implications of owning a property in California. Since California state tax authorities might seek to impose income tax on certain earnings related to the property, could you please share some insights into how you ensure compliance and minimize potential tax burdens?

As a researcher studying international taxation, I hold properties in various countries worldwide, but this doesn’t automatically make me a tax resident in any of those places. I meticulously keep track of my days to avoid exceeding the six-month threshold. By ensuring my annual physical presence is below that limit, I remain exempt from paying taxes in those jurisdictions. Additionally, I don’t engage in any business activities there.

Do you mind if I ask what tax haven?

As an analyst, I’d describe Sark, a tiny three-square-mile island in the British Channel Islands, as an intriguing anomaly in the world of taxes. Unlike most places, this tax haven asks for minimal contributions from its residents, making it particularly alluring. The freedom from meticulous record-keeping is what sets it apart, especially when dealing with complex transactions like converting altcoins to bitcoin and other alternative currencies before eventually settling in dollars. I can’t help but feel sympathy for those tasked with keeping such records and presenting them to the tax authorities.

Did you give up your passport?

acquiring a passport from Guernsey, the principal island in the English Channel. The two are quite similar, with the same benefits essentially, but I have yet to make the switch. Ultimately, my nationality doesn’t hold significant weight; what truly matters is where I reside for fiscal purposes.

How would you describe your political views?

As I grow older, I may have developed some more traditional views in certain aspects of life. However, at heart, I identify as a capitalist, holding the belief that this system is beneficial for people. Politically, I’m not particularly active or vocal. In my past, I might have leaned towards anarchism, but nowadays I tend to go along with the prevailing opinions and trends without actively advocating for change myself.

Is there anything more you want to say about the possible theft of those Casascius coins?

Approximately 55 bitcoins held a value of around $3.5 million at present day prices. At the time they were lost or stolen, their worth was approximately $13,000 – a significant amount then, but mere peanuts compared to today’s valuation. Consequently, I am more than willing to extend a reward of half a million dollars for their recovery. No legal action will be taken against the finder or returnee; my only wish is for the safe return of these valuable digital assets.

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It is unlikely that they have disappeared, as their addresses remain unchanged. I was taken aback when I recently verified that these addresses have not been altered or defaced in any way. Therefore, it is reasonable to assume that they are still in existence somewhere.

Last question, what are you looking forward to at Consensus?

I’ve experienced some exciting journeys involving actual coins. On one occasion, I had to travel to Shanghai personally to retrieve them since they couldn’t be sent through the mail at that moment. The trip to Shanghai was quite an adventure on its own.

There are individuals I’ve connected with through online forums and the internet whom I believe it would be delightful to meet in person, should we cross paths at conferences. These encounters provide opportunities to share knowledge and ideas that might not otherwise materialize if we were confined to our home computers.

So I’m looking forward to it. It’s quite exciting. It’s my first visit to Texas.