6 ms·

I've looked at doing this in Europe before, interest-bearing completely changes the classification of the prepayment. I didn't dig too deeply, but the general g

I've looked at doing this in Europe before, interest-bearing completely changes the classification of the prepayment. I didn't dig too deeply, but the general gist was that regulation-wise it really wasn't worth doing for a relatively gimmick-level feature

Imustaskforhelp 2mo ago
Very interesting I am curious how this is the case, could you share some more details/information about it? Also, how does it compare to say, accepting gold or treating a gold based ledger instead treating gold as a currency and similar ideas? Also could this re-classification be ever useful too? For examples bonds being treated in such way?
- bojangleslover 2mo ago
  It's the case because once you buy cloud credits you are in an entirely unregulated space. At Carolina Cloud, that means your cloud credits are nothing more than an audited and backed up DB entry. Therefore, we can do whatever we want with them. We could double them every 6mo if we wanted. We settled on something more reasonable (SOFR). Not unlike the hyperscalers giving $100k+ to startups and it not counting as income for C-corp tax purposes. Totally unregulated space!
- infecto 2mo ago
  What is surprising? Paying interest on cash is effectively a financial instrument. Not sure what gold has to do with it. If you pay a business cash and they turn it into credits that pay interest that would not pass a smell test. No customer would truly care about this and in most jurisdictions you would probably go through a lot more paperwork because of the interest payments.
bko 2mo ago
I've heard about similar regulatory barriers especially in finance so this does not surprise me. A long time ago I remember reading about banks that want to provide incentives for saving that amount to basically lottery tickets. The idea is that people aren't thrilled about a savings account that pays 2%, but if instead they offered a monthly 1 in 50 chance to get 100% return (same expected value, ignore compounding), people would like that a lot more. But this amounted to essentially a lottery and that's a state monopoly.
- dmurray 2mo ago
  Ireland, like the UK, has a system of Prize Bonds that work exactly like this, administered by the state. The expected return on them is actually quite competitive, depending on your tax situation. Everyone here seems to have got a present of €20 Prize Bonds for a 10th birthday from an aunt or grandmother, yet people from outside are always surprised that such a product can exist.
  - mnahkies 2mo ago
    My return on premium bonds this year (so far) is roughly 3.2% annualised - it's not bad considering that it's tax free, and secured by the government
- jancsika 2mo ago
  What's the difference between a regulatory barrier and a Chesterton's fence?
- lurkshark 2mo ago
  In the US they call those Prize-Linked Savings Accounts. They’re actually legalized in a majority of states but aren’t marketed particularly heavily (especially when compared to lotteries, sportsbooks, prediction markets, …) https://en.wikipedia.org/wiki/Prize-linked_savings_account https://en.wikipedia.org/wiki/Prize-linked_savings_account
bojangleslover 2mo ago
This is interest on credits, not on cash. Once you start paying interest on cash you need a banking license. I think you'd be fine even in Europe paying interest on credits.
- infecto 2mo ago
  Why would you think credits and cash would be treated differently? I am not a EU tax expert but it would be shocking if that’s the case because you could create some pretty interesting schemes if by turning cash into a “credit” meant it was treated entirely different. Maybe that’s the case for the EU but it would be surprising.
  - addandsubtract 2mo ago
    Probably because you can't turn credits back into cash.
    - infecto 2mo ago
      Is that a law?
      - kachnuv_ocasek 2mo ago
        I'd guess that's a part of the TOS.
        infecto 2mo ago
        TOS is not the point. The root of this thread was surprise over rules around interest. I am saying it’s not surprising because companies could then easily create weird schemes.
        alias_neo 2mo ago
        I think you're overcomplicating it. It's "ok" _because_ the credits can't be turned back into cash (thanks to their TOS). If some business tried some clever scheme where they offer this "interest" on credits that _can_ be turned back into cash, they'd be breaking the law and would need a banking license, it's already covered.
jwrallie 2mo ago
In some regulations you can also be expected to declare and pay tax on the money you earned from the interest, which can be annoying to do for such small values.
- dannyw 2mo ago
  Definitely annoying, and YMMV, but a lot of jurisdictions don't treat credits (that cannot be redeemed back to cash) as income. In the same way signing up for $App and getting $100 in API credits isn't income; paying a bill early for a 3% discount isn't income; and frequent flyer points or cash back you get on our credit card isn't income.
mynegation 2mo ago
I think that is why Carolina Cloud pays the interest in credits (redeemable for their services), as opposed to cash. It is not much different how some business give you a discount if you pay the amount upfront or in a more convenient form of payment.
- dannyw 2mo ago
  At scale, a decent number of commercial/business agreements have Net Discount provisions (or provisions to that effect); basically get a % discount if you pay within X days; or pay the full amount with no discount in Y days, so the general arrangement is far from unorthodox. Opening it up to everyone is nice.
linohh 2mo ago
Which is a good thing. While it may seem strange to regulate these things for good faith actors, it's obvious why it's a great when thinking about bad faith actors.
- arcfour 2mo ago
  Yes, I love maximally restricting rights of others for unclear reasons.

Imustaskforhelp 2mo ago

Very interesting I am curious how this is the case, could you share some more details/information about it? Also, how does it compare to say, accepting gold or treating a gold based ledger instead treating gold as a currency and similar ideas? Also could this re-classification be ever useful too? For examples bonds being treated in such way?

bojangleslover 2mo ago
It's the case because once you buy cloud credits you are in an entirely unregulated space. At Carolina Cloud, that means your cloud credits are nothing more than an audited and backed up DB entry. Therefore, we can do whatever we want with them. We could double them every 6mo if we wanted. We settled on something more reasonable (SOFR). Not unlike the hyperscalers giving $100k+ to startups and it not counting as income for C-corp tax purposes. Totally unregulated space!
infecto 2mo ago
What is surprising? Paying interest on cash is effectively a financial instrument. Not sure what gold has to do with it. If you pay a business cash and they turn it into credits that pay interest that would not pass a smell test. No customer would truly care about this and in most jurisdictions you would probably go through a lot more paperwork because of the interest payments.

bko 2mo ago

I've heard about similar regulatory barriers especially in finance so this does not surprise me. A long time ago I remember reading about banks that want to provide incentives for saving that amount to basically lottery tickets. The idea is that people aren't thrilled about a savings account that pays 2%, but if instead they offered a monthly 1 in 50 chance to get 100% return (same expected value, ignore compounding), people would like that a lot more. But this amounted to essentially a lottery and that's a state monopoly.

dmurray 2mo ago
Ireland, like the UK, has a system of Prize Bonds that work exactly like this, administered by the state. The expected return on them is actually quite competitive, depending on your tax situation. Everyone here seems to have got a present of €20 Prize Bonds for a 10th birthday from an aunt or grandmother, yet people from outside are always surprised that such a product can exist.
- mnahkies 2mo ago
  My return on premium bonds this year (so far) is roughly 3.2% annualised - it's not bad considering that it's tax free, and secured by the government
jancsika 2mo ago
What's the difference between a regulatory barrier and a Chesterton's fence?
lurkshark 2mo ago
In the US they call those Prize-Linked Savings Accounts. They’re actually legalized in a majority of states but aren’t marketed particularly heavily (especially when compared to lotteries, sportsbooks, prediction markets, …) https://en.wikipedia.org/wiki/Prize-linked_savings_account https://en.wikipedia.org/wiki/Prize-linked_savings_account

bojangleslover 2mo ago

This is interest on credits, not on cash. Once you start paying interest on cash you need a banking license. I think you'd be fine even in Europe paying interest on credits.

infecto 2mo ago
Why would you think credits and cash would be treated differently? I am not a EU tax expert but it would be shocking if that’s the case because you could create some pretty interesting schemes if by turning cash into a “credit” meant it was treated entirely different. Maybe that’s the case for the EU but it would be surprising.
- addandsubtract 2mo ago
  Probably because you can't turn credits back into cash.
  - infecto 2mo ago
    Is that a law?
    - kachnuv_ocasek 2mo ago
      I'd guess that's a part of the TOS.
      - infecto 2mo ago
        TOS is not the point. The root of this thread was surprise over rules around interest. I am saying it’s not surprising because companies could then easily create weird schemes.
        alias_neo 2mo ago
        I think you're overcomplicating it. It's "ok" _because_ the credits can't be turned back into cash (thanks to their TOS). If some business tried some clever scheme where they offer this "interest" on credits that _can_ be turned back into cash, they'd be breaking the law and would need a banking license, it's already covered.

jwrallie 2mo ago

In some regulations you can also be expected to declare and pay tax on the money you earned from the interest, which can be annoying to do for such small values.

dannyw 2mo ago
Definitely annoying, and YMMV, but a lot of jurisdictions don't treat credits (that cannot be redeemed back to cash) as income. In the same way signing up for $App and getting $100 in API credits isn't income; paying a bill early for a 3% discount isn't income; and frequent flyer points or cash back you get on our credit card isn't income.

mynegation 2mo ago

I think that is why Carolina Cloud pays the interest in credits (redeemable for their services), as opposed to cash. It is not much different how some business give you a discount if you pay the amount upfront or in a more convenient form of payment.

dannyw 2mo ago
At scale, a decent number of commercial/business agreements have Net Discount provisions (or provisions to that effect); basically get a % discount if you pay within X days; or pay the full amount with no discount in Y days, so the general arrangement is far from unorthodox. Opening it up to everyone is nice.

linohh 2mo ago

Which is a good thing. While it may seem strange to regulate these things for good faith actors, it's obvious why it's a great when thinking about bad faith actors.

arcfour 2mo ago
Yes, I love maximally restricting rights of others for unclear reasons.