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The Government Dilemma: How To Tax Something One Pretends Does Not Exist


Cryptocurrencies are often criticized for failing to replicate some of the basic functions of fiat money. Governments are always ready to warn you that you can't spend, or save, or trade, or make digital coins. This state of mind, however, is slowly but surely changing, as more benefits become apparent. Paying, saving, investing – bitcoin can serve all these purposes, and sometimes that happens with approval from authorities.  

Failing to Be Fiat, Proving to be Money

Policy makers and central bankers often claim that cryptos are unable to perform basic functions of fiat money – means of payment, medium of exchange, store of value, and unit of account. Many times, however, they acknowledge one or more of these characteristics, especially when that serves their priorities. Filling the coffers is one such priority, if not the main one, for just about any government. Taxes are the major source of budget revenues for most countries with open market economies. Last year's record highs have put cryptocurrencies in the spotlight of this year's tax campaign.

Why Bitcoin Sounds Like Money to Your Government

But how do they tax something they pretend does not exist, or exists without permission?

Authorities had very little time to solve the dilemma. Only a few months separate the bull run that pushed bitcoin to almost $20,000 in December and Tax Day, which in many countries comes in April. That's probably why we see some unexpected concessions in regards to cryptocurrencies.

"There is no plan to increase the use of private cryptocurrencies" – that's what Latvia told Coppay, when the company inquired about crypto payments last year. "We consider them unable to fulfill money functions and a high risk means of payment," the country's central bank said in November. Latvijas Banka also "invited financial institutions and citizens to avoid engagement in crypto activities". In April of this year, however, authorities in Riga decided that cryptocurrencies are "taxable". They plan to collect 20% on gains from crypto deals now when the Finance Ministry recognizes them as a "medium of exchange".

1 Comments in Response to

Comment by Ed Price
Entered on:

Regarding IRS taxes, if government pushes it hard enough, they are going to prove what they have been saying all along, that IRS taxes are voluntary. When they do this, many people will volunteer out. There was an article a few days ago in Freedom's Phoenix that said that a guy beat the IRS on religious principles. Anybody can do it this way. And there are a hundred other ways. To find something that works, go here - - and listen to all the videos that have "IRS" in their title. It will be a job, but you will win if you get the thing embedded into yourself. It isn't hard. what is hard is changing your concepts. If there is ONE concept you need to get down, it is: COMMON LAW IS ABOVE THE CONSTITUTION AND EVERYTHING THAT FLOWS OUT OF THE CONSTITUTION.

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