Buy and Hoard, Why Your Crypto-Currency Earnings Are Subject To Taxes – March 6, 2021,
So I’ve been reading up on regulations regarding cryptocurrencies and there appears to be a growing census that is evolving to the centralization model, that is leaning more towards forcing people and entities trading or doing transactions in cryptocurrencies being forced to pay taxes in the local currency.
Why should you care? Because crypto-currencies namely bitcoin is going up in value and believed to continue to do so in the future, meaning that when you buy something in Bitcoin as an example you will inadvertently be paying a higher price, which also equates to you paying higher taxes.
Now sure in most Western Nations, paying taxes is almost voluntary as long as your not a wage slave, but… in most Western Nations when you avoid alerting your local government of your bartered transactions in fiat dollars, you could risk imprisonment.
Although these cryptocurrency tax laws aren’t rolled out yet, if you begin to read your local, State, Provincial, or Federal Tax codes, they all appear to be uniformly heading in the same direction. This direction is basically going to make buying or trading real things in cryptocurrencies a PRIVILEDGE not a right!
You’re not going to be able to usurp fiat currency laws, which in man ways solidifies cryptocurrencies as digital assets, what this ultimately equates to is that in the future only very large orders will be worth transacting in cryptocurrencies.
How the laws are being written is that governments can make you a criminal for not notifying them that you’re transacting or an owner in cryptocurrency-derived assets. If the laws are enforced or enforceable will obviously depend on your region of residence, but because transactions in crypto can be traced it could complicate your ta situation if you volunteer that information and don’t give your government access to your transactions.
What does appear to be the case when I review the new tax laws however is that a centralized digital currency will either not be transparent or realistically won’t be coming to market.
As these laws for cryptocurrencies take on a life of their own rooted in transparency and finding value, a centralized digital currency/token could not exist as a storer of value, under the cryptocurrency laws a centralized digital dollar, appears to be more of a replacement for what many Americans know as food stamps, which in and of itself as a central government entity, would resemble more of a tax discount or tax write off for the private sector.
Whereas decentralized cryptocurrencies, appear to be headed for what I deem to be an ever appreciating digital asset, worth hoarding and not spending. Now, similar to Gold, the smart money is going to buy and hold, but the base of supporters who are buying to flip, once these crypto laws are rolled out, will need to seek out some form of financial education.
Because it appears that crypto under the government is going to be reserved for the more industrious in civil society. Where I see a bit of a conflict is as the crypto-space matures, mining cryptos will not only be regulated but scrutinized, meaning there will be very little benefit to transact in cryptos if you’re not purchasing a fiat cash producing asset.
As an example, most smart people in the Gold space, don’t sell back to the dealers, unless they’re selling their gold for a fiat cash flow producing asset, like real estate for example. I’ve known some acquisition entrepreneurs that sold their gold positions to purchase a business, I suspect, that this is what’s going to happen with Bitcoin, because you can avoid paying the taxes if what you buy with bitcoin helps the fiat dollar economy, typically in the form of a downpayment.
On the other hand, if you’re imagining Bitcoin will buy your day-to-day expenses, I believe that era if it ever existed or was imagined is coming to end, cryptos if matured, are going to be used mostly by the more industrious in civil society.
If the country of origin is more socialistic in nature, once these tax laws are rolled out and normalized, you will not only be labeled a tax cheat, but you could also potentially be criminalized for doing frequent transactions in cryptocurrencies, also because your transactions will be traceable and also because the poorer your nation, the fewer people they’ll be with Bitcoins as an example, the easier it will be for your government to target you.
To the people in freer nations, expect audits, which is why I would suggest only hoarding and making big purchases if you’re going to get involved in crypto because as these “tax the rich” schemes become more widely accepted, it will be easier for you to be traced, not only by the government but potentially the media or other entities out to get you.
On the flip side, if you have the ability to buy and hoard for a profitable exit position, that appears to be a wise choice! Once these Government regulations are normalized, cryptocurrencies will no longer benefit the poor!
Interesting times ahead!
